Niger-Delta Crisis: Let people derive benefit from oil revenue

By Thompson Ayodele and Olusegun Sotola

Quite 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 civilian 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 per cent of export earnings, 83 per cent 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.// This Day


Ayodele and Sotola are with the Initiative for Public Policy Analysis, a
public policy think-tank based in Lagos.