N96 Trillion Oil Revenue: How Nigeria short-changed oil producing areas

*Deprived of N36 trillion derivation,  got only N12.3 trillion

*2500 killed in 25years

*No derivation from Gowon, Murtala/Obasanjo regimes

*Why Niger Delta region, others want restructuring, resource control

BY CLIFFORD NDUJIHE, Deputy Political Editor

LAST week, we published the first part of our exclusive story on how much Nigeria earned from crude oil since exploitation started in 1958 at Oloibiri, in present day Bayelsa State, and June 2016. Today, we serve you the concluding part of the story detailing how the oil producing areas have been short-changed in the sharing of the N96.212 trillion crude oil earnings, effects of oil exploitation and why calls for restructuring, resource control and fiscal federalism are unceasing.


Of the N96.212 trillion, which accounts for about 80 per cent of the country’s federal revenue, only N12.3 trillion has been paid to the oil producing areas as derivation.

The figure is N35.848 trillion less than the N48.106 trillion the oil-bearing regions should have got as derivation if 50 per cent derivation had not been jettisoned few years after crude oil became the chief revenue earner.

The First Republic civilian administration of Sir Abubakar Tafawa Balewa (1960-1965) was faithful with the 50 per cent derivation principle. Of the N91.4 million crude oil earning of the period, it paid N45.7 million derivation.

A derivation of N11.5 million was also paid during the General John Thomas Aguiyi-Ironsi military regime of January to July 1966.

Thereafter, the oil producing areas got no derivation for a period of 14 years (1967 to 1981) during the first oil boom era of the 1970’s under the Generals Yakubu Gowon and Murtala Mohammed/Olusegun Obasanjo military regimes.

Among the over 13 administrations/regimes that have ruled the country since 1960, former President Goodluck Jonathan, paid N6.63 trillion derivation, the highest and more than 50 per cent of the N12.3 trillion paid so far to the oil producing areas (see table) – although it should be started that the Jonathan administration got the largest chunk of revenue from crude sales (N51trillion)

However, the huge earnings since 1958, arguably, have translated to little or no improvement on the welfare of the citizenry, especially the people of the oil producing areas, whose environment – land, water and air – has been adversely contaminated and, in many cases, devastated and polluted.

Effects of oil exploitation

In the last 25 years, about 2,500 persons have been killed in pipeline-related explosions and accidents in the region. Indeed, a World Bank report warns that 40 per cent of habitable terrain in the Niger Delta area would disappear in 20 years if strong-willed re-mediation was not carried out. And the Federal Government admitted that more than 40,000 oil spills had occurred in the past 58 years of oil exploration.

In the report, the World Bank claimed that the palm groves, shorelines, creeks and other habitable areas would be washed away by erosion as well as spills due to vandalism, system failure and crude oil theft.

Apart from effects of oil spills, gas flaring constitutes a veritable hazard. It causes acid rain which acidifies the lakes and streams and damages crops and vegetation. It reduces farm yields and harms human health; increases the risk of respiratory illnesses, asthma and cancer and often causes chronic bronchitis, decreased lung function, blindness, impotence, miscarriages and premature deaths.

Constant heat and the absence of darkness in some communities have done incalculable damage to human, animal and plant life in affected areas. Gas flares also cause affected places to be covered in thick soot, making even rain water unsafe for drinking.

A United Nations Environment Programme (UNEP) report, in 2011, criticised how the Shell Petroleum Development Company (SPDC) deals with the environmental damage it has caused in the Niger Delta, especially in Ogoniland. UNEP said Ogoniland needed the world’s largest ever oil clean-up, which would cost an initial $1billion or N160 billion and could take 30 years. The Administration of President Muhammadu Buhari has started the process of cleaning up Ogoniland but how far the clean up would go is a matter of conjecture. Mention is yet to be made of other affected communities.

Women deliver deformed babies, go barren

Special Adviser to President Muhammadu Buhari on Niger Delta Affairs and Co-ordinator of the Presidential Amnesty Programme, Brig-Gen Paul Boroh, rtd, raised the alarm, last month over the increasing trend of women giving birth to deformed children who look like dwarfs, while others have become barren and suffer stillbirth because of crude oil pollution in the troubled region.

Advising militants to stop bombing of oil facilities in the region, which he said had worsened the already bad situation, he said: ‘’There is information now that women in Niger Delta have started experiencing stillbirth, some of them cannot even take in normal anymore and even kids that they deliver these days are having biological issues. Some of them look like dwarfs.”

