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More on Resource Control - A Few "Last Words"

 

by

 

Mobolaji E. Aluko, PhD

Alukome@aol.com

 

 

May 29, 2002

 

INTRODUCTION

 

 

Periodically, I give over my Essays to others whose contributions I wish to highlight.  This time, I give it to two recent contributors on oil and resource control:

 

  Prof. U. O. Umozurike: "Resource Judgement: Review and Prospects";

            Prof. Sam Aluko: "There are no Oil Producing States"

 

The one is an erudite contribution to the discussion - to my mind - and the second introduces a second dichotomy to the controversial onshore/offshore  issue:  oil-producing/oil-endowed states.

 

Please read the two articles as fully reproduced in the Appendix. 

 

 

ON PROF. UMOZURIKE'S PIECE

 

 

Let me first commend and comment on Prof. Umozurike's piece in the Guardian of May 28.

 

In a season of rants and raves over the Resource Control Supreme Court judgement, particularly coming from our Akwa Ibom compatriots, Professor Umozurike's rejoinder is the most academically concise that I have come across.  Even Professor Itse Sagay's usually erudite rebuttal came a little too late - as a SAN, why did he not represent his own Delta State before the Supreme Court for example? - and quite too emotional, understandable under the circumstances of the prospect of seriously reduced revenues of some states and the need to pay their own debts.

 

The key sections of Umozurike's piece are the following:

 

 

QUOTE

 

Since the Constitution is silent on the matter, it falls to be decided through negotiations between the federal and state governments. Alternatively, the National Assembly could resolve the issue through legislation taking serious note of the losses suffered by the traditional users of the seas, the extent of their usage and the risks to which they are exposed. There is a world of difference to a coastal state of mining conducted one mile from the coast and mining carried out 200 miles away. The nearer the operations to the coast the greater the losses and the risks; the farther away the operations, the lesser the losses and the more remote the risks........The whole issue should appropriately be discussed in a national conference which is curiously anathema to the Federal Government. What could be more democratic than to openly discuss all outstanding problems and the fundamental basis of national relations which could have been one of the greatest achievements of any administration?.......A distance geographically pertinent to the coastal state should be treated as though it was part of its territory for revenue purposes. The territorial sea and the contiguous zone should certainly be so treated.....

 

UNQUOTE

 

 

The present mantra of a "political solution" to the Supreme Court ruling will in fact be found in POLITICAL NEGOTIATIONS - most preferably in a National Conference - that MUST result in FAIRNESS to ALL of Nigeria,  and not through bluster or threats.  All of that must be realized  within the reality that the littoral  states make up only 8 out of 36 states (or 22%), 26.6% of Nigeria's population, 12.5% of the land area, 168 out of the 774 local councils (21.7%although those numbers are growing in leaps and bounds), 24 out of 109 Senators (22%) and  87 out of 360 National House of Representative members (24%).   Thus, in general, they are a one-quarter to one-fifth-clout region, and their political maneouvarability in passing laws must be realistically evaluated within those numbers.  President Obasanjo cannot just through legislative fiat - and for short-term political advantage - come up with a "political solution".  After all, this is not 1976 - 1979 when he was a military dictator.

 

Prof. Umozurike highlights an important issue:  the importance of certain jurisdictions in the sea beyond the ephemeral "low water mark (LWM) along the coast", which is referred to as the coastal baseline.  I can assure you that if you pick the last most seaward village along the coast of a given state (say Akwa Ibom), and provided one mile is still 1760 yards, that "low water mark" cannot be more than 880 yards - or half a mile, even less - beyond that last village!  Beyond this coastal BASELINE (CB), there  is

 

(i)  the 12 nautical mile Territorial Sea TS (by Article 3 of the 1982 United Nations Convention of the Law of the Sea UNCLOS)

 

(ii)  the High Seas, which is internationally recognized (according to several 1958 Geneva Conventions which have now been superceded by 1982 UNCLOS) as everywhere beyond this outer boundary of this territorial sea;

 

(iii)  the additional 24 nautical mile Contiguous Zone CZ (according to Article 33 of UNCLOS) making 36 nautical miles beyond the baseline;

 

(iii)  the 200 nautical mile Exclusive Economic Zone EEZ from the baseline [according to Article 57 of UNCLOS];  this makes the territorial sea AND the Contiguous Zone PART of the EEZ, with an additional 176 nautical miles to spare beyond Contiguous Zone;

 

 

(iv)  because of certain shapes of their Continental Shelf, some countries (eg the United States) are allowed to claim up to but no more than 350 nautical miles of the EEZ without challenge - some kind of Extended EEZ (EEEZ).  

