Urhobo Historical Society

    


AN ACTION PLAN FOR POVERTY REDUCTION, PEACE AND SUSTAINABLE DEVELOPMENT IN THE NIGER DELTA REGION

 

A Memorandum Submitted to the Niger Delta Technical Committee, September 25, 2008

 

By Dr. Emmanuel Ojameruaye

 

Vice President, Research & Program Development

International Foundation for Education & Self-Help (IFESH)

5040   E. Shea Blvd, Suite 260, Scottsdale, AZ 85022, USA

Tel: 1-602-595-6108 (H); 1-602-628-0792 (Mobile); E-mail: emmaojameruaye@yahoo.com   

 

 

1.    Definition of the Niger Delta Region

 

Not all oil producing communities belong to the Niger Delta in geographical terms and not all communities in the Niger Delta region are oil-producing or impacted by oil exploration and production activities. There is an urgent need to clearly define the area of interest (“Niger Delta region” or “Oil Producing Areas”?) in order to appropriately focus developmental interventions. Currently, there are various definitions of the NDR including the following:

 

The area occupied by the Ijaws, the aboriginal tribe of the Delta. It spans the coast of the Bight of Biafra, from the Forcados River to the Opobo River and upstream to the tributaries of the Nun and Forcados Rivers…is about 10,000 sq. miles…population 2 million”

 

The area from the bifurcation of the Niger River at Aboh, bounded in west by Benin River and east by Imo River; total area put at 25,900 sq. km by 1997 ERML report, 20,000 sq. km by 1995 World Bank report, between 40,000 and 70,000 by NDES Survey and 112,000 sq. km by the NDDC Regional Plan.

 

Political Definition 1: The 6 states of South-South Geopolitical Zone.

 

Political Definition 2: The 9 NDDC States:112,000 sq. km, 27 million people, 185 LGAs, about 13,329 settlements 94% of which have populations of less than 5,000.

 

Suggestion: The term Niger Delta should be restricted to its geographical/hydrological definition. The term “Oil Producing Areas or Territory” should be used instead of “Niger Delta” region in describing the area of interest. Thus, the Ministry of Niger Delta should be changed to Ministry for the Oil Producing Areas and NDDC should be renamed “Commission for the Oil Producing Areas”(COPA

 

2.    A Clear Definition of Poverty

3.        

A socio-economic condition characterized by deprivation or disempowerment or lack of access or unequal access to basic socio-economic necessities.

 

A condition in which a person or community is lacking in the basic needs for a minimum standard of well-being and life, particularly as a result of a persistent lack of income.

 

Deprivation of those things that determine the quality of life, including food, clothing, shelter and safe drinking water, as well as "intangibles" such access to education, health, basic rights, dignity, and respect.

 

1.    A Clear Definition of Sustainable Human Development

2.        

development that meets the needs of the present without compromising the ability of future generations to meet their own needs” Brundtland Commission (1987)

 

“Development that not only generates economic growth but distributes its benefits equitably; that regenerates the environment meets rather than destroys it; that empowers people rather than marginalizing them. It gives priority to the poor, enlarging their choices and opportunities, and provides for their participation in decisions affecting them ---Development that is pro-poor, pro-nature, pro-jobs, and pro-women ---growth with employment, growth with environmental friendliness, growth with empowerment, and growth with equity” (UNDP Administrator)

 

4. Current State of the Oil Producing Areas (Niger Delta)

 

·       “Poor, backward and neglected”- 1958 Sir Henry Willink Commission of Inquiry Report which advocated for special attention to the region to ensure that it catches up in development with other regions of the Nigerian federation. After 50 years, not much has changed! According to the 2006 UNDP Niger Delta Human Development Report:

 

Poverty has become a way of lifein the Niger Delta…

 

The Human Development Index (HDI) scores for the Delta are almost as they were in the 1992 and 1996 calculations…relative human development situation has declined

 

The human development situation in Nigeria as a whole has declined, although the drop off appears to be steeper for the Niger Delta states than for the rest of the country

 

Oil wealth enriches Nigeria as a country, but it has not alleviated the grinding poverty, neglect and deprivation in the region that produces it

 

A critical issue …is not only the increasing incidence of poverty, but also an intense feeling among the people that they ought to do better given the enormous resources flowing from their region

 

Social instability, poor local governance, competition for economic resources and environmental degradation have taken a toll.