With oil revenue going down, whether or not the Ogoni clean-up will be done is to be seen. By projection, Nigeria currently crude oil reserves of  about 37.2 billion barrels, which at the current rate of exploitation (2.2mbp) may be exhausted in the next 40 years unless new deposits are discovered.

Like most oil-bearing areas of the world, the Niger Delta has a tough terrain, which needs huge funds to be developed. Often times, oil producing areas are marshy or arid and most of the  is marshy. The devastation of the region has been attributed, among others, to pipeline vandalism and failures of policy  in spite of the government’s efforts to pay special attention to the area.

Till date, no city in the region has been mapped out for a special development as the government did in Lagos and Abuja.

In 1958, before crude oil became a critical factor in Nigeria’s development, Sir Henry Willink’s Commission recommended that the Niger Delta region deserved special developmental attention by the Federal Government because of its difficult terrain.

In response, the government established the Niger Delta Development Board (NDDB) in 1960 to tackle the developmental needs of the region. The board in its seven years of existence achieved little or nothing. It was consumed by the military coup of 1966 and the outbreak of the civil war in 1967.

Before and shortly after Nigeria’s independence in 1960, the federating units (regions) retained 50 per cent of revenues derived from their areas and contributed the rest to the central pool. It was on this basis that the regional governments led by late Chief Obafemi Awolowo (West); Dr Nnamdi Azikiwe (East); Sir Ahmadu Bello (North) and later Dennis Osadebey (Mid-West) unleashed unparalleled development in their respective areas.

However, the 50 per cent derivation principle was kicked aside by the military in 1967 as earnings from crude oil sky-rocketed. First, part of the proceeds was used to prosecute the Nigeria-Biafra civil war of 1967 to 70. After the war, the military rulers refused to return to the status quo and chose to disburse funds to the states as they deemed fit.

Distorting Nigeria’s structure

In 1914, when the Southern and Northern protectorates were brought together by Lord Lugard, the North was just a protectorate without divisions. At independence in 1960, there were three regions – Northern, Eastern and Western. In 1963, the civilian regime created a fourth region, Midwestern, out of the Western Region. Then Northern Region had 14 provinces; Western Region (7 provinces), Midwestern (2) and Eastern Region (12). In essence, the North had one region and 14 provinces while the South had three regions and 21 provinces. However, things started tilting in favour of the North when in 1967, and by military fiat, the regions were replaced with 12 states; six in the North, and six in the South. All through the military era, series of state and local council creations were made such that by 1996, the North, which trailed the South in terms of number of regions, provinces and divisions, was further divided into 19 states (and, with the Federal Capital Territory, FCT, became 20 in a manner of speaking) and 414 local councils. Conversely, the South that had six states and 55 divisions in 1967 was divided into 17 states and 355 local councils.

The military funded the numerous states and local councils it created with oil money. The oil producing areas were short-changed in the series of state and councils creation sprees. With crumbs coming from the centre as allocation and their primary occupations – fishing and farming – inhibited by oil pollution, Niger Deltans embarked on vigorous agitation to save their lives and environment.

In response, the President Shehu Shagari Administration set up a Presidential Task Force (popularly known as the 1.5 per cent Committee) in 1980; and 1.5 per cent of the Federation Account was allocated to the Committee to tackle the developmental problems of the region. This committee could not achieve much. There were doubts if the government actually disbursed 1.5 per cent of the revenue to the committee. And most of the funds released were allegedly looted.

Discontent in the area was to continue. So, when General Ibrahim Badamasi Babangida came to power, he set up the Oil Mineral Producing Areas Commission (OMPADEC) in 1992 and allocated 3 per cent of federally collected oil revenue to it to address the needs of the areas. Like its forebears, the OMPADEC, which initially raised hopes, also failed to deliver as it perceptively became inefficient and corrupt. When General Sani Abacha took over, he set up the Petroleum Trust Fund (PTF) headed by Major General Muhammadu Buhari (rtd). The PTF did not meet the yearnings of Niger Deltans as its mandate covered all parts of the country. With critics saying that the PTF carried out more projects in northern parts of the country, restiveness in the Niger Delta assumed a higher gear.

Abacha convened a National Constitutional Conference (NCC) in 1994, where conferees agreed on at least 13 per cent derivation. Abacha did not live to implement the recommendation. His successor, General Abdulsalami Abubakar, included it in the 1999 Constitution which he handed over to President Olusegun Obasanjo on May 29, 1999. On his part, Obasanjo scrapped the PTF and established a special body, the Niger Delta Development Commission (NDDC), to undertake rapid development of the impoverished oil region. He foot-dragged on the payment of the 13 per cent derivation until the oil producing states got a court judgment, which forced him to pay the proceeds beginning from June 1999.