 

So the question is:  what do we assign to eight littoral states:  13% of all oil revenue from CB (LWM), TS, CZ, EEZ or EEEZ off their coasts?  Can we with a straight face claim that 350 miles away from Akwa Ibom disrupts the life of fishermen of Akwa Ibom - do their canoes go that far? -  and a spill so far away pollutes their land?  Or even 80 miles, like the Agbami offshore field is?  Depending on the ocean currents, could such a spill not get to Lagos State coast before getting to Akwa Ibom?

 

Those are questions that inquiring minds want to know.

 

My suggestion is  that oil revenue derived from oil fields only in the territorial seas TS (that is 12 nautical miles) plus half of the Contiguous Zone CZ (that is a further 12 nautical miles, making a total of 24 nautical miles) should be assigned to ALL THE LITTORAL STATES in a manner INVERSELY proportional to the distance between SPECIFIC oil fields and the state capital (40%) and local government headquarters. (60%).  Any net revenues OUTSIDE the 24 nautical miles zone should be FULLY put in the Federation account to be split by all tiers of government.

 

 

ON PROF. SAM ALUKO'S PIECE

 

Prof. Sam Aluko, in the Champion newspaper of May 27, 2002, makes the case that  what we gain NET from oil as a nation is not all what it is cracked up to be, and that an important distinction is to be made between oil-endowment and oil-production.

 

The key section of his piece is as follows:

 

QUOTE

 

"One thing that Nigerians donít know and even the oil-endowed areas, not oil-producing areas Ė because they donít produce oil or contribute to the production, is that the cost of earning that oil dollar is very high, so the net is very minimal." According to him, if the country earns $25 per barrel the net value accruing to it is about $15 before oil industry-related expenses. Prof. Aluko stated, however, that after meeting the cash call commitments to oil firms the government is left with only about $6 per barrel. These commitments, he said, include purchase of the oil firmsí equipment, high cost maintenance of Nigerian National Petroleum Corporation (NNPC), Company (PPMC), 28 depots and four refineries.  He said if the country manufactured the equipment, "we would have been desiring money maximally from oil. If you look at it, we get more money on Customs, Federal Inland Revenue Service (FIRS) and some other company taxes than we get on oil. The total gross of oil contributes only 12 per cent of the Gross Domestic Product (GDP) the wealth of Nigeria," he said. Prof. Aluko also stated that in comparison, agriculture alone accounts for 42 per cent "or 3 1/2 per cent times that of oil," to the GDP..........

 

 

UNQUOTE

 

 

With respect to GDP contribution, Table 1, derived from a year 2000 Central Bank publication, gives the true picture from 1995 to 1999 (for which I have the most complete data.  Thus we see that in fact during the years 1995 - 1999, the GDP contribution of oil never rose to more than 11 - 13%, while the contribution of agriculture was  between 40 and 47 %, roughly four times higher as approximately stated by Prof. Sam Aluko.

 

The other issue he raised has to do with passivity of economic activity of the "oil-endowed" states. The indisputable fact of the matter is that these states as official entities are PASSIVE participants in the production of the oil, and expend little or no money of their own in the production.  The question then arises:  what REVENUE actually is to be shared?

 

For example, in the year 1999 (for which I have the most complete information), I have indicated certain oil earnings information in Table 2.  What we see is that although the country earned N1,184,779.7 million in the entire year from 1.96 mbd of oil sales, our gross oil revenue was N738,798.7 million (or 62.4% of earnings), and after removing oil-related first charges of N209,581.5 million, that reduces to N529,217.2 (or 44.7% of earnings.)  Thus in effect in 1999, we went from earning $17.90 per barrel to $11.2 per barrel to $8.0 per barrel.

