Disagreeing With El-Rufai On The Onshore – Offshore Restructuring Recommendation By Ekemini Udim

Introduction I have carefully read the Report of the APC on true federalism and restructuring of Nigeria. I have also read the recommendations therein. Of great concern and interest to me is the recommendation on the onshore, offshore oil which attempts to resurrect the vexed issue of oil dichotomy in Nigeria. I am however not oblivious of the fact that, just at the name entails, a recommendation is only but a proposal or suggestion made by a person or group of persons to another with intent that it be acted upon. I also know that such recommendation may remain in the realm of recommendation and may never be acted upon any time soon or at all. But when one remembers our peculiar historical antecedents, one becomes justified in raising the flag when a contentious issue such as the onshore, offshore dichotomy conundrum, which almost tore the country apart some years back, is re-introduced to the national discuss in the name of recommendation for restructuring or true federalism or whatever it is called. The El’Rufai Report It would be recalled that in the buildup to the 2015 general election, the APC (then leading opposition party in the country; now the ruling party) made huge promises to Nigerians. These promises were to be implemented if the party wins at the general election, especially if it wins the presidency. The party won. One of such promises was the promise to restructure Nigeria and make it more efficient for the benefit of the entire citizenry. In Article 7 of the party’s Constitution, it has been stated that the APC shall, firstly, promote and foster the unity, political stability and national consciousness of the people of Nigeria, and secondly, promote true federalism in the Federal Republic of Nigeria. Also, at page 7 of its Manifesto, the APC entered into a pact with Nigerians to create a federalism with ‘more equitable distribution of national revenue to the States and Local Governments because, this is where grassroots democracy and economic development must be established.’ At page 37 of the Manifesto, last paragraph, under the heading ‘A Government You Can Trust’ the APC pledges to ‘devolve more revenue and powers to the States and Local Governments…’ Perhaps in its bid to actualize these promises, the leadership of the APC constituted a 10 – Member Technical Committee to work out the roadmap and advise the party as appropriate in line with the terms of reference of the committee. It is important to note that one of the terms of reference was ‘To examine the Party’s Constitution, Manifesto and other publications to distill the true intent and definition of the true federalism promised by the party in its Manifesto and during the Presidential campaign.’ After due deliberations on the nature and scope of its assignment, the Committee recommended to the party, an expansion of its membership for more inclusiveness. The party then expanded the membership of the Committee to 27 with Mallam Nasir El’Rufai as Chairman and Senator Olubunmi Adetunmbi as Secretary. The Committee went to work and published its Report in January, 2018. The Report is made up of 56 pages with a preface written by Mallam El’Rufai at page 4 and acknowledgment written by Senator Olubunmi Adetunmbi at pages 5 to 6. In the Report, the Committee has made far-reaching recommendations, one of which is that, ownership and control of resources in the continental shelf and territorial waters should remain with the Federal Government. [See pages 37 to 38 of the Report]. It is this recommendation on the ownership and control of resources in the continental shelf and territorial waters that is the concern of this article. The Recommendation is About Oil Though the Committee in its Report refers to ‘resources in the continental shelf and territorial waters’ without specifically naming the resources, it goes without argument that as at today (and indeed many years to come) the most significant of Nigeria’s resources in the continental shelf and territorial waters is crude oil. This is the main stay of Nigeria’s economy. So, the recommendation is specifically targeted at the black gold. By this recommendation, the Committee has again raised the issue of Onshore – Offshore Oil Dichotomy in Nigeria. It simply proposes that the oil producing States of the Niger Delta Region should only benefit from such oil drilled onshore (that is, on its land separated from water) while such quantity of oil drilled from the belly of the ocean (which ocean is simply an extension of the boundaries of the States) shall belong to the Federal Government. Even by the onshore arrangement, the oil producing States will be entitled to only 13 percent of the revenue while the Federal Government will be entitled to the larger portion of the remaining 87 per cent. In addition to the larger share of the 87 per cent, the Federal Government will also be entitled to 100 percent of revenue from the offshore oil. The reality for the Oil Producing States A State like Akwa Ibom will automatically become a non-oil producing State. This is because, Akwa Ibom has no onshore oil. All its oil wells are in the deep sea and therefore, offshore. No reality can hit a people harder than this; that the number one oil producing State in the