At the National Political Reforms Conference (NPRC) convened by Obasanjo in 2005, South-South delegates insisted on 25 per cent derivation and had to walk out on the gathering when the other parts of the country said they could not approve anything more than 18 per cent, which was later recommended. However, this recommendation did not see the light of the day and died with Obasanjo’s controversial third term ambition. And the agitation for enhanced welfare continued.

On succeeding Obasanjo, late President Umaru Musa Yar’Adua established the Ministry of Niger Delta Affairs, to offer more palliatives to the region. When militancy took the upswing in the area and knocked down oil production to about less than one million barrels per day, he also offered amnesty to the militants, a progamme that has gulped billions of Naira. President Goodluck Jonathan inherited and implemented the programme, which was meant to lapse in 2015. However, a host of the ex-militants and new ones want the programme to continue and the Niger Delta area is turbo charged now with the militants on an unceasing bombing spree of critical national assets in the oil and gas sector with the attendant socio-economic drawback.

Looking at the situation, recently, former governor of Akwa Ibom State, Obong Victor Attah, said there is need to practice fiscal federalism with the federating units controlling their resources and making contributions to the centre. According to him, the fear of the oil producing areas is that other parts of the country would abandon the Niger Delta to swim in her inhabitable environment after exhausting the oil resources.

Crude oil earnings and derivation since 1958

YEAR                            REVENUE (N)                      DERIVATION (N)

1958                                0.2 million                        0.1 million

1959                                3.4 million                         1.7 million

1960                                2.4 million                         1.2 million

1961                                17 million                        8.5 million

1962                                17 million                        8.5 million

1963                                10 million                       5.0 million

1964                                16 million                        8.0 million

1965                                29 million                         14.5 million

1966                                45 million                          22.5 million

1967                                30 million                         15.0 million

1968                                15 million                          ———————-

1969                                75.4 million                        ———————-

1970                                167 million                        ———————-

1971                                510 million                         ———————-

1972                                764 million                          ———————-

1973                                1.016 Billion                        ———————-

1974                                3.724 Billion                         ———————-

1975                                4.272 Billion                        ———————-

1976                                5.368 Billion                        ———————-

1977                                6.081 Billion                        ———————-

1978                                4.556 Billion                        ———————-

1979                                8.881 Billion                        ———————-

1980                                12.354 Billion                      ———————-

1981                                8.564 Billion                         ———————-

1982                                7.815 Billion                         117.9 million

1983                                7.253 Billion                          108.795 million

1984                                8.264 Billion                          123.96 Million

1985                                10.915 Billion                        163.725 Million

1986                                8.107 Billion                         121.6 Million

1987                                19.027 Billion                          285.05 Million

1988                                20.934 Billion                          314.01 Million

1989                                39.131  Billion                          586.96 Million

1990                                55.216 Billion                          828.24 Million

1991                                60.314 Billion                          904.71 Million

1992                                115.392 Billion                      3.462 Billion

1993                                106.192 Billion                      3.204 Billion

1994                                160.192 Billion                      4.830 Billion

1995                                324.548 Billion                      9.736 Billion

1996                                369.190 Billion                      11.076 Billion

1997                                416.811 Billion                      12.504 Billion

1998                                289.532 Billion                      8.686 Billion

1999                                500.00 Billion                          32.5 Billion

2000                                1.34 Trillion                             174.23 Billion

2001                                1.708 Trillion                            221.91 Billion

2002                                1.231 Trillion                            160.017 Billion

2003                                2.074 Trillion                            269.659 Billion

2004                                3.355 Trillion                            436.124 Billion

2005                                4.7624 Trillion                        619.112 Billion

2006                                6.109 Trillion                            794.17 Billion

2007                                6.70 Trillion                                871 Billion

2008                                3.96 Trillion                                514.8 Billion

2009                                2.225 Trillion                            289.307 Billion

2010                                9.15 Trillion                                1.190 Trillion

2011                                5.561Trillion                              722.91 Billion

2012                                12.5 Trillion                                1.625 Trillion

2013                                12.6 Trillion                                1.638 Trillion

2014                                11.891Trillion                          1.546 Trillion

2015                                6.945 Trillion                            903.85 Billion

2016(June)                              1.499 Trillion                            194.87 Billion  

TOTAL                                96.212 Trillion                             12.258 Trillion





N96 Trillion Oil Revenue: How Nigeria short-changed oil producing areas on Vanguard News.


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