13% Derivation: Nigerian Oil Producing States Received N454bn In 2020

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Mordi Chukwunonso Esther 

According to data from the Central Bank of Nigeria (CBN), Oil producing states in the country received a total of N454.35 billion from the Federation Account in 2020, under the 13 per cent Derivation Principle. 

The oil producing states in Nigeria are Delta, Akwa-Ibom, Bayelsa, Rivers, Edo, Ondo, Imo, Abia and Lagos. The 13% Derivation allocation which is paid monthly, was in addition to the general and larger monthly allocations received by the states, also from the Federation Account.

Central Bank of Nigeria, CBN, in its Quarterly Economic Reports, disclosed that the amount received by the states from the 13% Derivation allocation in 2020, was 13.46 per cent lower than the N525.03 billion received by the nine states in 2019. This could be attributed to the crash in oil prices triggered by disruptions caused by the Covid-19 pandemic and the oil price war between Saudi Arabia and Russia. 

Giving a breakdown of the allocation to the states, the CBN disclosed that the states received N139.47 billion, N113.17 billion, 102.23 billion and N99.48 billion in the first, second, third and fourth quarter of 2020, respectively, compared to N132.54 billion, N126.17 billion, N124.85 billion and N141.47 billion received by the states in the first, second, third and fourth quarters of 2019, correspondingly.

In 2020, the CBN stated that total federally-collected revenue stood at N9.314 trillion, while gross oil revenue stood at 4.733 trillion.

For the fourth quarter figures, the CBN said: “At N2.208 trillion, federally collected revenue in the fourth quarter of 2020 fell by 13.1 per cent and 8.3 per cent below the budget benchmark and the level in the preceding quarter, respectively, and was also 16.8 per cent below the collections in the corresponding period of 2019.

“Oil receipts accounted for 44.6 per cent of the total collection, while non-oil constituted the balance of 55.4 per cent. The relatively low receipts recorded in the review period underscored the lingering effect of the COVID-19 pandemic on domestic and global economic activities.”

Despite the 13% derivation received, most of the 9 states (if not all) are among the most highly indebted states in Nigeria. Data from the NBS, showed that the proportion of internally generated revenue in comparison to total revenue for the other oil-producing states is well below average, indicating that most of the states are Federal Account Allocation Commitee (FAAC) dependent states. 

At the launch of the 13-storey head office building of the Niger Delta Development Commission, NDDC, in Rivers State, March 13, Minister of Niger Delta Affairs, Chief Godswill Akpabio, had accused governors of oil producing states of not been able to properly account for the 13 per cent Derivation money allocated to them over the years.

This, of course angered the governors, with Governor Nyesom Wike of Rivers State leading the attack against Akpabio. This came against the backdrop of a report by ACIOE Associates, which stated that eight oil-producing states in the country received N6.589 trillion from the 13% Derivation allocation, between 2009 and 2019, with the funds having little or no impact on the lives of citizens of the various states.

The report had listed the states as Abia, Akwa-Ibom, Bayelsa, Delta, Edo, Imo, Ondo and Rivers states.

The report, among other stakeholders, including the Deputy Senate President, Senator Ovie Omo-Agege, had indicted the governors of the states of mismanaging the funds, and called on the Federal Government to pay the money directly to the oil-producing communities, instead of the governors.

The Oil and Gas Producing Communities in Nigeria (HOSTCOM),in a statement, also said paying the fund through state governors, as currently done, was a gross violation of two mandatory provision of the 1999 constitution as amended and called on President Muhammadu Buhari to order for the direct payment of 13% derivation to the Host Communities, through the proposed Presidential Derivation Committee (PDC) and States Implementation Committee (SIC) .

Stating that the federal government is the second line charge, state government third line charge while local government is the fourth line charge, it said: 

“The 1999 Nigeria Constitution made it very clear that 13% derivation fund is provided constitutionally and exclusively for the oil/Gas producing Communities primarily as compensation for lost of Fishing rights and productive Farmlands as a result of Oil/Gas exploration and production activities.

“Oil/gas is number 39 on the Exclusive Legislative List ‘’Mines and Minerals including oil fields, oil mining, geological survey and natural gas.

“It is instructive to note that any matter that is on the Exclusive Legislative List, it is only the President or Head OfState that has the prerogative and jurisdiction on all matter on the exclusive legislative list. No governor or state assemblies can legislate on matters on the exclusive list”. 

In a report by Energy Frontier, Omowumi Iledare, a Professor of Energy Economics, who is also Professor Emeritus, LSU Energy Studies, Baton Rouge, Louisiana, USA; so also the Executive Director, Emmanuel Egbogah Foundation Abuja, Nigeria and Director, Africa Region and Society of Petroleum Engineers International, Dallas faulted the continued payment of 13 per cent Derivation to state government of Oil producing areas or regions as there is nothing to show for in terms of developments in the regions. 

He made this assertion while speaking at a recent Stakeholders forum in Lagos. According to him, In United States of America, they don’t give you cash instead they tie the money to developmental project in the community.

 The Professor Emeritus decried the lack of development in the Niger Delta region especially in Warri. “Warri’s economy collapsed when Shell left Warri. The place has become a shadow of itself since Shell left Warri. Decades ago Warri was full of life, It was bubbling and people were enjoying themselves and the place was busy. But now it has become a shadow of itself,” he noted.

He stated that the quantum of money given to the Oil producing States has not impacted on the areas, communities and the people. It only succeeded in making some people millionaires in the place.

“13 per cent derivation should not go to the state governments of the oil producing regions, instead it should go to Sovereign Wealth Funds or Host Community Trust Funds,” he said.

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