Obasanjo signs oil dichotomy abolition bill

Feb 18, 2004 01:00 AM

At last, the controversial bill for the abolition of the dichotomy between onshore and offshore in the application of the principle of derivation has been signed into law. The Special Adviser to the President on National Assembly Matters, Senator Florence Ita-Giwa, said President Olusegun Obasanjo signed the bill.
The signing of the bill with such speed, the presidential adviser said, demonstrates the importance attached to the issues of the Niger Delta by the President. The bill, which was passed last month by the National Assembly, had been dogged by controversy since its introduction in year 2003 during the tenure of the last National Assembly. It was passed by the last National Assembly, but the President did not assent to it due to some areas of disagreement.

The executive, in the bill, had limited the application of the law for the abolition of dichotomy to the contiguous zone adjoining the littoral states but the version passed by the National Assembly extended the application to the continental shelf and exclusive economic zone contiguous to the littoral states. However, the President pointed out that it would have some dire consequences on the nation's international relations and obligations under the international law.
But in another letter to the National Assembly leadership on February 5, 2003, the President said that neither the earlier position held by the executive nor that of the National Assembly would achieve the desired objective. The President said he had consulted governors of the littoral states and a consensus had been reached.

President Obasanjo subsequently replaced the contiguous zone with 200 meters water dept isobath as a way out of the impasse. This was agreed upon by both the Senate and the House of Representatives and passed last month. It is this version that the President now signed. Ita-Giwa commended the efforts of both the National Assembly and the President, pointing out that it would go a long way in bringing succour to the affected areas.
In the middle of year 2001, the Federal Government formally requested a judicial interpretation from the Supreme Court of the constitutional provision regarding the 13 % derivation principle, as it affected the income from federal revenue of the littoral, oil-producing states. It also sought a judicial definition of the zone within the seaward boundary of Nigeria's territorial waters from which revenue accruing to the littoral states from the Federation Account should be computed.

Following the affirmation of the derivation principle by the Supreme Court in April 2002, and its ruling that this principle should take effect from May 29, 1999, when the current constitution came into force, President Olusegun Obasanjo sent a Bill to the National Assembly which sought, among other things, to define the extent of the seaward boundary from which the littoral states might rightfully expect to benefit from the Federation Account on the basis of the 13 % derivation principle.
The Bill defined this zone as being more orless coterminous with Nigeria's internationally recognised territorial waters (now called the contiguous zone), extending the zone to about 24 nautical miles from the Nigerian coast. The National Assembly, however, amended this provision of the Bill and inserted in its stead a provision which defined the applicable zone for the purpose of derivation to the full extent of Nigeria's exclusive economic zone and continental shelf which is internationally defined as extending to 200 and 350 nautical miles respectively from the Nigerian II coast, and even beyond.

President Obasanjo however objected to the bill and in various and extensive private consultations gave reasons why he couldn't sign the Bill as amended. The President's major objections to the Bill as amended were that:
it equates the sovereignty of the littoral states (in respect of revenue derivation) with the sovereignty of the Federal Republic, and this according to the President, is to the disadvantage of the non-littoral federating units of the Republic.
According to the President, therefore, the bill as amended would grant the littoral states the concurrent power to make foreign policy, in violation of the constitutional and exclusive prerogative of the Federal Government in matters of diplomacy and foreign policy in general.

Nigeria is technologically ill-equipped to undertake an accurate and "scientific demarcation "of its seaward boundaries extending to the continental shelf, a distance of more than 350 nautical miles, not to talk of doing so among the federating states of the country. Even if it were capable of doing the above, such an accurate demarcation would involve a probable encroachment on the equally legitimate claims of Nigeria's maritime neighbours -- a possible cause for armed conflict. We can imagine a doom's day scenario in which the Federal Government is involved in an oil war with one or more of our maritime neighbours, and in which six or more littoral states in Nigeria are simultaneously engaged in local squabbles over maritime turf.
Worse still, a state may cause war with a sovereign country on the basis of its interest in revenue derivable from the continental shelf. a basic precondition for any claim to maritime sovereignty is that the claimant must be able not only to police, but to effectively defend the territory it claims.

Most of the offshore exploration and exploitation of crude oil in which Nigeria is currently involved is carried on within 24 nautical miles of her shores. For reasons both of limited funding and the absence of any technology capable of mining in such distances from the shore, the situation will remain unchanged for some time to come. Thus, the littoral states of Nigeria do not stand to gain any increased revenue in the immediate future merely by a legal extension of the zone from which they may derive income.
Control of territorial waters carries with it the responsibility of monitoring the environmental impact of economic exploitation of such a territory, and imposing appropriate penalties on those who infringe on our environmental laws, far away from our shores. Nigeria does not now have, and is unlikely to have in the long term, the capability to effectively assess such impact.

Nigeria under President Obasanjo has signed an agreement with the maritime and neighbouring Republic of Sao Tome, setting up a Joint Development Zone on the high seas between the two countries. It is likely that a similar agreement will be signed with other countries. The objective is to eliminate, through negotiating, the potentially dangerous consequences of each country insisting on its maritime rights in a geographical area in which precise demarcations are impossible.
The amendment which the National Assembly adopted in the bill will render such a peaceful approach to the matter endemic, and limit the country to the option of war, in defence of the “rights” of a relatively small number of littoral states, and to the detriment of the non-littoral states.

The most dangerous implication of the bill is the implied right which it confers on a small number of littoral states to unilaterally engage in foreign policy-making, through presumably direct negotiations with foreign powers and companies, a prerogative which our constitution reserves exclusively to the Federal Government; for the right to make such a claim of derivation logically carries along with it the right of negotiation over it.
While signing the bill may enhance the President's political popularity in certain sections of the country, the government argued, the consequences for Nigeria of doing so would be so disastrous as to put in question any claim he may have to statesmanship and good visionary leadership. The President however expressed hope that a solution that protects the legitimate interest of the littoral states as well as that of the country as a whole would be found, through dialogue and consultation.

A meeting with the governors and other representatives of the littoral states was scheduled for further discussions. Meanwhile, the people of the Niger Delta received with joy news of the signing into law of the dichotomy bill.
Essentially, the Act recognises that the 200 m rate depth isobath contiguous to 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 the state pursuant to the provisions of the constitution of the Federal Republic of Nigeria 1999 or any other enactment.
In addition, the Act 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."

Immediately the news was broken in the National Assembly, Senator Effiong Bob (Akwa Ibom State) said the signing of the bill into law was a welcome development to the affected states as it will reduce political tension in the Niger Delta, and produce fresh resources to empower the restive youth in the states.
"The states in the South-South will benefit immensely and we will like to commend all the lawmakers in the National Assembly and President Olusegun Obasanjo for signing the bill into law. We will reciprocate by using these resources wisely," Bob said. He disclosed that the people of the affected states, especially in Akwa Ibom State, have been celebrating since it leaked that the President had signed the bill into law.
"It has been a long struggle which has been sustained by our people until the President graciously signed it into an Act..."

After protracted negotiations, President Obasanjo reached a consensus with the governors of the littoral states before he forwarded a letter to the Senate on January 9, 2004 asking it to reconsider the bill. An earlier bill to the last National Assembly technically lapsed because it did not conclude deliberations on it before its tenure ended on June 2, 2003.
In the heat of disagreements on the bill between the governors andFederal lawmakers on one hand, and the President on the other, the President wrote to explain why he rejected their insistence on a continental shelf and exclusive economic zone for a 200-metre contiguous zone.

Source: Guardian Newspapers Limited
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