 

The question that needs to be responded to is the following:  what "revenue" is to be awarded, after we have decided whether it is the LWM, TS, CZ, EEZ, EEZ or no zone at all that we are talking about? Section 134 (1) of the 1960 constitution clearly stated that  50% of the proceeds of royalty and rents (SPECIFICALLY royalty and rents) received by the federation with respect to mining of minerals (including mineral oil) in any given region should be given to the state, with the continental shelf being part of that region "for the purposes of that section."

 

Obasanjo's 1979 Constitution made no explicit provision for revenue allocation, but Shagari's National Assembly did enact an Act [Cap. 16], and amended thereafter by various military decrees. If we fast forward to Babangida's decree 106 of 1992, this gave three percent "from mineral revenue" to OMPADEC for the development of oil producing areas BASED ON NEED,  and another one percent of the revenue accruing to the Federation Account derived from minerals to be shared among the mineral producing states in proportion to the amount of mineral produced from each state, whether onshore or offshore.  It is this decree which carried over to the 1999 Constitution, Section 162(2), which states, inter alia:

 

QUOTE

 

..Provided that the principles of derivation shall be constantly reflected in any approved formula as being not less than thirteen percent of the revenue accruing to the Federation Account directly from any natural resources.

 

UNQUOTE

 

 

Unlike the 1960 or 1963 Constitution, subsequent derivation clauses in Acts and in the Constitution have left enough ambiguity to drive a truck through.  For example, for 1999, does the revenue referred to in the 1999 Constitution mean the crude oil export earning N1,184,779.7 million, the gross oil revenue N738,798.7 million or the net revenue after removing oil-related first charges of N209,581.5 million, the amount N529,217.2?

 

This are the questions that Prof. Sam Aluko's intervention bring to the fore.  It is only reasonable that the revenue in question should be the NET revenue - which is less than half of the export earnings related to oil.  This is why the Federal government is now talking about commercializing the NNPC, so that its financial support for it can cease.  Also, FGN move (a la Falae suggestions) from Joint Ventures (which require all these cash calls because of joint development and production costs) to Production Sharing Costs (which have after-profit sharings with contractors only and no upfront costs) is to be commended.

 

 

DEBT PAYMENT ISSUE

 

There is an issue almost as equally momentous as the offshore/onshore dichotomy.  This has to do with the issue that the federal government and the individual states should now be responsible for their own debt.  For example, Bayelsa recently revealed that it owes $27.5 million dollars from debt it inherited from Rivers State 22 years ago;  Adamawa owes about N20 billion (inherited from Gongola State),  Lagos State owes N50 billion and Osun N42 billion.  For example, since Nigeria used N149 billion to service its external debt in 1999, one would expect that about 85% of that (or N126.7 billion) was for the Federal government and N22.3 billion would be due to the states. Coming from Ekiti State which has traditionally has the least subvention from the Federal government (see Table 3) and  little or no external debt, no political solution short of each state paying its own debt will suffice for Ekiti!

 

Let me explain with a graphic example, if contrived.  Suppose person A lives in a 30  million dollar house, and I (person B) live next door in a 300,000  dollar house, and we pay the same mortgage interest rate (spreading  that mortgage equally over 30 years).  Each one of us is to share  some 300 million dollars revenue in some EQUAL MANNER for the next 30  years. Before debt payment, each person would get 10 million  dollars per year. Now, is it FAIR for someone to COMBINE our  mortgages (30.3 million dollars), then ask EACH of us to SPLIT that  mortgage equally (1.01 million dollars, paying 0.505 millon dollars each), before giving us our revenue money, so that we each get 9.495 million  dollars each annually? Should Person A not pay his own annual 1 million dollar debt (and hence receive 9 million dollars annually) and Person B pay his own annual  debt of 10,000 dollars - and hence receive net 9.99 million dollars annually?  Otherwise, would that not mean that I am subsidizing Person A by about $500,000 annually, more than the TOTAL cost of my house of $300,000?

