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Urhobo Historical Society |
AN ACTION PLAN FOR POVERTY REDUCTION, PEACE AND SUSTAINABLE
DEVELOPMENT IN THE
NIGER
A Memorandum Submitted to the
By Dr. Emmanuel Ojameruaye
Vice President, Research & Program Development
International Foundation for Education & Self-Help (IFESH)
5040
Tel: 1-602-595-6108 (H); 1-602-628-0792 (
1.
Definition of the
Niger
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
�
�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
�Poverty has become a way of lifein the
Niger
�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
�Oil wealth enriches
Nigeria
�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
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
�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
�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
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
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
|
%
|
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
�A dedicated fund owned by the State of
Alaska
�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
�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