Resource Control: The Economic & Political Dimensions

Expectedly, the Governors of the 17 southern states rose from its third
summit in Benin City, the Edo State Capital, March 27, 2001, and proclaimed
its preference for fiscal Federalism based on the principles of national
interest, need and derivation.  Its communiqué at the end defines resource
control as "the practice of true federalism and natural law in which the
federating units express their rights to primarily control the natural
resources within their borders and make agreed contribution towards the
maintenance of common services of the government at the centre.  This dogma
is not true in its entirety as the individual and not the state is the final
repository of this General Will.  The benefits of resource control according
to Chief Obafemi Awolowo should accrue to the individuals and not the state
following the principles finally expatiated upon by Adam Smith in The Wealth
of Nations in 1776.

But I am fascinated with the succinct manner the host of the summit, Mr.
Lucky Igbinedion put it to reporters. He said,  "Resource control means that
if I as a Bini man goes to Kebbi State and finds gold, the resource should
belong to me and not the state or the federal government.  All I owed the
Federal Government is to pay taxes and royalties.  The same principle should
apply if a Kano man comes to Edo, Delta or Bayelsa and strikes oil.  He only
pays royalties and taxes to the state or the federal government".

The issues at stake in Nigeria's economic philosophy is that the current
formula for the distribution of the nation's wealth is unacceptable.  As
members of the same family, the President of the Federal Republic of Nigeria
owes it as a duty to call all shades of opinion to decide the matter rather
than the pursuit of the matter through the legal process.  The action of the
Federal Government in dragging the 36 state governments and the Federal
Capital Territory to the Supreme Court to seek judicial interpretation of
the constitutional provision on the matter may turn out whatever the
outcome, as an ill wind which could cause a tremour which the Federal
Government cannot control.  Also, the Federal Government suite asking the
Supreme Court to define the seaward boundary of a littoral state within the
federal republic for the purpose of determining the amount of revenue
accruing to the federation account directly from any natural resources
derived from the State as contained in the section 162(2) of the
Constitution of Nigeria is based on the false premise of ignoring Section
162(1) which initiated the provision that all funds collected by the Federal
Government with the exception of the personal income tax of the police,
armed forces, the foreign affairs ministry and the residents of the Federal
Capital Territory,  Abuja accrues to the Federation Account.  These raises
the issue of what the Federal Government intends to do with the on-shore
off-shore funds if they are not going into the Federation account.  For, if
section 162(1) is to be applied, then, the basis for the writ without
prejudice to the decision of the Supreme Court would be called to question.
Equally, there is an existing Act namely No. 106 of 1992 of Federation
Account, etc., Amendment Act which states, "For the purpose of subsection
(2) of this Section and for the avoidance of any doubt, the distinction
hitherto made between on-shore oil and off-shore oil mineral revenue for the
purpose of revenue sharing and the administration of the fund for the
development of the oil producing areas is hereby abolished".  The question
then arises: Are we asking the judiciary by fiat to make new laws?

Resource control is a basic economic theory grounded in the fact that land,
labour, capital and entrepreneurship are factors of production (Adam Smith,
an early economist, outlined these in The Wealth of Nations the principal
factors of production.  These are land, labour, capital and
entrepreneurship.  Just as the price of labour is wages, capital has
interest, entrepreneurship is driven by profit while rent and royalties are
rewards for landownership.  Rent is a return for the use of the original and
indestructible properties of the soil.  Whoever owns a land expects some
form of compensation from those hiring this very important factor of
production.  The clamour for resource control is a clamour for adequate
compensation, a cry for redistribution of the revenue allocation formula,
and nothing more.  The only thing a government should do is to impose tax to
be used for the welfare of the community.  This theory has been in existence
since the creation of man and is correctly reflected in the Bible.  If you
change these rules ordained by God, then you invite chaos.  Hence the Psalm
says, "change and decay around I see; oh thou who changeth not, abide with
me".