 

This blatant unfairness is what has been happening in our country with "First  Charge" debt removal, in which some states with little or no debts  have been SERIOUSLY subsidizing those with ENORMOUS debts and nothing  to show for them. That is one of the things that the Supreme Court  has ruled to be illegal - among other things that we should talk  about in a Sovereign National Conference, and no "political solution" can cure it.

 

 

EPILOGUE

 

Using as props, I have analyzed the recent contributions of Professors Umozurike and Aluko in order to bring out some points concerning the Resource Control debate in Nigeria.  The need for a political solution requires cool heads.  Rather than inveigh against Chief Obafemi Awolowo and Chief Bola Ige and Chief Aremu Obasanjo and  Chief Rotimi Williams and Justice Kayode Ogundare - the usual anti-Yoruba demagoguery coming this time from minority quarters and championed by Akwa Ibom drum majors like Governor Obong Attah - those who are unhappy about the Resource Control suit should buckle down to political solutions and stop threatening the universe.

 

They should also prepare for a Sovereign National Conference.

 

Best wishes all.

 

 

 

BIBLIOGRAPHY

 

http://www.nigerdeltacongress.com/farticles/federalism_the_constitution_and_.htm

Federalism, the constitution and resource control: My response

Prof. Itse Sagay

 

http://www.akwaibomstate.com/DEMANDS.htm

NO ON-SHORE/OFF-SHORE OIL DICHOTOMY; NO BALKANIZATION OF OUR STATE;

CONVENE SOVEREIGN NATIONAL CONFERENCE, AND RESTRUCTURE NIGERIA

April 20, 2000

IBOM PEOPLES CONGRESS, U.S.A.

 

http://www.gamji.com/NEWS1389.htm

Akwa Ibom State: The Nigeria Scapegoat (I)

Clement Ikpatt

 

http://www.gamji.com/aluko25.htm

MONDAY QUARTERBACKING:  Revenue Allocation and the Nigerian State: Of  Derivation,  Dichotomy and Debt Issues

Mobolaji E. Aluko, May 20, 2002

 

http://www.gamji.com/aluko16.htm

MID-WEEK ESSAY: Simplifying Our Revenue Allocation Formula Once and For All

Mobolaji E. Aluko, Ph.D. 

Wednesday, April 17, 2002

 

http://www.hrw.org/reports/1999/nigeria/Nigew991-04.htm

IV. OIL WEALTH AND THE NIGERIAN CONSTITUTION

 

http://www.nigerdeltacongress.com/tarticles/trouble_with_onshore.htm

The trouble with onshore/offshore dichotomy

 

http://www.nigerdeltacongress.com/particles/politics_of_oil.htm

THE POLITICS OF OIL: WHO OWNS OIL, NIGERIA, STATES OR COMMUNITIES?

Professor Omo Omoruyi

 

http://www.nigerdeltacongress.com/oarticles/obasanjo_has_betrayed_us.htm

Obasanjo Has Betrayed Us  by Obong Victor Attah

 

http://www.nigerdeltacongress.com/iarticles/i%20will%20die%20for%20resource%20control.htm

Iíll die for resource control ó Attah

By  Mideno Bayagbon

 

http://www.nigerdeltacongress.com/sarticles/sins_of_a_people.htm

Sins of a people...

Uwem Inyang

 

http://www.nigerdeltacongress.com/articles/Awo%20and%20the%20Creation%20of%20States.htm

Awo and the Creation of States [1987].

