Reuters Foundation: More oil money should stay in Nigeria’s delta -ICG

03 Aug 2006 10:08:04 GMT
Source: Reuters

By Estelle Shirbon

ABUJA, Aug 3 (Reuters) – Nigeria could avert “violent meltdown” in its oil producing Niger Delta if it met militant demands for more local control over oil wealth in a transparent way, the International Crisis Group (ICG) said on Thursday.

A wave of militant attacks this year has killed an unknown number of people in Nigeria’s vast southern wetlands and shut down a quarter of output from Africa’s biggest oil producer — the latest flare-up in a conflict that has dragged on for years.

“Attacks on the oil industry in recent months — kidnappings of oil employees, sabotage of remote riverine installations and two ‘symbolic’ car bombings in regional cities — mark a turning point in the conflict,” the ICG said in a report on the delta.

The ICG, dedicated to conflict prevention and resolution, said delta militancy was more dangerous now than in the past, when unrest involved mainly local groups seeking to extort promises of cash or badly needed municipal development projects.

“Today’s militants are increasingly connected in a loose network … They share an increasingly common goal: ‘resource control’ for a region whose residents perceive history to have deprived them of their fair share,” the ICG said.

“Militants boast — and have displayed evidence — of being better armed than ever before,” it added.

Nigeria’s oil producing states receive up to six times more national revenue than other states under a system known as “derivation” which allows them to keep 13 percent of locally generated petrodollars.

But delta militants, angry at poverty and neglect in a region that produces most of Nigeria’s wealth, accuse state politicians of wasting or pocketing much of the derivation funds and call for total local control over oil revenues.

OPPORTUNITY

“The demand for devolved resource control is legitimate and steps should be taken to bring this about transparently,” the ICG said, adding that high oil prices offered an opportunity.

The recommendation follows a U.N. report last month that also backed the call for greater resource control in the delta.

“With oil prices over $70 a barrel and expected to remain high for the foreseeable future, an increase in the formula of derivation payments to states that produce oil could be achieved without weakening the federal government budget,” the ICG said.

However, the reform would have to be accompanied by tougher measures against corruption, an area in which the government’s record is seen in the delta as “window-dressing”, the ICG said.

It suggested increasing the derivation amount given to groups of residents at the village or clan level, and refashioning the joint ventures between government and oil firms that control production to give residents an ownership stake.

It said that the response to unrest in the delta so far, a mix of brutal army repression and a “semi-illicit system of government and oil company payments to militants”, had bred resentment and rewarded violence, worsening the conflict.

Oil companies collectively spend millions of dollars each year on development projects in the delta but the ICG said these had failed to make a positive impact on most communities.

“White elephants — empty clinics and schools lacking staff or equipment, hulking, empty water towers with broken or missing pumps and pipes — are visible throughout the region,” it said.

The government of President Olusegun Obasanjo has announced measures including the building of a $1.8 billion east-west road in the delta and the creation of 20,000 new jobs. The ICG likened this to “plugging holes in an increasingly leaky dam”.

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