Published On: Sun, Jan 20th, 2013

Oil Communities and Derivation Proceeds

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Oil polluted community in Niger Delta Region


By Aruviere Martin Egharhevwa
That the issue of resource allocation remains a central element of the national question is, perhaps, the main message in the complaint by communities in five oil-producing states over the disbursement of the 13 percent derivation fund. It also underscores a loss of faith and significant disconnect between state governments and the people they are supposed to cater for.
In a letter to the Nigerian Extractive Industries and Transparency Initiative (NEITI), and endorsed by representatives of the oil-producing communities in Akwa Ibom, Bayelsa, Delta, Edo and Ondo States, the communities argued that the 13 percent derivation fund is not part of the consolidated revenue of any tier of government, whether federal, state or local, and has, therefore, been illegally appropriated by states to the detriment of oil-bearing communities. To halt this trend, the oil communities want NEITI to prevail on the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFAC) to disburse the derivation fund directly to them through a National Derivation Board.

The derivation fund, minuscule as it is, has grossed seven trillion naira in the last 13 years. Yet, its impact remains largely unnoticed in the oil-bearing communities of the Niger Delta, which have continued to suffer neglect and deepening impoverishment. While oil receipts fed the greed of state actors amidst endemic poverty, it was only a matter of time before those from whose lands the resource was being exploited, would begin to seek remediation.

From the late eighties up to the decade of the nineties, the question of environment degradation of the oil-producing communities in the Niger Delta became a national and even global issue. The authoritarian response of the military government of the time exacerbated the discontent among oil-producing communities.

At the advent of the Fourth Republic, it was hoped that the issue would be resolved. Indeed, the 1999 Constitution accentuated that optimism with the engrossment of the 13 percent derivation in it.

According to Section 162(2): “The President, upon the receipt of advice from the Revenue Mobilisation Allocation and Fiscal Commission, shall table before the National Assembly proposals for revenue allocation from the Federation Account, and in determining the formula, the National Assembly must take into account, the allocation principles, especially those of population, equality of states, internal revenue generation, landmass, terrain as well as population density: Provided that the principle of derivation shall be constantly reflected in any approved formula as being not less than thirteen per cent of the revenue accruing to the Federation Account directly from any natural resources.”

Despite this provision for derivation, which represented an increment from the paltry three percent obtainable in 1992, the agitation for resource control has not abated. The issue contributed to the stalemate in the 2005 National Political Reform Conference where the stakeholders from the Niger Delta had called for a graduated increase from 25 percent to 50 percent in line with the provisions of 1960 and 1963 Independence and Republican Constitutions, in that order.

Across the globe, there are abundant principles and best practices pertaining to ownership and control of resources, which have underpinned the agitation for fiscal federalism in the country, to which the extant Land Use Act and the Petroleum Act contradict.

The viewpoint that derivation is meant for the oil communities is altogether reasonable; it is for administrative reasons only that it was routed through the state. As it is well known, non-accountability and misappropriation has become endemic among state governments. The Federal Government should, therefore, stop paying 13 percent derivation to state governments and instead remit the fund directly to the communities concerned, either through the proposed derivation board or any other independent institution.

It is also important for the RMAFAC to come up with a new arrangement that takes care of such contradictions, as the limitation of local authorities, by the sheer fact of state-local governments joint account. It is time the nation emphasised strong institutions and not strong men, if the country’s democracy must be consolidated and made effective.

Any forward-looking government should have started reconsidering the undue emphasis, and dependence on unearned income, emanating from hydrocarbon, that fuels corrupt practices at all levels of society.

It should also have sought new ways to shift focus towards resource creation. This is the pathway to true development, as it will unleash the creative energy of all states.

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