Ken Saro-Wiwa

 

http://www.nigerdeltacongress.com/darticles/decolonization_through_resource_.htm

Decolonization through resource control

Ita Awak

 

http://www.deltastate.com/articles/dafinone.asp

THE 13% DERIVATION FUND CONTROVERSY

Senator David Dafinone's submission on the Fund

 

http://www.unesco.org/most/crossroadsedl.htm

Federalism, Fiscal Centralism and the Realities of Democratisation in Nigeria: The Case of the Niger Delta

Edlyne E. Anugwom

 

http://allafrica.com/stories/200104020047.html

Focus On Controversy Over Control of Resources

UN Integrated Regional Information Networks  April 2, 2001

 

http://www.gdiv.statkart.no/galos/Law_of_the_Sea.html

Law of the Sea

 

Oceans and Law of the Sea

http://www.un.org/Depts/los/ 

 

UNCLOS and Agreement on Part XI - Preamble and frame index

http://www.un.org/depts/los/convention_agreements/texts/unclos/closindx.htm 

 

UNCLOS

http://www.unclos.com/ 

 

UNCLOS

http://www.unclos.org/ 

 

 

 

 

 

Table 1:  Oil and GDP Contribution at 1984 Factor Cost

 

------------------------------------------------------------------------------------------------

 

Activity Sector                     1995                1996                1997                1998                1999    1999

                                                                                                                %of GDP

-------------------------------------------------------------------------------------------------

 

1.  Agriculture                       40.11         41.75          43.50       45.25         47.15     40.6

    %of total GDP                  (38.7%)    (39.0%)  (39.4%) (40.1%)  (40.6%)

 

2.  Industry                                20.26         21.23       21.47     20.53     20.08    17.3

(i) Crude Petroleum                 13.07       13.97       14.17      13.48    12.92    11.1

    %of total GDP                  (12.6%)    (13.1%)  (12.8%)  (11.9%)  (11.1%)

(ii)Mining & Quarry    0.31         0.32           0.34      0.36       0.37     0.3

(iii) Manufacturing  6.88   6.94         6.96           6.69       6.79       5.9

 

3.Building & Const.    2.07        2.10           2.23       2.36      2.46     2.1

 

4.Wholesale/RetTrad          12.60      12.71       12.90     13.29     13.62    11.7

 

5.   Services                           28.49       29.23       30.30    31.52     32.69    28.3

 

---------------------------------------------------------------------------------------------

 Total (GDP)                          103.53      107.02  110.40  112.95   116.00   100.0

----------------------------------------------------------------------------------------------

  Non-Oil (GDP)                     90.46       93.05      96.23     99.47   103.08

----------------------------------------------------------------------------------------------

 

Source:   Central Bank of Nigeria Annual Report and Statement of Accounts, For the Year Ended 31st December 1999

 

 

 

 

Table 2:  Information on Oil Production and Revenues for 1999

 

Crude Oil Production                       -  1.96 mbd    =  715.4 mby

  ((including Condensate)

Export of crude oil            - 1.66 mbd     =  605.9 mby

Crude oil for                              - 0.26 mbd     =   94.9 mby

  (local consumption)

Crude oil lifted (PPMC)    - 0.10 mbd     =   36.5 mby

Crude oil delivered to                     - 0.10 mbd     =   36.5 mby (on average)

  local refineries

           

Average price (Bonny Light)     - $17.91 pb

Average price (Forcados Light)  - $17.85 pb

Will use average price                - $17.90 pb

 

Exchange Rate (Jan Ė October 25)- $1  = N91.8

Exchange Rate (Oct. 25 Ė Dec.)  - $1  = N96.12

Exchange Rate (Jan Ė December)  - $1  = N92.52  (on average)

                      

Crude Oil Exports (estimate from above)  - N1,184,779.7 million

 

             Oil Revenue(Gross)                   - N738,798.7 million        77.8%

              Non-oil revenue                     - N210,389.2 million        22.2%

             -------------------------------------------------------------------------

Gross Federally collected Revenue - N949,187.9 million         100%

 

        

             Crude Oil Exports                    - N514,038.9 million         

                PPT, Royalties,                   - N164,273.4 million        

     Domestic crude oil costs                     - N 46,110.2  million         

    Taxes on Petroleum Products                   - N 14,376.2 million           

    -----------------------------------------------------------------

             Oil Revenue(Gross)                   - N738,798.7 million

 

      FIRST CHARGES:

       Non-oil related:         

         External Debt Service                   -  148,818.1 million

    Special Res./Excess Proc.                    -   29,981.3 million

    ----------------------------------------------------------------

       Total Non-Oil Related                     - 178,799.4 million

 

