Thursday, 30 May 2013

Oil Producing States

On the Atlantic coast of Nigeria where the Niger River divides into numerous tributaries and along the coast from Benin River on the west to the Imo River on the east lies the oil rich Niger Delta.
Home to some 30 million people from the Ijaws, Edos, Urhobos, Itsekiris, Yorubas, Igbos, Efiks and Kalabaris, the Niger delta occupies a land mass area that makes up 7.5% of the country. The traditional oil producing Niger delta states are Edo, Delta, Bayelsa, Rivers, Akwa-Ibom and Cross Rivers. Abia, Ondo, Imo were later additions. Anambra State was recently added in 2012 by the president to make up the ten oil-producing states. 

The 80-20 States

Akwa-Ibom is the highest oil producing state with eight local government areas in the state hosting production. Apart from crude oil, Akwa-Ibom has several natural mineral resources such as clay, limestone, salt, coal, natural gas, giver nitrate and glass sand.
Rivers state is famous for its oil production, with vast reserves of crude oil and natural gas. It is also the chief oil-refining city in the country with two refineries in Port Harcourt. For several years Rivers State produced more oil than all the other states before being displaced from its position by Akwa-Ibom. The main occupation of its people is farming and fishing, with the state government currently running a robust agricultural policy, aimed at improving food production.
Delta state ranks third to rivers and produces a major fraction of Nigeria’s crude oil. The nation’s second refinery as well as petrochemical plant is located in the state, at Warri. The people of the state are mostly farmers, with agricultural produce as; yam, fish crab, cocoa yam, rubber.
Bayelsa state is home to Oloibiri in Ogbia local government were crude oil was first discovered in commercial quantities back in 1956. The first oil well was active for 20 years before it was shut down. The major occupation of Bayelsa people are fishing and farming.
Nigeria’s crude oil types were named after the regions that produce them- Bonny Light is named after the prolific city of Bonny in Rivers state, home to the liquefied natural gas (LNG) on Bonny Island. Qua Iboe is from Akwa Ibom, Brass comes from Bayelsa, Forcados and Escravos from Delta. 

Revenue Contributions, Derivations and Community Funds

There is a derivation principle governing the allocation of revenue to oil producing states. The 13% derivation was enshrined in the 1999 constitution, and came into effect in year 2000.
After the sale of Nigeria’s crude oil, 13% is removed from the gross oil revenue exclusively for oil producing states. To understand how oil revenue is shared – click here. Each oil producing state gets a share out of 13% revenue, calculated based on the production of oil from the individual states. For instance, Akwa-Ibom earns the largest revenue from derivation royalties because it is the highest oil producer out of the oil producing states. These sums are paid into the state accounts.
If the presently debated Petroleum Industry Bill is passed into law, with the Host Community Fund allocation, communities described “petroleum producing areas” are set get a new 10% funding for socio-economic and infrastructure development. 

Dearth in the Midst of Plenty

In human development terms, the delta fares somewhat better - poverty rates according to the NBS are said to be lower by half, compared to the rest of Nigeria. Contrary to these findings, over 75% of the people of the delta rate themselves as poor (Sayne, Gillies).
Despite the oil riches of the delta region, the glaring paradox is that it remains grossly underdeveloped in terms of formal economy, infrastructure and public services. Militancy is just one of the symptoms of the deeply rooted problems in the delta regions. Environmental damage brought about by decades of exploitation; continuous gas flaring, oil spills, illegal refining, oil theft and lenient laws continue to worsen the situation. Multinational oil companies have contributed in part to these hazards. These companies have had to pay compensations to calm volatile reactions from communities and/or penalties albeit at lower rates than international standards. 
The agitations of different stakeholders in the Niger Delta have posed a number of pertinent questions around good governance and benefit capture for the oil producing communities. For instance, some communities have claimed that in the past 13 years, their governors have misappropriated over N7.282 trillion received as derivation funds, calling on NEITI and other agencies to intervene in this matter.
Over the years, the Nigerian government has increased financial allocations to the area and established all sorts of agencies to oversee socio-economic development within the Niger Delta.  Some of the agencies have included the likes of OMPADEC (1996) now defunct, NDDC (2000) and Ministry of Niger Delta Affairs (2008) South-South State Governors from oil producing states have also jointly ventured into establishing an organisation- the BRACED Commission to promote regional, economic co-operation and integration. To what extent though have these agencies and financial allocations addressed the problems of the delta? What value creation have they accomplished? What can be done to strengthen good governance and transparency around natural resources countrywide?

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