The World Bank announced on September 9, 2008, that it was ending its support for the controversial Chad-Cameroon pipeline. The announcement came after the Chadian government repaid $65.7 million in outstanding loans to close out its debt to the Bank for the project.
This development comes as the tenth anniversary of the inauguration of a project that has attracted intense controversy since its inception, and the fifth anniversary of its first oil exports, approaches. In 2001, the World Bank agreed to help finance the pipeline after ExxonMobil, the leader of the consortium of oil companies, requested Bank assistance as a precondition for pursuing the project, knowing that the project could become a serious reputational liability.
Greengrants has been supporting several local groups around this issue for years. Grantees were identified by both the West Africa Advisory Board and our International Financial Institutions Board. Feel free to search our grants database.
The pipeline, which constitutes one of the largest on-shore investments in Africa, is routed through areas with delicate environments and indigenous groups already wary of their governments. Both the Cameroonian and Chadian governments were widely considered corrupt and repressive dictatorships with questionable capacity to manage such large investments. By agreeing to support the project, the World Bank catalyzed finance for the construction of the pipeline, turning Chad into Africa’s newest oil producer.
Facing stiff resistance from civil society, the Bank went to great lengths to promote the pipeline as a model for using revenues from high-risk projects to reduce poverty. It instituted an unprecedented, elaborate system for ensuring that revenues were devoted to social spending. Since it was commissioned in 2003, however, the project has been fraught with persistent problems, and the financial system put in place to manage Chad’s oil proceeds never worked as intended. The bellwether for the system was President Idriss Deby’s use of a $25 million “signing bonus” for re-arming his military; civil society complained heavily, but the Bank ultimately decided that the signing bonus was not covered by the terms of its contract with the Chadian government.
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Click here for a commentary about this by Daphne Wysham of Institute for Policy Studies.