       Oil-related:

                 JVC Cash Calls              - 185,470.6 million

          NNPC Priority Projects                 -  24,110.9 million

          ------------------------------------------------------------

       Total Oil Related                         - 209,581.5 million

      ----------------------------------------------------------------

      Grand Total First Charge          - 388,290.9 million

 

 

-------------------------

 

Source:   Central Bank of Nigeria Annual Report and Statement of Accounts, For the Year Ended 31st December 1999

 

 

-------------------------------------------------------------------

 

Table 3:  Profile of Subventions from Federation Account

          (In Billions of Naira)

 

State         2nd half     2000       2001     Increase

               1999                                        Ratio

                 A                B          C            C/A

-----         --------         ----        ------

 

Lagos         3.0           9.3      17.9        5.97

Ogun          2.1           6.7      10.8        5.14

Ondo          2.0         10.2      17.2        8.60

Oyo            2.4           7.6      12.7        5.29

Ekiti           1.6           5.2       8.6         5.38

Osun          2.0           6.2      10.6        5.30

-----------------------------------------------------

Total SW  13.1        45.2       77.8       5.94

 

Anambra    2.0          6.3       11.0        5.50

Imo            1.9          7.5       12.9        6.79

Ebonyi       1.6          4.9        9.4         5.88

Enugu        1.7          5.5       10.05      5.91

Abia           1.7          6.2       11.2        6.59

-----------------------------------------------------------

Total SE     8.9        30.4       54.55       6.13

 

Rivers         2.6        17.7       30.2       11.62

Bayelsa       2.07      15.9       26.5       12.80

Akwa Ibom 2.6        19.7       31.0       11.92

Cross River 2.0          6.3       10.4        5.20

Edo             2.0           6.7       10.9        5.45

Delta           2.8        24.7       41.7       14.89

-----------------------------------------------------------

Total SS   14.07       91.0     150.7       10.71

 

Sokoto        2.0          6.4      10.0        5.00

Zamfara      1.8          5.7       9.9         5.50

Kebbi          1.9          5.6      10.3        5.42

Katsina       2.6          8.09     12.6        4.85

Kaduna       2.6          8.3      13.3        5.12

Kano           3.0          9.4      15.5        5.17

Jigawa         2.1          6.7      11.4        5.43

----------------------------------------------------------

Total NW  16.0        50.19     84.0        5.25

 

Kwara       1.9           6.0       9.6         5.05

Kogi          1.9           6.0       9.6        5.05

Niger         2.4           7.4      11.9        4.96

Nassarawa 1.6           5.2       8.8         5.50

Plateau      1.9          6.07     12.7         6.68

Benue        2.4           6.7      12.3        5.13

-----------------------------------------------------------

Total NC  11.1       37.37     64.9         5.85

 

Adamawa  2.1          6.5      10.9         5.19

Gombe      1.6           5.1       8.9         5.56

Borno        2.4           7.7      12.6        5.25

Bauchi       2.2           6.8      11.6        5.27

Yobe         1.9           5.9      10.4         5.47

Taraba       1.9           6.1      10.1        5.32

-----------------------------------------------------------

Total NE   12.1        38.1      64.5        5.33

 

FCT           3.0          30.0      45.0       15.00

 

-------------------------------------------------------------------

 

Source:  http://allafrica.com/stories/200204090034.html

Supreme Court Ruling: How Does It Affect the States?

EDITORIAL April 8, 2002 This Day

 

 

 

 

APPENDIX

 

 

ARTICLE ONE:

 

http://nigeriaworld.com/news/source/2002/headlines/052825-news.html

The Guardian

May 28, 2002

 

Resource judgement: Review and prospects

By U. O. Umozurike

 

THE opponents of the Supreme Court judgement on resource control have been unrelenting in their criticism and this is understandable. A judgement that reduces the revenue of a littoral state by millions or even billions of naira attracts very close scrutiny. Though regrettable, it is unfortunate to impute that the Supreme Court was out to sing a tune pleasing to the President or that it allowed itself to be used to achieve the President's objective. It is equally unfair for the political rivals of a governor to claim that the judgement was a reprisal for his confrontational attitude to the President all of which are a baseless indictment of the Court, the President and the Governor.

