THIRTEEN PERCENT DERIVATION FUND: MORE QUESTIONS THAN ANSWERS
Friday, November 25, 2022
THIRTEEN PERCENT DERIVATION FUND: MORE QUESTIONS THAN ANSWERS
The principle of derivation as encapsulated under the proviso to Section 162 (2) of the 1999 Constitution as amended. It is geared towards providing recompense to the producers of any natural resources for the expropriation and sequestration of their rights to control and manage same, by the Nigerian State.
The percentage of revenue paid to the oil-producing states from the oil that is produced from their areas has been a matter of contention since oil was first discovered in Nigeria. The 1999 constitution provides that at least 13 percent of the revenue derived from natural resources should be paid to the states where it is produced, though there have been substantial delays in calculating and paying these sums. The federal government only began making payments in accordance with the increased allocation in January 2000, although they fell due from June 1999, and in practice has never paid the 13 percent minimum. Nonetheless, allocations from the federal government to the oil-producing states have increased markedly since 1999, rising to 25 percent of the amount paid out to states from the “federation account” in 2001 (the equivalent of just over U.S.$1 billion), from 12 percent in the second half of 1999 (or approximately $120 million). The main oil producing states – Akwa Ibom, Bayelsa, Delta, and Rivers – have about 10 percent of the population of Nigeria. These payments have not satisfied residents of oil-producing areas who feel they still do not receive adequate benefits from the oil. Individuals and groups from across the political spectrum in what is known as the “south-south” zone of Nigeria have demanded that the oil producing states assume “full control” over their natural resources, and pay tax from those revenues to the federal government. They also demand the repeal of a number of laws that give control over land and mineral resources to the federal government.
Despite claims of neglect and abandonment, investigation has revealed that governments of oil-producing states in Nigeria had over the years, failed to utilize the resources provided them to develop their states and the region. Data obtained from a series of reports from the Central Bank of Nigeria, CBN, revealed that oil-producing states in Nigeria received N7.006 trillion as payments under the 13 per cent Derivation principle over the last 18 years, from 1999 to 2016.
The oil producing states are Akwa-Ibom, Rivers, Delta, Cross River, Edo, Bayelsa, Abia, Ondo, Imo, Anambra, and of recent, Lagos State. Analysis of the payments showed that from 1999 to 2003, N360.4 billion was paid to oil-producing states; N1.338 trillion were paid to the states between from 2004 and 2007; 2008 to 2011 saw the states receiving N2.36 trillion, while from 2012 to 2016, the states received N2.947 trillion. Ironically, the 2017 budget of all the states, inclusive of Lagos, stood at N3.165 trillion, about half of the amount received by the states from the Federation Account under the 13 per cent derivation principle.
The huge sum notwithstanding, the Niger Delta region is still suffering from massive infrastructure decay, widespread poverty and environmental degradation, among numerous others. The 13 per cent derivation fund has been a subject of controversy between the oil-producing communities and their various states government, with the former asking the Federal Government to stop paying the money directly to the communities and not into the coffers of the state.
The federal government has announced on several occasions the priority it gives to development in the Niger Delta, including by establishing a Niger Delta Development Commission. But the announcements have not led to significant improvements on the ground. In particular, little of the money paid by the federal government to state and local governments from the oil revenue is actually spent on genuine development projects: there appears to be virtually no control or proper audit over spending by state and local authorities-despite the federal government’s creation of an Independent Corrupt Practices Commission (ICPC) with the mandate to investigate such wrongdoing
Recently, the revelation of Governor Nyesom Wike of Rivers State that President Muhammadu Buhari approved and paid the arrears of the 13% derivation fund to Rivers, Bayelsa, Delta, Edo and Akwa Ibom states came like a bombshell. Wike spoke on the arrears during the inauguration of the N17billion Port Harcourt Campus of the Nigerian Law School. The governor said President Buhari’s gesture was the major source of revenue for his projects, including the flyovers, the law school and the cancer centre. He was quoted as saying: “Monies that were not paid to the Niger Delta states since 1999 mainly 13 per cent deductions, the President approved and paid all of us in Niger Delta states.” Wike repeated his comments at two other events afterwards.
Wike’s revelation has raised another series of questions such as what have the other governors who received a similar windfall been doing with their own? How much was received by each state? And did they just receive it and keep quiet? How will they expend it? Or will they just walk away with it or utilize it as campaign funds in an electioneering period like this or use it for other extraneous purposes that are not related to the yearnings and aspirations of the people of the state who are supposed to be the major beneficiaries? Another important question that comes to mind is how such conspiracy of silence was possible in a democracy and where there are a plethora of checks and balances put in place which is expected to put people in the know.
We at CACOL, would like to know the exact amount collected by each of the states involved, how the money was spent or is being spent. We would also use this medium to call on the anti-corruption agencies to investigate the governors of the states concerned including Rivers, so as to be sure that the quantity and quality of the projects executed is commensurate with the money collected.
SPDC, People and the Environment: Annual Report 2002, p.10.