Exclusive:13% derivation fetches Nigerian oil producing states N602 bn in 16 months

13% derivation fetches oil producing states N602bn in 16 months
13% derivation fetches oil producing states N602bn in 16 months

Despite claims of neglect, oil producing states in the country received N602.37 billion as their 13 percent derivation fund from the Federal Government between January 2017 and April 2018, analysis by PETROLGASREPORT has shown.

The oil producing states are Akwa-Ibom, Rivers, Delta, Cross River, Edo, Bayelsa, Abia, Ondo, Imo, Anambra, and of recent, Lagos State.

Revenue allocation in Nigeria has been one of the most intractable and controversial issues particularly the `principle of derivation’ which has been highly contentious in the country’s fiscal federalism since oil discovery in 1958.

The derivation principle seeks to allocate natural resource revenues accruable to the federation’s account on the basis that is perceived to be equitable, given particular consideration to the resource-producing states and regions.

Since its introduction, the percentage revenue due to producing states has declined from the initial 50 percent share to one percent  in the 1990s, and subsequently was increased again to the current 13 percent share.

This has been considered unfair and unacceptable by the producing states especially Akwa-Ibom and Ondo states whose oil is virtually 100 percent offshore, which technically limits their benefits from the principle of derivation.

This has resulted to the agitations by these states for equitable share of their natural endowment for effective development.

Specifically, the highest allocation of N57.49 billion was shared among the oil producing states as 13 percent derivation fund in March, 2018, while the lowest allocation was N3.08 billion in March, 2017.

A breakdown of the report by the Federal Account Allocation Committee, (FAAC) shows that in January 2017, the sum of N26.83 billion was shared, N34.11 billion in February and N3.80 billion in march.

Further analysis showed that in April, May, June, July and August, 2017, the sum of N35.75 billion, N29.94 billion, N26.96 billion, N29.89 billion, and N31.59 billion was shared, respectively, among the states.

Also, in September, N41.97 billion was shared, while N40.22bn was shared in October. November and December had N40.85 billion, N43.21 billion respectively.

Meanwhile, due to the steady increase of oil prices, there was an increase in the allocation to the oil producing states.

Between January and April, 2018, the oil producing states shared N217.25 billion.

Specifically, in January 2018, the sum of N51.74 billion was shared, in February, the sum of N52.04 billion, while in March, the highest allocation for the period under review was shared with the sum of N57.49 billion, while there was a drop in April to the tune of N55.98 billion.

It could be recalled that some time ago, the leadership of Oil and Gas Producing Communities of Nigeria had alleged that the governors of the states had embezzled over N8.1trillion between 2000 to June 2013 to the detriment of poverty-stricken oil producing communities.

Industry observers who spoke with business a.m. argued that the 13 percent derivation fund has become the highest fraud for the nine benefiting states of Ondo, Edo, Delta, Bayelsa, Rivers, Akwa/Ibom, Cross-Rivers, Imo and Abia and, recently, Lagos.

“There is no evidence on ground to show for the huge allocations over the years,” they said.

Moses Ojo, an analyst at Pan African Capital plc said the drop in March allocation could be attributed to possible shutdown in production of some oil companies adding that this would also reflect on the allocation to the three tiers of government in the month.

“We need to know the total amount that was shared by the three tiers of government in March. You will discover that it will also be low as well which was the reason for the low allocation,” Ojo said.

“It is either there was a major shutdown in production by oil producing companies. It can’t be attributed to price because there was no serious price crisis in the month.

“For instance, what will be shared for the months of June and July will likely be low. There must be shutdown among the oil companies probably as a result of repair. This made the production go down and that affected the proceeds shared,” he further explained.


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