 

A careful and objective assessment of the judgement puts it in a landmark category delivered with clarity and perspicacity. Of course the Court received immense help from the counsel on both sides who had gone to great lengths to fish out relevant authorities in other jurisdictions which though not binding were very persuasive. Bonsor V LA Macchia (1969-70) 122 CLR 177, Reference Ownership of Offshore Mineral Rights (1968) 65 DLR 2nd 354 (Canada) and New South Wales & Ors V Commonwealth (1975-6) & ALR 1 (Australia) were very much in pari materia with the case on hand. The constitutional importance and the financial implications placed a high premium on the case. It is not often that legal scholars have such a relish in a single case which saw an interfacing of so many aspects of the law" International Law, Tort, Constitutional Law and Land Law. Aspects of the judgement expose the Federal Government's refusal to implement the law on 13 per cent derivative revenue since May 19 1999. Nor could the Federal Government have bargained for the Court's pronouncement on gas as a natural resource.

 

Fortunately the courts do not resolve all disputes. They are just one facet of conflict resolution. There are others and the resource dispute lends itself to other resolution strategies that take seriously into account the losses and the risks to which the littoral states are exposed, whatever the strict law may be. Let us recount or simplify certain aspects of the judgement. The 1960 Constitution prescribed the payment of 50 per cent of the royalty for mining on derivative basis. Section 134(6) of that Constitution stated clearly: "For the purpose of this section the continental shelf of a Region shall be deemed to be part of that Region". Similarly, Section 140(6) of the 1963 Constitution made a similar provision on the same basis for the benefit of the coastal region. The 1999 Constitution has no provision treating the shelf of a state as part of it for revenue purposes. Decree No. 9 of 1971 vested the minerals in the territorial sea on the Federal Government as did the Petroleum Act Cap. 350, the Exclusive Economic Zone Act Cap. 116, the Territorial Waters (Amendment)Act Cap. 428 and the Territorial Waters (Amendment) Act 1997; all of which vest ownership and control of oil and gas on the Federal Government. Decree 106 of 1992 which mineral derivative revenue did not divert the Federal Government of ownership and control and is subject to the 1999 Constitution.

 

The importance of the Common Law cannot be underestimated, contrary to the view of some commentators. The high seas of the world were open to all nations and no state had exclusive proprietary rights over parts of it. A three-mile limit became recognised among most states as an area a coastal or littoral state could exercise sovereign rights subject to the right of other states to innocent passage and lay submarine cables. The lattest treaty" the UN Convention on the Law of the Seas 1982 of which we are a party recognises a maximum of 12 nautical miles as territorial sea, an exclusive economic zone of 200 miles and a further exclusive right to exploit the continental shelf up to a maximum of 350 miles. These appertain to the sovereign states. Neither international customary law nor conventional law throws light on the respective rights of the units of the sovereign state viz-a-vis the state, an obvious matter of domestic jurisdiction.

 

Since the Constitution is silent on the matter, it falls to be decided through negotiations between the federal and state governments. Alternatively, the National Assembly could resolve the issue through legislation taking serious note of the losses suffered by the traditional users of the seas, the extent of their usage and the risks to which they are exposed. There is a world of difference to a coastal state of mining conducted one mile from the coast and mining carried out 200 miles away. The nearer the operations to the coast the greater the losses and the risks; the farther away the operations, the lesser the losses and the more remote the risks. Within the Exclusive Economic Zone of 200 miles there are two recognised zones - the territorial sea and the contiguous zone which extends from the outer limit of the territorial sea to a distance of 24 miles from the lowest watermark or from the straight baseline which links selected points on land or across an estuary or around a group of islands. Revenue obtained from one or both of these should be treated as if derived from its land territory for derivative purposes. The whole issue should appropriately be discussed in a national conference which is curiously anathema to the Federal Government. What could be more democratic than to openly discuss all outstanding problems and the fundamental basis of national relations which could have been one of the greatest achievements of any administration?