 

The delta today is a place of frustrated expectations and deep-rooted mistrust.

 

In spite of the substantial flow of oil money to state and local governments, service delivery and development projects have been disappointing.

 

Inadequate infrastructure in the delta is the result of historical neglect

 

Bad governance and corruption have played essential roles in perpetuating low levels of human development

 

The Delta could have reached a different (better) outcome had the region’s wealth been used judiciously

 

The Niger Delta faces the prospects of eco-catastrophe (ecological disaster)…The environmental sustainability of the region has been seriously compromised by human activities, including oil and non-oil related activities

 

5. Necessary Conditions for Poverty Reduction and Sustainable Human Development

 

2.1   Peace and Security

 

Steady deterioration of the situation since the early 1990s; increase in the number, types and intensity of conflicts, criminality and general sense of insecurity; new dimensions – kidnapping, hostage-taking, wanton destruction of oil facilities, crude oil theft, militarization, etc.

 

FG’s dual responses – physical development agency (OMPADEC/NDDC) and military suppression/ campaign/pacification- have proved ineffective.

 

A military “surge” or “counter-insurgency” strategy is counter-productive. What is required is a more robust response strategy encompassing the underlying factors such as poverty reduction, jobs creation for youths, resource control and environmental abatement. 

 

Short-term solutions include resolution of the resource control issue, demilitarization, demobilization and reinsertion, and sustainable job opportunities for militia groups and other groups

 

Implement a program that brings direct benefits of oil production to all the people, i.e. direct cash payment through a petroleum wealth dividend fund  

 

Establish inclusive peace and security network (PSN) at state and LG levels throughout the region and launch a P&S campaign. The PSN should be a Public-Private Alliance to promote peace and security and conflict resolution. 

 

Improve security through improved law enforcement, enhanced capability of police (e.g. logistics and improved conditions of service); establishment of more humane and reformatory prisons in remote locations (e.g. isolated islands), arrest and long-term incarceration of criminals in a remote prisons, abolish bail for criminals.

 

2.2   Resolution of the Resource Control Issue

 

“Resource control” (RC) is more robust than increasing mineral (oil) derivation percentage.

 

  “Derivation is the recognition of a prior beneficial right that was subsequently expropriated… the principle of derivation is a form of compensation and /or reparation for an expropriated interest. That is why the proviso to section 162(2) of the 1999 Constitution directs that not less than 13 per cent of the revenue accruing to the Federation Account directly from any natural resources located in the state should be paid to same. On the other hand, resource control is the desire of the state to control any natural resource found within its boundaries. Thus, it is not being recompensed for anything even though it will be paying tax to the centre for its common protection and administration of the federation”. Given the political economy of Nigeria, absolute RC control by state or regional governments is not practicable at this time and in the immediate future. What is practicable is to ensure “joint ownership” by the federal government and the mineral producing states/LG/communities. This can be achieved through the allocation of equity holding to the state/LG/communities. As equity holders, they can then participate in the management and control of the mineral business

 

There are three options to be considered in resolving the RC issue, viz:

 

i. Abandon RC in its true sense and increase derivation to progressively to 50% through either: a) Incremental derivation or b) Differential-incremental derivation.

 

ii. Replace derivation with equity holding –i.e. allocation of equity to oil-producing state and local governments.

 

iii. Combine derivation and equity holding

 

In order to capture the “voices” of the people and ensure a binding decision, there is need to conduct a referendum in all the oil-producing areas to adopt one of the above options.

