Obasanjo, Diri renew Niger Delta’s agitation for bigger oil revenue

Former President Olusegun Obasanjo and Bayelsa State Governor Douye Diri have renewed calls to review Nigeria’s 13 per cent derivation allocation to oil-producing states, arguing that the current arrangement has not delivered a fair share of the country’s petroleum wealth to the Niger Delta.

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Mr Obasanjo, who described the 13 per cent allocation as a starting point rather than a final settlement, said oil-producing states and communities had not received a fair deal from the exploitation of resources in their territories.

“You are right that the states and oil-producing communities have not got a fair deal so far. Thirteen per cent is the beginning. You can continue to talk,” the former president said.

According to The Punch newspaper, Mr Obasanjo spoke on Monday at the flag-off of the $1 billion Azikel Refinery crude distillation unit in Obunagha, Yenagoa Local Government Area of Bayelsa State.

Mr Diri, who has repeatedly challenged the distribution of petroleum revenues, also criticised the Land Use Act, arguing that the law places oil-producing communities at a disadvantage by separating control of land from the ownership and management of the resources beneath it.

The renewed demands revive longstanding debates over resource control, fiscal federalism and the extent to which communities bearing the environmental and social costs of oil production benefit from the revenues generated from their territories.

Derivation controversy

Calls for a higher derivation allocation follow ongoing questions about how state governments in the Niger Delta account for and use the substantial revenues they already receive from the Federation Account.

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Under Section 162(2) of the 1999 Constitution, the federal government is required to ensure that the principle of derivation is reflected in the allocation of revenue from natural resources, with not less than 13 per cent of revenue accruing directly to the Federation Account from natural resources in the relevant states.

However, the debate over whether the share is sufficient has increasingly intersected with questions about transparency, public spending and whether oil-producing communities are seeing tangible improvements in their living conditions.

Governors of oil-producing states have received substantial funds through derivation and other Federation Account allocations. Still, the money has not resolved concerns about infrastructure, healthcare, education, environmental degradation, and economic opportunities in many oil-producing communities.

In Akwa Ibom, for instance, Governor Umo Eno has acknowledged the substantial revenue accruing to his administration under President Bola Tinubu. Yet questions remain about whether the state’s spending and development outcomes reflect the scale of funds received.

The demands for a larger share of petroleum revenue concern the distribution of national wealth between the federal and state governments, while questions about expenditure concern how governments deploy the funds already available to them.

A higher derivation rate would not, by itself, resolve accountability concerns unless accompanied by transparent reporting, effective public expenditure, and demonstrable benefits for the communities from which the resources are extracted.

The debate also raises questions about how much oil-producing communities participate in decisions on how to use derivation revenue, rather than relying solely on state governments to set spending priorities.

Obasanjo and the offshore-onshore controversy

Mr Obasanjo’s intervention matters because his administration was at the centre of one of the most consequential disputes over petroleum revenue distribution: the offshore-onshore dichotomy.

The controversy concerned whether revenue from oil produced offshore, particularly beyond coastal states’ territorial waters, should count towards the derivation allocation due to those states.

During Mr Obasanjo’s presidency, the federal government maintained that the 13 per cent derivation principle did not automatically extend to offshore oil beyond the relevant territorial waters. The position triggered legal and political battles with littoral states, including Akwa Ibom, Bayelsa, Cross River, Delta, Ondo and Rivers.

In December 2001, the Supreme Court ruled that a littoral state’s seaward boundary is the low-water mark of the landmass, or the seaward limit of inland waters, excluding offshore areas beyond that boundary from the states’ territories in the dispute.

The ruling provoked strong opposition from oil-producing states, which argued that they were being denied revenue from petroleum produced off their coasts.

The National Assembly subsequently enacted the Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act in 2004, abolishing the offshore-onshore distinction in applying the derivation principle.

The dispute nevertheless left a lasting imprint on the Niger Delta’s struggle over resource ownership, revenue distribution and the relationship between the federal government and oil-producing states.

Mr Obasanjo’s latest remarks signal support for continued negotiations over the share allocated to producing states. However, his description of 13 per cent as a starting point offers no concrete alternative percentage or proposal to change the constitutional formula.

Diri faults Land Use Act

Speaking at the refinery event, Mr Diri said the region’s agitation stemmed from a persistent imbalance between the communities where crude oil is produced and the places where the benefits of its exploitation accrue.

“As people of the Ijaw ethnic nationality, we have protested and fought because we feel that God gave us something in our land, but we are not benefiting from it. Others are benefiting and see us as second-class citizens,” he said.

The governor described the Land Use Act as unfair, saying its provisions, along with federal control over petroleum resources, have limited host communities’ ability to decide how resources beneath their land are managed.

“The Land Use Act is unfair. Surface resources belong to states but what lies underneath belongs to the federal government. That law is obnoxious and not good for any just society,” he said.

Mr Diri said the Niger Delta was not seeking to appropriate all proceeds from its resources but wanted a meaningful role in decisions about their management.

“We do not want to take all to ourselves. We want to be co-players in determining how it is done. Thirteen per cent is not enough for the states,” he said.

The Land Use Act, enacted in 1978, vests land in each state in the governor, to be held in trust and administered for the use and common benefit of Nigerians, subject to the law’s provisions. Petroleum ownership and control are governed by separate constitutional and statutory arrangements that vest ownership and control in the federal government.

The governor’s criticism reflects a longstanding resource-control argument that communities should have more influence over decisions concerning land, petroleum extraction, environmental protection and the distribution of the economic benefits of oil production.