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allAfrica.com: Making Oil Revenue Work

Maxwell James, The Daily Trust (Nigeria)
Published: Aug 22, 2007

For the record, I wish to state that my empathy for the Niger Delta region is strictly based on my brief experience as a development worker (not a journalist) with a non-governmental organisation (NGO) that has been working in the area of peace and development in Nigeria for decades. I have never been an agent of the Movement for the Survival of the Ogoni People (MOSOP) or any other pressure group in the region, neither have I met the MOSOP leader, Ledum Mitee before as Rev. Fr. Matthew Hassan Kukah deliberately misinformed the public in his self-protective article entitled “MOSOP, the Ogonis and I: Some Clarifications” (Daily Sun, June 30, 2007); a purported reply to my earlier piece “Ogoniland, Shell and Fr Kukah,” in which I made some compelling points against the strategies employed in the ongoing Ogoni peace talks.

Despite being a proud Igala man of Kogi State origin, I’ve had privilege to visit more than 90 percent of the existing communities in the core Niger Delta states of Rivers, Bayelsa and Delta in the course of my peace-building effort in the troubled region. While I am not frowning at the return of Shell to Ogoniland (which Fr. Kukah denied having knowledge of), I still stand by my position that the approach adopted in the entire peace process should be reviewed.

At least, any patriotic Nigerian that has lived all his life in the Northern part of this country like yours sincerely should know that the paradox of our clime is that the resource which oils the wheels of our nation’s economy is found among the group that is suffering from needless underdevelopment including Fr. Kukah’s ‘beloved’ Ogoniland. This group has little or no say as far as oil revenue disbursement is concerned. Unlike Fr. Kukah, it is my humble opinion that we should collectively and sincerely too educate the oil companies and the government on minimum standard of global practices as I intend to do in this piece instead of working hand in gloves promoting obnoxious practices as well as other impious existing laws and environmental legislations like the Mineral Act of 1958, the Land Use Decree of 1978 and the Petroleum Decree of 1969.

Like Aceh in Indonesia, Doba Basin in Chad, the Niger Delta accounts for all the oil revenue that Nigeria depends on for her economic survival. For instance, oil translates to over 90% of export earnings and some 80% of government revenue. But the history of oil exploration here is synonymous with mindless exploitation. This is apparent because since the discovery of oil in Nigeria in 1956 at Oloibiri in the present Ogbia Local Government of Bayelsa State and Bomu/Ogoni/Rivers State in 1957 by Shell Petroleum Development Company (SPDC), further ‘successes’ were recorded by a number of oil companies including Chevron Nigeria Limited in the 1960s and 1970s.

The impact of the above is yet to be seen and felt as colliding and dizzying factors have effectively conspired to rob the oil-bearing communities of their common humanity. Today, we expect appreciable standard of living, peaceful atmosphere for business and plausible governance but what we have is frighteningly disturbing as the military is still struggling to contain militia groups in the oil-producing region. These of course are being facilitated by unbridled negative practices inherent in our system including the Fr. Kukah-style (back door consultations). The consequences are enormous as Dr Edmund Daukoru, former Energy Minister recently lamented that between 1999 and 2003, Nigeria lost a colossal amount of revenue running into US$6.8 billion due to sundry militia activities. He went further to say the unimaginable; that US$21.3 billion of oil revenue has been lost between 2003 to date.

Again, the case of the Niger Delta is not different from other oil-producing countries of the world as most often than not, political solution is adopted. This often translates into greater oil security for the common good of all. It is cheering, however, that reprisals, trying of the leaders of the militants, separatist or vigilante groups were reviewed to give room for dialogue; the next option is devising a coherent and penetrative community-based revenue-sharing formula that has human face as President Umar Yar’Adua plans to convene the Niger Delta summit.

The Aceh province in Indonesia had also had their fair share of struggle with the central government, which pundits say is related to minority right, self-determination, social and economic justice like the Niger Delta. The peace process had several setbacks before it was finally kick-started after the devastating impact of the tsunami that consumed a total number 170,000 people, with 500,000 rendered homeless including colossal damage estimated to be in the region US$4.5 billion.

Nigeria has so many things in common with Indonesia – high population; many provinces (states); long years of colonial interference; decades of bad governance; fratricidal crises and civil war and heavily corrupt leaders. The above scenario is instructive because the cordial relationship between the government, the oil companies and the communities was not affected at all as evident in the fact that after series of protracted crises, the Acehnese unlike the Niger Deltans were given the bulk of the oil revenue to mitigate insurgency.

Now let’s take a look at specific cases. Worthy of note is how oil revenue was put to work in Aceh province. Union Oil of California (UNOCAL) (now Chevron Company), a major oil company with decades of experience spanning 35 years and a whopping investment portfolio of US$5 billion, has been operating without hitches in the country. The company has a spread of interest in about 6.6 million acres in Indonesia. To give credence to the company’s local content policy, the company signed the first production sharing contract with Pertamina – the state oil company. After the discovery of Indonesia’s largest offshore oil and gas field – the Attaka field, the company swiftly started commercial gas operation at Santa terminal. What is cheering for the Indonesians distinct from the Niger Deltans is the fact that the company’s average staff strength of 2000 has 96% local content (indigenes); this looks like a remarkable sense of social responsibility.

Politically too, our lawmakers can put a great deal of effort to check our obnoxious laws mentioned earlier. Some examples will illustrate this point. The Indonesian parliament passed two strategic laws – the Regional Political Autonomy and Fiscal Decentralisation laws. The laws have given radical economic teeth to the country’s 340 local governments, 260 regencies and 72 cities. Also, there are lessons to learn from the country’s tax system which mainly has two divisions – central and local governments. The laws provide that the central government receives 20% while the regional (local) government gets 80% which is further distributed accordingly. For instance, 16% goes to the general province while 64% goes to the oil-producing communities. You may call this ‘resource control’ but that is how oil revenue works in Indonesia. Royalties are distributed according to 20/80% formula. This common sense (not common in Nigeria) style of revenue distribution in Indonesia has awakened the hitherto dormant provincial government (like Northern Nigeria) to seek alternative revenue sources from oil and gas production.

It is saddening, however, that the inconsequential role of the states, local governments and the communities in our clime has watered down the impact of oil revenue sharing formula as well as its impact in Nigeria. With the foregoing, the Aceh example has laid a huge moral burden on the multinational oil giants to review their community (local content) efforts wholesomely and also call for the comprehensive review of Nigeria’s oil and gas policy by the government. Finally, weaning Nigeria from dependence on oil and making its revenue work must start with conceding at least 50% of benefits and earnings from natural resources to the local communities. Period!

James is Managing Consultant, MediaMax Consulting, Kpansia, Yenagoa, Bayelsa State,

Distributed by AllAfrica Global Media. (allafrica.com)

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