 

5.2.1. Mathematical Model for Incremental and Differential-Incremental Derivation

 

GOR = COGX + DCOS +PPT + ROY +OOR = f(COGP, AP)

 

D = JVCC + EDS

 

NOR = GOR – D

 

MOD = {a + b(t – 2009)NOR        (Incremental Derivation models)

 

FG = cAD

 

SG = eAD

 

LG = fAD

 

MOD2 = {g + h(t-2006)}(COGX + DCOS + PPT + OOR) + {k + m(t-2006)}ROY – Differential-Incremental derivation model

 

GOR = Oil Revenue accruing to the federation account; COGX = Revenue from sale of crude oil

DCOS = Domestic Crude Oil Sales; PPT = Petroleum Profits Tax; ROY = Royalties and Rents

AP = Average price of crude oil; D = Deductions; JVCC = Joint Venture Cash Calls; EDS = External Debt Service; NOR = Net oil revenue; MOD = Oil Derivation Fund   

 

Incremental Derivation:

 

Increase oil derivation percentage from 13% to 20% in 2009, and subsequently on an incremental basis (5% point p.a.) to 50% by 2015.

 

Year

2008

2009

2010

2011

2012

2013

2014

2015

% Derivation to Oil Producing State and LGs

13

20

25

30

35

40

45

50

 

Differential-Incremental Derivation

 

Apply different derivation percentages to the various components of oil revenue - crude oil/gas exports (COGX), domestic crude oil sales (DCOS), petroleum profits tax (PPT), royalties (ROY) and “other” oil revenue (OOR). The FG should get the bulk of PPT, COGX, DCOS and OOR. On the other hand, the oil-producing state and local governments should get that the bulk of royalties (ROY). To ensure gradual adjustment, the percentages should be increased incrementally.

 

Derivation Accruable to Oil Producing State & LGs

2009

2010

2011

2012

2013

2014

2015

% COGX

5

9

13

17

20

23

25

% DCOS

5

9

13

17

20

23

25

% PPT

5

9

13

17

20

23

25

% ROY

50

60

70

80

90

95

100

% OR

5

9

13

17

20

23

25

 

 

5.2.3 Establish A Petroleum Heritage Trust Fund (PHTF) for Oil Producing Areas

 

50% of the allocation to PHTF will be prudently invested in the stocks, bonds, other financial assets and real estate to yield income

 

50% of the allocation to PHTF (plus 50% of income from investment) will accrue to a  Petroleum Dividend Fund which will be distributed (as direct cash payment) to all eligible resident (and registered) indigenes of oil-producing LGAs on an annual basis (similar Alaska Petroleum Dividend Fund )

 

5.2.4 Establish Agency for Development of the Oil-Producing Area (ADOPA) to replace NDDC

 

The ADOPA will focus on job creation, sustainable livelihoods and limited physical development programs.

 

5.2.5 Distribution of the Derivation Fund and Funding of PHTF and ADPA

 

The (Incremental) Oil Derivation Fund should be allocated among the oil producing state and local governments as well as the PHTF and ADOPA as follows:

 

Year

2009

2010

2011

2012

2013

2014

2015

%  Derivation

20

25

30

35

40

45

50

% to Sate Govts

10

11

12

13

14

15

16

% to Local Govts

5

6

7

8

9

10

11

% to PHTF

2

3

4

5

6

7

8

% to ADOPA

3

5

7

9

11

13

15

 

5.2.6 Adopt Equity Participation in the Oil Industry by Oil Producing States and LGs

 

·                   Review the JOA arrangements to allocating “equity” in the oil JVs to oil producing state and local governments as follows:

 

a)    30% to the FG (or begin from 50% declining gradually to 30% over a period of say 10 years)

 

b)   30% to oil companies  (declining gradually from the current 43% to 30% over a 5 years)

 

c)    20% to oil producing State Govts allocated by a weighted average of current and past hydrocarbon production, current reserves and value of oil producing assets (or begin from 5% increasing gradually to 20% over a period of a period of say 10 years)

 

d)   20% to oil producing Local Govts allocated by a weighted average of current and past hydrocarbon production, current reserves and value of oil producing assets (or begin from 2% increasing gradually to 20% over a period of a period of say 10 years)

 

The above percentages can be varied. The implication of the above is that the FG, SG and LG will participate in sharing the costs and benefits of the JV operations in the above proportion. The benefits of the PSC will be shared in the same production.

