The Almost Funny Case of Oil Producing States

The Almost Funny Case of Abia, Imo, Edo and Ondo ?Oil Producing? States ? and of the 40% Derivation Maximum

Mobolaji E. Aluko, PhD

July 6, 2005

Dear Compatriots:

I was just stepping out of my bathroom (where I do much of my thinking and singing under the shower) when this arithmetic hunch hit me?.

According to the May 2005 reports of the Federal Ministry of Finance, the following excerpt of the table shows the Gross Statutory Allocation, 13% share of derivation and Gross Total of the nine oil producing states:

S/N	State	Gross Statutory Allocation (A)	13% Share of Derivation (Net) (B)	Gross Total (C) = (A) + (B)	Ratio (B)/(A)	Ratio (C)/(B) = (D)	*13 (D)**	Crude Oil Excess
		Naira	Naira	Naira	Naira			Naira
1	Abia*	1,170,260,219.05	251,123,992.97	1,421,384,212.02	0.215	5.66	73.6	241,056,730.08
2	Edo*	1,299,264,587.48	275,963,802.93	1,575,228,390.41	0.212	5.71	74.2	241,550,824.17
3	Ondo*	1,220,799,232.39	343,756,960.74	1,564,556,193.13	0.281	4.55	59.1	361,651,163.53
4	Imo*	1,288,211,296.24	392,471,581.57	1,680,682,877.81	0.304	4.29	55.8	265,687,412.33
5	Cross-River*	1,222,670,070.47	484,163,282.28	1,706,833,352.75	0.396	3.53	45.9	258,890,305.06
6	Delta	1,306,900,637.97	3,650,010,389.18	4,956,911,027.15	2.793	1.36	Na	1,057,878,216.89
7	Akwa-Ibom	1,289,354,298.29	4,449,719,788.24	5,739,074,086.53	3.452	1.29	Na	920,279,247.67
8	Rivers	1,405,467,759.80	5,806,181,614.48	7,211,649,374.28	4.135	1.24	Na	1,460,874,696.12
9	Bayelsa	1,014,241,691.69	6,741,008,862.36	7,755,250,554.05	6.648	1.15	Na	1,151,271,662.49
	Total (all oil producing states)	11,217,169,793.38	22,394,400,274.75	33,611,570,068.13	1.996	1.501	Na	5,959,140,258.34
	TOTAL (all 36 states)	47,641,677,552.11	22,602,285,857.06	70,243,963,409.17	0.474	3.108	40.4	11,786,357,289.93

* states with (B)/(A) less than 1

Now Abia, Edo, Ondo, Imo and Cross-River have the unusual case that their 13% share of derivation is LESS than their Gross Statutory allocation. Since the total Gross Statutory + 13% Derivation is a fixed amount (from the Federation Account), that means that there is a possibility that IF derivation percentage is INCREASED by a certain amount , it could WIPE OUT the statutory allocation of these peculiar states, and they could then get LESS Gross Total than if the derivation percentage were not increase.

For example, if the derivation percentage were increased from 13% to 45.9%, and if somewhere between those two limits the increase wiped out the Cross-River statutory allocation of N1.223 billion, then Cross-Rivers State would actually get LESS Gross Total Allocation than before.

The same considerations go for (Imo), (Ondo), (Edo and Abia) at the threshold percentages of (56%), (59%) and (74%) from 13% respectively.

Fortunately, this peculiar happenstance is not happening here ? at least not based on these May 2005 data - but the above table shows that distinctly it could conceivably happen if some relative numbers change.

Fascinating !

So Cross-Rivers State and other non-AkBaDeRi states ? be careful what you ask for, or you might just get it !

Finally, there is another point that must be brought out: based on these May 2005 data: the percentage derivation cannot really be raised beyond 40.4% because it would WIPE OUT all the statutory allocations of the states, and leave the total of N70.2 billion with the 9 oil-producing states !

That would be nice, would it not ? Quite fair, would it not be ?

So what is this talk of 50% anyway ?

Bolaji Aluko

Scratching his head

And Shaking it

At the vagaries of arithmetic calculations

In the face of hard constraints

Bibliography:

For Tell Magazine jpeg files of Federal Allocations, please see:

http://www.nigerianmuse.com/images/FGNAllocations_May2005_Page1.jpg

http://www.nigerianmuse.com/images/FGNAllocations_May2005_Page2.jpg

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