Obasanjo moves against onshore/offshore dichotomy

Sep 05, 2002 02:00 AM

by Oma Djebah and Bature Umar

President Olusegun Obasanjo has sent a bill to the National Assembly seeking the abolition of the onshore/offshore dichotomy in the application of 13 % derivation to oil producing states.
In a letter to Senate President Anyim Pius Anyim, dated August 28, 2002, Obasanjo said, "The bill seeks to specify the extent of the application of the principle of derivation to resources derived offshore". The bill is entitled, "A bill for an act to abolish the dichotomy in the application of the principle of derivation for the purposes of allocation of revenue accruing to the Federation Account and for matters connected therewith."

Section 1 of the two-section bill provides that, "As from the commencement of this Act, the contiguous zone of a State of the Federation shall be deemed to be a part of that State for the purposes of computing the revenue accruing to the Federation Account from that State pursuant to the provisions of subsection (2) of section 162 of the Constitution of the Federal Republic of Nigeria 1999."
Section 162, subsection (2) of the 1999 Constitution states:
"The President, upon the receipt of advice from the Revenue Mobilisation Allocations and Fiscal Commission, shall table before the National Assembly proposals for revenue allocation from the Federation Account, and in determining the formula, the National Assembly shall take into account, the allocation principle especially those of population, equality of states, internal revenue generation, land mass, terrain as well as population density: Provided that the principle of derivation shall be constantly reflected in any approved formula as being not less than 13 % of the revenue accruing to the Federation Account directly from any natural resources."

In subsection (2) of section (1) the new derivation bill states that, "Accordingly, for the purposes of the application of the principle of derivation, it shall be immaterial whether the revenue accruing to the Federation Account from a State is derived from natural resources located onshore or offshore." The bill also wants the act, when finally passed, backdated to April 1, 2002.
"This Act may be cited as the Allocation of Revenue (Abolition of Dichotomy in the Application of Principle of Derivation) Act 2002 and shall be deemed to have come into force on 1st April 2002," Obasanjo wrote in the letter. April 1, 2002 was the day the Supreme Court ruled on the onshore/offshore suit.

The Federal Government had on February 6, 2001 filed a suit at the Supreme Court against the 36 states of the Federation in response to claims of littoral states, namely Akwa Ibom, Bayelsa, Cross River, Delta, Edo, Ogun, Ondo and Rivers, that the natural resources located off-shore should be treated and regarded as located within their respective states.
In the suit, the Federal Government had asked the apex court to therefore determine the seaward boundary of a littoral state within the country for the purpose of calculating the amount of revenue accruing to the Federation Account directly from any natural resources derived from that state, pursuant to the provisions of Section 16 (2) of the 1999 Constitution.

On April 5, the Supreme Court while delivering judgment fundamentally restructured the Federation Account and gave the Federal Government control of off-shore revenue. The court held that only proceeds from oil on land (on-shore) of the littoral states concerned could form the basis for ascertaining how much should accrue to the states on derivation as contained in the 1999 Constitution.
With the judgement Akwa Ibom and Ondo states, whose oil had been wholly offshore, were confronted with the possibility of getting zero allocation from the Federation Account. Faced with criticism, Obasanjo set up a presidential committee headed by Works and Housing Minister, Chief Tony Anenih, to find a political solution to the crisis arising from the Supreme Court judgment.

Submitting its report last June, the committee asked the government in the interim to allocate some money to Akwa Ibom and Ondo, states worst hit by the judgement. The committee however said only a constitutional amendment and enactment of a new law will bring a lasting solution.
"A long term solution to the problem raised by the Supreme Court judgment might entail specific amendment to the 1999 Constitution of the Federal Republic of Nigeria. The presentation of a bill to the National Assembly making it possible to regard the national resources found off-shore in a contiguous zone adjacent to any of the littoral states as if they found within the territory of that state for the purpose of determining its share of the revenue from those resources under the derivation principle," the committee stated in its report.

Obasanjo had in an executive order last July unilaterally amended the revenue allocation formula and increased the Federal Government allocation from 48 to 56 %. He added the 7.5 % special funds which the Supreme Court said was unconstitutional to the Federal Government allocation. The president's executive order stalemated a number of times the meeting of the Federation Accounts Allocation Committee (FAAC) and delayed the sharing of the Federation Account for July.
The Federal Government and the 36 states were only able to reach a compromise after a further amendment of the executive order. However, one of the 17 constitutional breaches the National Assembly listed against Obasanjo is his unilateral amendment of the revenue formula through the executive order.

Source: This Day
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