country can suddenly become a non-oil producing State within a twinkle of an eye as a result of the re-introduction of the unfathomable onshore, offshore Oil Dichotomy policy. Other States in the Niger Delta Region will also be greatly affected by the dichotomy. Most of them will also become non-oil producing States. Recall that the most visible onshore oil well in the Niger Delta Region is traceable to Oloibiri in the then River State. Oloibiri is now in Ogbia Local Government Area of Bayelsa State. This oil well was operated by Shell Petroleum but was abandoned owing to restiveness in the area, which restiveness is a direct product of years of marginalization. Today, there are scanty onshore oil wells in the Niger Delta Region. Some of the wells have deposits of oil in non-commercial quantities and therefore not economically viable. The implication is that the majority of functional oil wells in the Niger Delta Region today are offshore. If these offshore wells are taken or handed over entirely to the Federal Government as recommended by the El’Rufai Committee, then the Niger Delta Region is as good as obliterated or wiped off from the map of oil producing regions of the world. If the El’Rufai Committee’s recommendation is accepted and implemented, the stack reality will be that many oil-producing States of the Niger Delta Region will become non-oil producing States overnight. The Federal Capital Territory, Abuja will then become the new ‘oil producing State’ in Nigeria. But there is a law against dichotomy One is tempted to ask whether the El’Rufai Committee averted its mind to the fact that there is a law in Nigeria which abrogates the Onshore, Offshore Dichotomy policy. Pardon me for being this inquisitive, but I consider this question very pertinent considering the caliber, pedigree, political exposure and educational qualifications of the members of the Committee. As a legal practitioner and ‘student’ of law, I know as a fact that laws are not made for fun but mostly for purpose of arresting a prevailing situation and in the process, providing a roadmap to avoid future occurrence. In the history of Nigeria’s socio-economic and socio-political developments, this same Onshore – Offshore Dichotomy policy has been introduced and implemented by various administrations to the detriment, cheat, deprivation and marginalization of the people of the Niger Delta Region. At every epoch of such introduction, the reaction of the affected people of the Niger Delta Region and the condemnation by the international community and people of conscience is usually of such magnitude that there is always the urgent need to re-visit the issue with a view to abrogating the policy. Whenever the policy is introduced, the level of restiveness in the Region increases. Economic stagnation afflicts the Region like plague while hunger and outright starvation roam the land in four legs. The consciousness of marginalization heightens, especially as the people watch the oil companies extracting crude oil (from their backyards) for export and in the process flaring gas and polluting their waters and farmlands. It was in response to the above that the National Assembly of Nigeria in 2004 enacted the Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act, 2004. It is sad to note that the El’Rufai Committee never made mention of this Act in the Report that is now in the public glare. The Report only mentioned three federal laws and recommended consequential amendment of the said laws to reflect the proposal for exclusive ownership of offshore oil by the Federal Government. The three laws mentioned in the said report are: Petroleum Act, 2007, Nigerian Minerals and Mining Act, 2007, Petroleum Profit Tax Act, 2007 and the Land Use Act, 1978. (See pages 37 – 38 of the Report). As noted earlier, the abolition of oil dichotomy law has not been mentioned anywhere in the El’Rufai Report. If this is an omission on the part of the Committee, it is indeed a very expensive one. If someone is trying to be mischievous by deliberately excluding the law from the Report, such mischief is indeed highly regrettable. I hold the opinion that any contemporary discussion on the onshore – offshore oil dichotomy issue in Nigeria is incomplete, lopsided and deeply biased if the existing onshore – offshore dichotomy abrogation law is not mentioned and carefully analyzed in the discussion. The Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act, 2004: What exactly does it say? This Act was indeed a child of necessity and a product of legislative wisdom. It goes straight to the point and leaves no room for conjecture or forensic interpretations. Unlike most Acts of the National Assembly which have numerous sections and sub-sections, the Onshore-Offshore Oil Dichotomy Act has only two sections. While section one provides for abrogation of the onshore-offshore dichotomy, section two simply provides for the short title. For ease of reference and clarity of our discussion, I take the liberty to reproduce the provisions seriatim, herein below: Abrogation of the Onshore and Offshore Dichotomy: 1(1)     As from the commencement of this Act, the two hundred meter water depth Isobaths 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. 1(2)     Accordingly, for the purpose 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.