To be fair, the statutory distribution of revenue from the Federation
Account had been controversial as well as contentious.  The Political Bureau
Report of 1987 observed that the issue is so contentious that "none of the
formula evolved at various times by a commission or by decree under
different regimes since 1964 has gained general acceptability among the
component units of the country".

But the Report also observed that the issue of revenue allocation and to be
specific derivation, had been essentially a political rather than an
economic tool.  Whoever is in charge introduces a formula that best serves
his interest.  The British administered the country initially mainly from
the proceeds from oil palm trade derived largely from the then Eastern
Region.  Derivation was not given any prominence.  But when groundnuts and
tin from the North and cocoa and rubber from the West became major earner of
revenue, derivation, to use the words of Dr. S. J. Cookey in his report,
"was catapulted into a major criteria for the allocation, thus underscoring
the linkage between regional control of the political process and the
dominant criteria for revenue allocation at any given time.  This linkage
was further underscored when, following the increasing importance of
petroleum derived mainly from the Eastern States (now Niger Delta) as a
revenue yielding source, derivation was again de-emphasised.   And now, it
is instructive to note that the exclusive federal jurisdiction over a
natural resources apply only to oil and gas, and not to cocoa, palm oil,
hides and skin, bitumen, marble, etc.  This is the core of the agitation of
the people of the South-South Region.

To be sure, the practice of federalism had been so traumatic, making some to
blame it on the "mistake of 1914."  Even so, our nationalists who negotiated
the form of our existence made some efforts to stimulate healthy competition
among the regions.  The 1958, 1960 and 1963 Constitution allowed for
competition among the various segments of the society now.  The 1963
Republican Constitution was not a perfect document but its stance was clear
on issues of the society, issues that were central to federalism. It
directed that revenue derived from imports be paid 100 percent to the state
in proportion to the consumption of the product.  The same goes for Excise
Duty: 100% payment to the state according to the proportion of the duty
collected.  For minerals, the constitution shares the revenue in the
proportion of 50: 20: 30; i.e. 50 percent for derivation, 20 percent to the
Federal Government and the remaining 30% paid into the distributable pool to
be shared among the states, including the Donor State.  It was not perfect,
but it made up somehow for past mistakes.

However, the advent of the Military in power made nonsense of our
federalism.  Based on its hierarchical command structure, the central
government became so powerful while the states are relegated and
subordinated, or like the Soviet Federalism of old, " mere administrative
units of the central government.  But federalism is the direct opposite, the
coming together of different entities for the good of all but not the loss
of their respective independence."  Like I have said before, at a different
occasion, Nigeria fought a little civil war to safeguard the federation.

(It is my considered opinion, from all available facts that the civil war
was caused by the betrayals, intrigues, compromises, arrangements and
settlements in the command structure of the Military which resulted in
Ojukwu refusing to serve under a junior officer.)

The Willink's Report of 1958 succinctly declared that we are a group of
independent and autonomous kingdoms and peoples, with separate languages,
culture and religion, equal in status and in no way subordinate to one
another but united as a corporate body to form the Federal Republic of
Nigeria.

During his electioneering campaigns, President Olusegun Obasanjo assured all
the aggrieved and marginalised people that as soon as he assumed office, he
would redress all the injustices that have for years occasioned the polity
as a result of long period of military mis-rule. A glaring case of this is
the Niger-Delta. Obasanjo gave the people his words. And they were taken as
sacrosanct. A promised sense of belonging in place of lost and despairs. Of
course, these promises were made against the background of the obvious
sustained neglect and abandonment by successive regimes including the
multi-national oil companies engaged in exploration activities and the
consequent declining security situation in the Niger-Delta and its
implications to the economy.