 

One more point, the impression should not be given that the Supreme Court judgement completely deprives the coastal states of revenues from sea mining. Rather, the affected states will enjoy from the revenue on the same basis as other states of the federation. It is our contention that a coastal state suffers losses in fisheries and pollution from oil spills and blow-outs. A distance geographically pertinent to the coastal state should be treated as though it was part of its territory for revenue purposes. The territorial sea and the contiguous zone should certainly be so treated. States which have received money on the calculations of federal officials and have expended such money on governance should not be asked to make refunds even if the federal authorities have to pay with retrospective effect and for gas which it was not paying. Discussions must complement the Supreme Court judgement for a reasonable revenue package.

 

* Professor Umozurike is with the Abia State University, Uturu.

 

 

 

ARTICLE TWO:

 

http://allafrica.com/stories/200205270155.html

Champion

May 27, 2002

 

There are no oil producing states ó Aluko

From Bisiriyu Olaoye, Akure

 

FORMER Chairman of National Economic Intelligence Committee (NEIC), Prof. Sam Aluko, has said contrary to widespread belief that oil contributes the bulk of the national wealth, the mineral resource actually accounts for not more than 12 per cent of the nationís Gross Domestic Product (GDP).

 

Prof. Aluko also frowned at the usual reference to communities with oil deposits as oil producing areas, saying that such communities do not produce oil. He said the proper reference to them should be oil-endowed communities. Speaking to Daily Champion in Akure, Ondo State capital, Prof. Aluko said: "One thing that Nigerians donít know and even the oil-endowed areas, not oil-producing areas Ė because they donít produce oil or contribute to the production, is that the cost of earning that oil dollar is very high, so the net is very minimal."

 

According to him, if the country earns $25 per barrel the net value accruing to it is about $15 before oil industry-related expenses. Prof. Aluko stated, however, that after meeting the cash call commitments to oil firms the government is left with only about $6 per barrel. These commitments, he said, include purchase of the oil firmsí equipment, high cost maintenance of Nigerian National Petroleum Corporation (NNPC), Company (PPMC), 28 depots and four refineries.

 

He said if the country manufactured the equipment, "we would have been desiring money maximally from oil. If you look at it, we get more money on Customs, Federal Inland Revenue Service (FIRS) and some other company taxes than we get on oil. The total gross of oil contributes only 12 per cent of the Gross Domestic Product (GDP) the wealth of Nigeria," he said. Prof. Aluko also stated that in comparison, agriculture alone accounts for 42 per cent "or 3 1/2 per cent times that of oil," to the GDP.

 

He said despite their massive contributions, farmers remained patriotic and level-headed as opposed to the attitude of oil endowed communities with less contribution. "So, because of the leakages from oil, the government is always cash-strapped. The value derived from oil sector, similarly, is not as significant as people think of it," he noted. Prof. Aluko said he believed that if these and other leakages were plugged, Nigeria would double or tripple revenue accruable to government.

 

He flayed governmentís continued importation of fuel, saying the development was counter-productive to the countryís interest. According to him, the aim of building the multi-million naira Export Terminal in Bonny was for export of excess petroleum products "so that we would bring more dollars and pounds into the country."

 

The laudable objective, Prof. Aluko noted, had been jettisoned presently with the importation of 60 per cent of fuel consumed in the country. The former NEIC boss also cautioned President Olusegun Obasanjo and the 36 governors to stop gallivanting round the world on public funds.

 

He said the development was pushing the economy into deeper morass to the detriment of the masses. Prof. Aluko called for more sacrifices from President Obasanjo and the governors to get Nigeria out of the woods. He said more sacrifices were also expected of ordinary Nigerians.

 

Said he: "We have 36 governors who are now gallivanting around the world and we have the President who is now going around the world. These things must stop. "Otherwise, the cost of even travelling which is in pounds or dollars, is eating deep into the coffers of government at all levels. Therefore, unless we realise all those things, if we continue like this, we will get poorer and poorer. When we analyse all these things on day to day basis, they will think we are anti-government.

 

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