A Review of the Nigerian Energy Industry

New Revenue Formula: Niger Delta demands 50 percent derivation

Governor Henry Seriake-Dickson of Bayelsa State

11 October 2013, Yenagoa — States in the Niger Delta region have demanded upward review of the current 13% derivation paid to oil producing states to 50%.

This was the high point of their presentation, Thursday to the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) in Yenagoa, Bayelsa State, as the commission rounded off its zonal public hearing on the best way to share the nation’s revenues among the three tiers of government.

If approved, revenues accruing to oil producing states of Akwa Ibom, Bayelsa, Rivers, Edo, Abia, Delta, Ondo, Imo and Anambra which joined the league recently will multiply by close to 300 per cent.

With the existing 13% derivation, the abrogation of the onshore/offshore dichotomy during the Obasanjo regime had created a wide gap in revenues between oil producing and non-oil producing states.

Many states in the later group complained that they have been impoverished by the legislation.

In addition, the Niger Delta zone is pushing for the establishment of the ‘Petroleum Host Community Fund’ in section 116 of the proposed Petroleum Industry Bill which is before the National Assembly. This was emphasised at the public hearing yesterday.

Other geopolitical zones had during their public hearing rejected any further increase in the percentage of derivation accruing to the oil producing states.

Regions of the north particularly called for a legislation to restore the onshore/offshore dichotomy in revenue sharing.

During the Nort west public in Kaduna, states in the zone said they did not support any further increase on the 13% derivation, and called for a legislation to restore abrogated the onshore/offshore dichotomy.

Stakeholders in the zone said they believed that the Niger Delta states have been fairly compensated through the 13% derivation, the Niger Delta Development Commission, Amnesty Programme, the Niger Delta Ministry and increased budgetary allocations to the Niger Delta under the present Administration.

However, some Niger Delta leaders immediately criticized the submission by the North West which opposed additional revenue to the region beyond the 13% derivation.

Comrade Nengi James, Chairman, Oil and Gas Committee, Nembe community, and Chairman Civil Liberties Organization, CLO, Bayelsa chapter said “I believe what they are saying is a mere joke because that will be tantamount to undermining the gesture of the Niger Delta people for being magnanimous enough to share their resources with the rest of the country”

During the north east public hearing in Bauchi, states in the region presented a similar position as the north west, rejecting any addition to the 13% derivation, and demanded for the establishment frontier exploration agency for the purpose of oil exploration in the region.

However, the Niger Delta states yesterday demanded that the share of federal government in FAAC be drastically reduced, while the shares of states and local governments increased considerably in the spirit of true fiscal federalism.

This view is shared by states in all the six geopolitical zones as expressed during the public hearings.

Presenting the position of Bayelsa state, the Governor, Seriake Dickson, represented by the Secretary to the State Government, Prof. Edmund Allison Oguru said cutting down the revenue accruing to the Federal Government apart from making more funds available to the states and local governments would to a great extent reduce the “do or die mentality” with which politicians scramble to assume the presidency of the country.

He also argued that the percentage of the allocations given on the strength of the population across the states which according to him currently stands at 40% be slashed to 10%. He stressed that there is no reliable census figure in the country at the moment to determine the accurate population of any given state.

Earlier while declaring the public hearing open, Governor Dickson noted that the aim of the review of the revenue sharing formula was to address the injustice inherent in the current formula.

He said in order for justice to be seen to have been done, Nigeria should go back to the sharing formula being adopted when agriculture was the main stay of Nigerian economy, where derivation was 100 and 50 percent at various times.

While calling on other regions of the country to show understanding, Dickson urged the National Assembly to expedite action on the passage of the Petroleum Industry Bill, (PIB) to also help and address some of the injustice in the federation.

In his address of welcome, the Chairman of the Revenue Mobilization Allocation and Fiscal Commission, (RMAFC), Engr. Elias Mbam, said the exercise was in line with the provisions of the 1999 constitution which requires that the revenue formula be reviewed periodically to reflect the changing realities in the society.

He noted that the commission had gone round the 36 states and the FCT, including the 774 local government areas to consult with the people, and expressed the readiness of the commission to reflect the views of the people in the final report.

Earlier, states in the South west had demanded that Federal government’s 53.8% share of revenue from the federation account be slashed down to 30% while states’ revenues increased to 42%. They also called for the upward review of local government allocation to 28%.

In similar manner, states in the North West called for federal government’s share of the revenue to be put at 41% while states get 34.5%, leaving local governments with 24.5% from the present 20%.


– Daily Trust

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