Niger-Delta Crisis: Let People Derive Benefit from Oil Revenue

Wednesday, July 30, 2008

By Thompson Ayodele and Olusegun Sotola

Nigeria DeltaQuite recently, the Nigerian government deployed soldiers and war ships to dislodge the militants in the oil producing communities. This development is in direct response to the repeated attacks by militants on flow stations and other oil installations, thereby causing disruptions in oil production and substantial cut in revenue.

The goal of the military campaign is to end series of kidnappings, rout the militants and end vandalisation of oil equipment and installations. What is more worrisome is if the latest military operation will bring the envisaged solutions to plethora of crises in the region.

The Niger Delta used to be a peaceful region until oil was discovered in commercial quantity coupled with the increase in oil related activities without commensurate improvement in the lives of people. Resistance used to be in form of pockets of violence and protests until it snowballed into large scale hostage-taking with demands for ransom as well as attacking oil installations, navy, police stations and engaging soldiers in combat with assault riffles.

The federal government might have embarked on the latest campaign apparently to stem the volatile situation in the region and end disruptions to oil production which has threatened the nation’s revenue. There is however need for caution as previous military involvements never yielded positive results. Instead, it created bad public relations and ended up creating a new set of problems, thereby aggravating the deep seated negative feelings in the region.

For instance in 1994, more than 2000 civilians were reportedly killed, while about 100,000 were refugees when the Rivers State Internal Security outfit occupied Ogoniland. In the same vein, the military reprisal attacks in Odi Town in 1999 affected over 2500 civilians and destroyed the town. What needs to be done is to evolve innovative and practicable solutions to the crises beyond the use of force.

It is understandable why government is keen on resolving the crisis in the region. The place of oil in Nigeria’s economy is immense. It contributes 95 percent of export earnings, 83 percent of government revenue, and about a third of gross domestic product (GDP). On a daily basis, Nigeria loses $46.44 million due to the two recent attacks on Bonga and Chevron facilities. This is outside $84 million daily lost to the general activities of the militants. In monetary terms this translates to $2.52 billion per month and more than a whopping $30 billion a year.

However, the current oil proceeds sharing formula is inherently flawed. It is obvious that it is incapable of solving the crisis even it is raised to 50 per cent. This is because statutory allocation goes to states, local governments and other bureaucracy like Niger Delta Development Commission (NDDC). As things currently stand, lasting solution surpasses mere provision of infrastructure and political compensation for lackeys. The people who own the land must derive direct benefit from oil revenue accruing to national purse. They must see themselves as stakeholders. As important the people are, the present arrangement does not have them in picture.

A few weeks ago, some oil companies proposed to the government the need to distribute certain percentage of their profits directly to the inhabitants of the area. This no doubt represents an innovative approach towards solving the problem in the region. Under this arrangement, rather than relying on oil revenue, government would have to on a large scale rely on normal tax policy instruments. The advantage of this is that it will insulate the system from corruption and mismanagement. This is because oil revenue would stay out of the hands of the public officials. Above all, it will rectify the imbalance of economics and political power that often favour government and against the people.

It is a fact that the discovery of oil has had negative impact on domestic economy and political institutions. It has given rise to officials seeking rent which in turn affects investment climate and growth. When oil revenue flows in large quantity as it is in Nigeria, promoting wealth creation will be a mirage and citizen has less incentive to hold government accountable. Government in turn has little incentive to manage well, provide adequate public services or respond to citizens. In addition, under the circumstances, building a strong market economy and a well-established property rights become a mirage.

A more lasting solution rests on a genuine restructuring of ownership and control of lands. There is the need to reform legislation such as the Petroleum Act and the Land Use Act that effectively deprive local residents of ownership stake in land and its resources. Consent for oil exploration should involve local communities and families. This will make them partly responsible, apart from restoring ownership. This is a sure way not only to sustainable peace in the Niger Delta but also a powerful linkage to a freer economy through limitation in government restrictive policies.

Oil producing communities must be a stakeholder in oil business. When they do, they will ultimately see themselves as co-owners. They will dare not destroy what is theirs. Under this arrangement, everyone wins; the government, the people and oil companies. Time was in some East Africa countries when the people in communities where most of the animals lived never got any direct benefits. People saw the animals as problems. Expectedly, the rate of poaching and illegal sale of ivory boomed. This was reverse when people get direct benefits and there were incentives for them to protect the animals.

The involvement of military again is largely misdirected. The involvement of military has strengthened the youths in the region who are bent on resisting military occupation. Many young people in the area possess varying knowledge of weapon handling. Military option will further provide a veritable ground for brainwashing and consequent recruitment of young people into militancy.

The Niger Delta crisis requires a careful handling. Military operation is short time solution. To insist on using military might to end the crisis would at the end be counter productive.

Ayodele is Executive Director of IPPA and a regular coumnist of 
Sotola is with the Initiative for Public Policy Analysis, a public policy think-tank based in Lagos