 

This arrangement will ensure “stakeholding” by oil-producing State and Local Govts. Thus if there is disruption in oil production in a State/LGA, their benefits will decline because of the decline in their share in total production.

 

This will also enable State and Local Govts to appoint their representatives into the Boards and top management positions of oil companies and influence (or “control”) their activities.  

 

Even if Federal Government converts all its JV into corporations (as speculated) this proposal is still valid.

 

5.2.7 Combine Derivation and Equity Participation

 

Allocate equity to SGs and LGs as follows: FG, 40%; Oil Companies, 30%; SGs, 15%, LGs 10%

 

Apply 25% Derivation to Oil Revenue, i.e. allocate 25% of oil revenue to oil producing states and local govts

 

3.    3 Ensuring Good Governance

 

       Design and implement an anti-corruption strategy and set up systems to ensure good governance.

 

       Establish independent state anti-corruption agencies manned by people of integrity (not political appointees)

 

Transfer all ill-gotten assets and money recovered from corrupt officials to petroleum heritage trust fund (PHTF)

 

Implement an effective political reform program including political education, improved electoral system and a return to IBB’s  2-party system and “option A4” voting system (queuing)

 

Build institutional capacity building at the state and LG levels

 

Remove LGs from federal revenue allocation. SG should fund their LGs.

 

Establish Government Accountability Offices; independent auditing of govt accounts and publication; transparent, open and competitive tendering system

 

Initiate a Good Governance campaign by  CSO that will demand good governance and monitor officials

 

Pass the Free of Information (FOI) and Protection of Whistleblowers legislation

 

5.4. Adopt a Sustainable Livelihoods Strategy in the Oil Producing Areas, including:

 

Diversification and reduced dependency on oil and related activities

 

Jobs creation and productive employment

 

Focus on the informal sector, small and medium enterprises, and micro-finance

 

Functional literacy and Skills training, especially for youth and women

 

Revitalization of agriculture and agro-based industries

 

Improved access to education, health, watsan, electricity

 

Launch “Make Poverty History” campaign

 

5.5. Coordination of Developmental Interventions

 

Ensure effective independent monitoring and evaluation of all developmental projects. Establish an independent M&E body and systems.

 

Publication of projects by all agencies – FG, SG, LG, NDDC and companies

 

Quarterly joint coordination meetings in each state

 

Delineation/allocation of projects to agencies

 

Avoid or minimize project duplications

 

Revitalize the “Blueprint initiative” and Annual Stakeholders Meetings of Shell

 

 

Appendix

 

 Alaska Permanent Fund

 

A dedicated fund owned by the State of Alaska:  established in 1976 through a constitutional amendment approved by Alaskan voters 

 

Fund Law: “At least 25 percent of all mineral lease rentals, royalties, royalty sales proceeds, federal mineral revenue-sharing payments and bonuses received by the state be placed in a permanent fund, the principal of which may only be used for income-producing investments."

 

Comprised of income-producing investments: The Fund is fully invested in the capital markets, diversified among various asset classes.  It generates income from these investments

 

Used for both savings and spending:   Realized earnings consist of stock dividends, bond interest, real estate rent and the income made or lost by the sale of any of these investment assets.  Unrealized earnings - those resulting from the change in market value of assets that are held - cannot be spent.  Most spending from the Fund has been for dividends to qualified Alaska residents.  The Permanent Fund Dividend Division (a separate entity from the APFC) operates the PFD program, which the Legislature established in 1980.

 

The 2007 Dividend Amount was $1,654 – paid to every eligible Alaskan.

 

Managed by a state-owned corporation: In 1982, the Legislature established the Alaska Permanent Fund Corporation to manage Fund

 

As at May 28, 2008, TOTAL FUND MARKET Value  $39.21 billion including US Bonds $9.36b; Non-US Bonds $1,27b; US Stocks $10,59b,000;  Non-US Stocks $5,36b; Global Stocks $5,64b; Real Estate$4,24b; Alternative $2,5b; Alaska CDs$241m 

 






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