THE recent squabble between a former President, Olusegun Obasanjo, and the leader of the Pan Niger Delta Forum, Edwin Clark, over the ownership of Nigeria’s oil wealth has reignited the long-running question of fiscal federalism in the country. Additionally, it reminds Nigerians and the world how successive governments have grossly mismanaged the country’s critical resources and driven majority of the population into poverty.
The kernel of the disagreement between the two public figures is an old one: who owns natural resources; who should benefit most from them, and who among the federal and state governments should control their exploitation?
Obasanjo had responded to the National Secretary of the Ijaw National Congress, Ebipamowei Wodu, who claimed that the rest of the country had appropriated the crude oil belonging to the Niger Delta region, where the resource is in abundance. But the ex-President insisted that oil resources “belong to the entire country and should be used for the development of all regions.” This drew the ire of Clark and other leaders and activists who say the crude resources belong to the people of the region.
It reflects the failure of the Nigerian state to operate as a cohesive diverse federal system that this issue has not been amicably resolved among the ethnic nationalities that make up the wobbly union. In other federal polities – there are 24 others – sensible arrangements have been worked out assigning roles, rights, and responsibilities to national and sub-national units. Nigeria should follow suit.
Oil was discovered in Nigeria in 1956 at Oloibiri in the Niger Delta after half a century of exploration by Shell-BP, which at the time was the sole concessionaire. Nigeria joined the ranks of oil producers in 1958 when its first oil field came on stream, producing 5,100 barrels per day.
However, crude oil extraction has been fraught with problems ever since, with environmental degradation and neglect of the oil-bearing communities. Agitation over the control of their natural resources by the inhabitants of the Niger Delta and of profits from crude and gas activities has divided the country and raised tension ever since.
Since crude oil became a dominant global resource fetching oil-producing countries enormous earnings, the founders of Nigeria thought it wise to use earnings from the black gold to develop every area of the country. After years of uneven distribution of the oil wealth, which culminated in the significant infrastructural development of some areas of the country at the expense of the region from where it is extracted, agitation for better treatment began and eventually led to the clamour by the Niger Delta people to control the resource found on their land.
However, this runs contrary to the position of the military-imposed 1999 Constitution, which gives the Federal Government absolute control of crude oil and other mineral resources found on and beneath the soil. It vests the ownership and control of all minerals, oil and gas in Nigeria, its territorial waters and in the Exclusive Economic Zone in the Federal Government based on the provision of Section 44(3).
This section contrasts with Section 140 of the 1963 Constitution that provided that a natural resource found in a region was to be controlled by the people of the area. Apart from the constitution, other legal instruments giving the management and control of oil and other minerals to the Federal Government are the Petroleum Act of 1969, the Land Use Act and the Nigerian Minerals and Mining Act of 2007.
Section 44(3) of the 1999 Constitution states: “Notwithstanding the foregoing provisions of this section, the entire property in and control of all minerals, mineral oils and natural gas in, under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria shall vest in the Government of the Federation and shall be managed in such manner as may be prescribed by the National Assembly.”
To address the growing agitation for control of resources found on their land, the Federal Government came up with the derivation principle, which conceded 13 per cent of oil revenue realised to the communities where such are found.
The implementation of the derivation principle has meant more money to the oil-producing states but has done little to assuage the feeling of neglect that the oil-bearing communities have as they believe that they should have a greater share of the revenue accruing from the sale of crude. Constitutional law experts insist that in a properly functioning federal country, mineral-bearing states are entitled to not less than 50 per cent as derivation.
In the United States, by law, the federal, state and local governments separately regulate aspects of oil and gas activities. According to the American Geosciences Institute, each of the 33 oil and gas producing states there “regulate all oil and gas operations in state waters that extend from the coast to 3.0 to 9.0 nautical miles.” LGs also legislate on the minimum distance of oil wells from built areas among others. Australia’s constitution similarly empowers its six states and 10 federal territories to regulate onshore petroleum activities concurrently with the federal government. This is the rational way to go.
Opponents of changing the constitution to allow states take control of their natural resources lack persuasive arguments. The charge that oil-producing states have mismanaged their 13 per cent derivation receipts is weak. Every other region has mismanaged its own revenue too. Besides, it is no one’s business how another party manages its resources.
There is a need to implement true fiscal federalism to allow federating units greater access and control over their resources, including crude oil and other mineral resources, and pay taxes to the Federal Government. The constitution should be amended to place minerals on the concurrent legislative list and overthrow the current exclusive federal control. There is also the need to formalise the country’s federalism so there will be equitable distribution of the commonwealth.
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