Apparently worried by this development, the conferees of the 1995
Constitutional conference convoked by the late Head of State, Gen. Sani
Abacha recommended against all the rancours at the conference a sharing
formula of the Federation Account Revenue, that 13 percent instead be set
aside for derivation to assist the development of the oil communities long
pillaged by the Federal Government. The thrust of the recommendation was
succinct - to financially empower the oil communities of the Niger-Delta
Region to tackle headlong the colossal neglect, exploitation and degradation
arising from absence of federal presence and the insignificant spending in
the region. But unfortunately, this was not to be, as General Abacha failed
to implement it.

The golden opportunity came in May 29, 1999 when the 1999 Constitution in
which the 13 percent derivation was enshrined finally became operational at
the assumption of office by President Obasanjo. The swearing-in of the
President equally heralded optimism in the deprived and neglected people of
the Niger Delta as the prospect of the implementations of the 13 percent
derivation engendered relief that the once hostile and indifferent nation
was suddenly waking up to the unwholesome, sordid injustice wrought against
them for decades. They believed that the nation was now alive to the grim
reality of a people with long bruised psyches.

But contrary to all expectations this has not come to be. While the
President faces the onerous task of governance, the problems and the issue
of the degradation of the oil producing communities of the Niger-Delta has
receded to the background despite the vandalisation of old pipe lines
constructed in 1976 which are awaiting renewal.  The President has my
sympathy but not withstanding this therefore, he should brace up and accept
the challenge which destiny has bestowed on him and should not hide in the
mask of the Supreme Court which will do no one any good.

And to some finer issues: Who owns the land? In many of the oil communities
in the Niger- Delta, the activities of exploration and exploitation have
killed fishes, and destroyed the ecosystem.  Who bears the pains of
exploitation? Is it only the Federal, the State Government, the
multinational or the communities that are directly affected? So on what
basis is the federal government appropriating 40% of the 13 percent
derivation revenue?  The continental shelf belongs to the ethnic
nationalities adjoining it if Section 3 of the 1999 Constitution is
construed in accordance with the spirit upon which it was framed as the
Federal Government has no land except the Federal Capital Territory.

The Land Use Act of 1978 does not vest the land on the Federal, State and
indeed the Local Government. Section 3 of the 1999 Constitution recognises
36 States and the Federal Capital Territory. There is nowhere the Federal
Government is said to own the land.   In States, land is vested on Governors
to hold in trust for the people and in local government, to the chairman and
the Traditional Rulers, also to hold in trust for the people. But when the
land is occupied before the Decree came into effect, the land is vested on
the owners because they have the statutory right of occupancy. The case of
Ojema vs Momodu was an eye opener. That is the structure before the
Constitution.   The citizens of these communities were in existence there
before the coming into being of the country called Nigeria.

And talking about the Constitution, there is nowhere it says that the
revenue accruing from derivation should go to the State, but to the
communities which sustained losses through the evils of oil extraction.  And
so, why are the States getting all the money and not the immediate
communities from which the oil/revenue is derived?  It is common knowledge
that many oil bearing communities complain of the diversion of funds meant
for projects in their areas to some other issues.  As a matter of fact,
there is nowhere in the Constitution where it is stated that the 13% should
be paid to the State Government.  The money is "rent" for the land hired
from the communities to the oil companies.  They need the money for their
pains, their sufferings and as a result of the destruction of their means of
livelihood, and their environment through ecological disasters.  The money
ought to be deposited in a Trust Fund that would underwrite their education,
and economic development, each according to its value and contributions.

It is therefore necessary that whenever funds emanate from derivation, it
should be placed in a Trust Fund to be administered by representatives of
all the stakeholders; the communities, the Federal, States, Local
Governments and the multinationals.  Such a Board of trustees should
administer all funds for the implementation of projects.

No meaningful social, political and economic progress would be made unless
we restructure and devolve in all its ramifications.

It is Midnight Nigeria.  The House is Falling and unless all the parties
come together in a round-table and find a lasting solution to its
intractable problems, Nigeria will always be at war, not of the spirit, not
of the body, but of the soul.