2. Short title

            This Act may be cited as the Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act, 2004.   This law had long buried the onshore, offshore dichotomy debate. Until the law is repealed, any attempt to resurrect the onshore, offshore dichotomy policy is (to the extent of its inconsistency with the law), unlawful, null and void and same must be totally rejected. The History of Onshore – Offshore Dichotomy Policy in Nigeria   During the Nigerian Civil War, the then Military Head of State, General Yakubu Gowon appropriated the entire offshore oil revenue to the Federal Government. This was the sad beginning of the onshore – offshore oil dichotomy policy in Nigeria. But the appropriation was not intended to last forever; it was said to be an emergency wartime effort intended to secure sufficient funds with which to prosecute the war by the Federal Military Government. The people of what it today known as the Niger Delta Region were persuaded to endure for a while and make this sacrifice to enable the then government prosecute the war and keep Nigeria as one. It was expected that this temporary arrangement will end with the war. Sadly, the war ended but the policy never ended. It has been said in some quarters that this policy was the brainchild or invention of Chief Obafemi Awolowo who at the time was the Federal Minister of Finance. It suffices to note that before the era of introduction of the onshore-offshore revenue derivation policy, the then Regional Governments were entitled to 50 percent of revenue from resources produced in their domain while the remaining 50 percent was paid to the government at the center. See Section 140 (1) of the 1963 Constitution which provided as follows: There shall be paid by the Federation to each Region a sum equal to fifty per cent of – (a) the proceeds of any royalty received by the Federation in respect of any minerals extracted from that Region; and (b) any mining rents derived by the Federation from within that Region. [italics supplied]. It was Gowon’s regime that reduced derivation to 45 percent for the Regions and 55 percent for the center. While the offshore oil revenue was hijacked by the Federal Government, the onshore oil remained in the Region where such oil was found and the Region was entitled to 45 percent of the revenue. General Olusegun Obasanjo, on assuming office as Military Head of State in 1977 maintained the onshore – offshore oil dichotomy policy. He also reduced the allocation to derivation (0nshore oil and other minerals) to 25 percent. His government took 65 percent of onshore revenue and 100 percent of offshore revenue. Alhaji Shehu Shagari retained the offshore oil dichotomy policy and removed yet another 20 percent from the onshore oil revenue to a paltry 5 per cent. That is to say, during his regime, the government at the center was entitled to 100 per cent of the offshore revenue in addition to 95 per cent onshore revenue. On assumption of office in 1983, General Muhammadu Buhari held on to the off-shore revenue policy and removed 3.5 per cent from the 5 per cent that was left behind by Shagari, thus reducing derivation on onshore oil to a most ridiculous 1.5 per cent. That is to say, during the military regime of General Buhari, the government at the center was entitled to 100 per cent of the offshore revenue in addition to 98.5 per cent of onshore oil revenue. The affected people of the Niger Delta Region cried out. Environmental rights activists and resource control proponents cried out in loud voices but the cries fell on deaf ears. The dichotomy continued unabated. General Ibrahim Babangida succeeded General Buhari in a coup d’état and shocked the producing States to the marrow when he further reduced the derivation to 1 percent. But he did something remarkable, perhaps, realizing the fact that there was the compelling need to assuage the oil producing areas of the country. He established the OMPADEC and introduced an ameliorating fund at 3 percent for the development of the oil producing states. In all, Babangida allocated 4 percent of derivation to the oil producing states. This 4 per cent was taken from the entire revenue from oil – both offshore and onshore. This comparatively humane gesture from President Babangida in effect, abolished the onshore – offshore dichotomy and marked the beginning of a new dawn in the history of the oil producing states. Babangida went further and promulgated Decree 106 of 1992 to provide the first legal backing in Nigeria for abrogation of the onshore – offshore oil dichotomy policy. The Decree provides: ‘’An amount equivalent to one per cent of the Federation Account derived from mineral revenue shall be shared among the mineral producing States based on the amount of mineral produced from each State and in the application of this provision, the Dichotomy of Onshore – Offshore oil producing and mineral oil and non-mineral oil revenue is hereby abolished.’’ It should be noted that before the promulgation of Decree 106 of 1999 there was the Allocation of Revenue Act (Cap 16) which failed to specifically address the onshore – offshore conundrum. Decree 106 was therefore an ingenious interventionist promulgation by General Ibrahim Babangida, a Northerner who refused to close his eyes in the face of glaring injustice and utter marginalization of the oil producing states. Then came General Sanni Abacha who convened the Constitutional Conference of 1994 – 1995. At the said conference there was a Committee on Revenue Allocation and the proportion of revenue payable to mineral producing States, expectedly, became a serious issue with many from a particular extraction of the country agitating for the continuation of the onshore–offshore dichotomy policy and others agitating for its permanent abrogation. The issues were contested and amicably resolved at the Conference. The resolution at the conference provided a formula for the administration of the derivation principle. It contained three significant embodiments. Firstly, that allocation to derivation shall stand at a minimum of 13 per cent. Secondly, that the dichotomy between onshore and offshore exploration shall not be taken into account in calculating the revenue accruable to the mineral producing States. Thirdly, that the boundaries of the litoral States (States contagious to the sea) were defined as extending to Nigeria’s exclusive economic zone. The report of the Abacha Conference had a tremendous influence on what eventually became the 1999 Constitution and in section 162 of the Constitution, a provision was made for the allocation of not less than 13 per cent of the revenue accruing to the Federation Account directly from natural resources. This provision is applicable in Nigeria today and has not in any way made a dichotomy between onshore – offshore revenue. If the Constitution intended to draw any such dichotomy, it would have clearly stated so. Having not made mention of the dichotomy, the law implies that the Constitution never intended to introduce the onshore – offshore dichotomy policy. This is the fundamental law of the land. At the dawn of democracy in 1999, Olusegun Obasanjo assumed office as the civilian president and stayed in office for eight years. It is interesting to note that for more than one year, Obasanjo only allocated one per cent of public revenue for derivation. The one per cent was however paid from onshore and offshore oil. The oil producing States disagreed with him and pressured him to implement the 13 per cent derivation as provided in the 1999 Constitution. It was at this point that President Obasanjo (perhaps enraged by the pressure mounted on him by the oil producing states for the implementation of the 13 per cent derivation) re-introduced the onshore – offshore dichotomy debate that had long been laid to rest for the good. President Obasanjo instituted a suit at the Supreme Court against the 36 States of the Federation with, ostensibly, the oil producing States as the key target. On the 5^th day of April, 2002 (to the surprise of the majority of Nigerians and the international community) the Supreme Court ruled that offshore crude belonged to the Federal Government and not to the States. The judgment of the apex court only fueled agitation in the oil producing region of the country. Youth restiveness increased and the consciousness of daylight marginalization heightened to an unprecedented proportion. It was indeed difficult to explain to the people of the Niger Delta Region that the oil wells which they could sight from their backyards and through which their waters, land and air were polluted on a daily basis, do not belong to them but to the Federal Government in Abuja. Something needed to be done urgently. The idea of a ‘political solution’ was therefore muted, the end product of which was the enactment of the Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act, 2004. The road indeed has been a tortuous one for the people of the Niger Delta Region and it is difficult to fathom the reason for the El’Rufai Committee’s Recommendation for a return to the onshore–offshore oil dichotomy debacle. It is also difficult to see the sincerity of purpose in the recommendation. Final notes

1. The recommendation of the El’Rufai Committee on the expropriation of 100 per cent offshore oil revenue to the Federal Government of Nigeria is first and foremost, a contradiction of the Manifesto of the APC which pledges amongst others, to ‘devolve more revenue and powers to the States and Local Governments…’ Taking the entire revenue from offshore exploration and leaving the States contiguous to the sea with not even a percentage of the revenue derived there from is obviously antithetical to this pledge.

