IFI governance

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IFI inspection mechanisms slam Bank faults in Uganda and Nigeria

26 September 2008

By Soren Ambrose, Bank Information Center

The Bujagali dam project in Uganda and the West Africa Gas Pipeline (WAGP) project in Nigeria have been roundly criticised by the World Bank’s Inspection Panel.

As construction of Bujagali gets underway after more than seven years of wrangling and scandal (see Update 60), the project has become not only a top priority for president Yoweri Museveni but also the first project to be simultaneously investigated by two IFI inspection mechanisms.

The report of the new Independent Review Mechanism (IRM) of the African Development Bank (AfDB), its first investigation, was published in July. It is critical of the AfDB’s failure to follow its resettlement policies, and recommends development of new policies in other areas. Action plans to address the problems identified by the IRM are expected soon.

It is stunning to see the World Bank deny impoverished people their due

The World Bank’s Inspection Panel accompanied the IRM on a joint tour of the Bujagali site in November 2007. Its report was submitted to the World Bank board in the first week of September. Unlike the AfDB, the World Bank does not provide the report to the groups that filed the original complaint. But reliable sources indicate that this report is also highly critical, and on a broader range of issues.

We understand that the Panel found that the Bank and project sponsors failed to try to reduce the amount of land required for transmission lines, and that the Bank is in non-compliance with its resettlement policy. There is no plan to address the needs of those already resettled, no accurate count of how many will have to be resettled, and inadequate budgeting for what will be needed.

Additionally the report expressed dismay that the potential impact on Lake Victoria was not analysed, on the dubious logic that the dam’s “area of influence” does not include the lake. It also criticised the Bank’s superficial examination of alternatives to a large dam and questioned the position that climate change would not be a factor in water releases from the dam.

On the financial side the panel calculated that the Bank had an overly optimistic view of revenues the dam would generate and found that the power-purchase agreement, a major source of concern in Bujagali’s first incarnation, may relegate even more risk to the Ugandan government.

The World Bank’s board is scheduled to discuss the report in mid-October, though that could be delayed given the approaching annual meetings. Meanwhile, construction continues, but groups like Ugandan NGO National Association of Professional Environmentalists are demanding that all the problems identified in the two reports be satisfactorily addressed before the project is allowed to proceed.

WAGP: Bank admits errors

In early August, the Bank board discussed an Inspection Panel claim on WAGP, which extends from the Niger Delta in Nigeria westward through Benin and Togo and into Ghana (see Update 57, 56). The report was a strong indictment of the way the West African Gas Pipeline Company (WAPCo) carried out its resettlement and compensation obligations in southwestern Nigeria.

The World Bank management response was unusually conciliatory, agreeing that the process had been seriously botched, and proposing an elaborate action plan to rectify the errors. In its response, Bank management admitted that residents were paid just 10 per cent of the established value of their land.

Mike Karikpo of Environmental Rights Action/Friends of the Earth Nigeria commented, “The World Bank should explain why it failed to effectively present the case for ‘land-for-land compensation’ that Bank policy calls for, and should prove its claim that now, after the mistakes are acknowledged, there is no more land available for the displaced people. Even after reading the Bank’s version of events, it is hard to believe the Bank did not collude with WAPCo to slash the already very conservative valuation of the villagers’ property.”

Karikpo added, “Let’s remember that WAPCo is not a struggling local enterprise, but a consortium of some of the world’s richest companies, including Chevron and Shell. It is stunning to see them, and the World Bank, deny impoverished people their due.”

Nasiru Jimoh, a member of the Igbesa community that comprises the bulk of the people displaced by WAGP, commented, “The World Bank quoted us the prices we should be paid, and then reneged without consulting us. They have sown confusion and despair in my community. Now that they are admitting mistakes, they must publicly disclose how they decided on their valuations of our trees, crops and lands.”

The Panel also criticised the Bank’s refusal to consider the source of the gas to be shipped via the pipeline – a refusal Bank management continued to defend on the grounds that the multi-country pipeline was a distinct project from the wells and the older pipeline to Lagos that connects to the WAGP.

The Panel found that the project was initially promoted as an instrument to reduce the gas flaring that afflicts Niger Delta communities with unending noise, heat, light, and pollution. Actual reductions in gas flaring will be, as the Bank’s management acknowledges, substantially less than was implied before the project was begun. The Bank board and management have not committed to any remedial actions to address this.