2. A recommendation that proposes that the government at the center should own and control the entire offshore oil revenue in a federation is a recommendation that runs contrary to the spirit and letters of true federalism which the APC promised Nigerians. It is interesting to note that the report of the El’Rufai Committee is titled ‘Report of the APC Committee on True Federalism’. True federalism basically entails the control of resources by the federating units and payment of an agreed percentage to the government at the center. The recommendation is therefore a betrayal of the title of the report.

3. The undeniable truth is that it is the people living by the sea that bear the direct brunt of offshore oil exploration. No large scale exploration of oil can be done without spillage. Oil spillage, everywhere in the world, can only be controlled or at best, minimized. Whatever may be the degree of the spillage, it is the people living contiguous to the sea that are directly affected by the impact of the spillage. The mature fishes are killed. The fingerlings are not spared neither are the millions of eggs. The natural source of drinking water is polluted. Before oil exploration, the people harvested fresh sea foods and made money from them. Periwinkles, oyster, prawns, crayfish, fishes, etc.

Today, they barely catch these edible sea creatures inspite of the spread of their nets and long hours of toiling in the waters. The permanent flaring of gas from the oil rigs offshore also affect the health and living conditions of the people living by the shores. In essence, it is the people living in the States contiguous to the sea that suffer the direct impact of offshore oil exploration; it is not the people in Abuja. It is therefore unfair and a case of marginalization taken too far, to consciously recommend that such people should have no share of the oil revenue taken from their backyards.

4. Nigeria is currently facing serious security issues in nearly all parts of the country. It is therefore the most inauspicious time to make a recommendation such as the one under discussion. The present calm in the Niger Delta Region which has seen to the increase in oil production and the concomitant increase in revenue generation for the entire country should be allowed to permeate and every such recommendation capable of provoking restiveness in the region should be carefully avoided.

Conclusion: It is for the reasons carefully analyzed above that I personally disagree with the El’Rufai Committee on its recommendation for re-introduction of the Onshore – Offshore Dichotomy principle into the socio – political and socio – economic discuss in Nigeria coming in the guise of restructuring or true federalism. The recommendation is totally uncalled for and should be jettisoned in the overall interest of Nigeria. By deliberately refusing to mention the existing Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act, 2004 in the Report, it is difficult not to sense mischief in the recommendation. Rather than deprive States of the Niger Delta Region of the current 13 per cent of revenue derived from both onshore and offshore oil, the time is long overdue for an upward review of the 13 percent. The provision of the 1999 Constitution says, ‘’not less than 13 per cent’’ of derivation should be paid to the mineral producing States. This means, more than 13 per cent can be paid to the States upon the proper activation of the necessary legal instruments. One would have expected the El’Rufai Committee of the APC on restructuring and true federalism to recommend that the 13 per cent be reviewed upwards in fairness to the oil producing States and in accordance with, equity, fairness and good conscience. Our unity should never be taken for granted. Therefore, anything on earth, be it recommendation or suggestion or legislation or whatever it is called, that is capable of causing instant disaffection and evoking that historical sense of marginalization among the people, especially the people directly affected, must be avoided. The El’Rufai Committee’s recommendation on the total expropriation of offshore oil revenue to the government at the center should, as a matter of wisdom and extreme necessity, be suspended. Ekemini Udim is a lawyer, author of law books and public affairs analyst. Email: ekeminiudimforjustice@gmail.com]]>