PANDEF demands 50% derivation allocation for oil-producing states

The Pan Niger Delta Forum (PANDEF) has called on the National Assembly and the federal government to increase the derivation allocation to oil-producing states from the current minimum of 13 per cent to 50 per cent.

PANDEF said the increase would enable oil-producing states and communities to address environmental degradation, health hazards and developmental challenges associated with oil and gas exploration and production.

The group made the demand in a communiqué read by Godknows Igali, the national chairman of its National Executive Committee, after the committee and the Board of Trustees met virtually on Tuesday.

The meeting brought together former governors, former ministers, first-class traditional rulers, political leaders, opinion leaders and other stakeholders from the six South-south states: Akwa Ibom, Bayelsa, Cross River, Delta, Edo and Rivers.

Mr Igali said the current minimum derivation allocation, provided for under Section 162(2) of the 1999 Constitution, as amended, has remained unchanged for more than two decades despite the environmental and developmental burdens oil-producing communities in the Niger Delta bear.

He said the region continued to face environmental damage and the social and economic consequences of petroleum exploration and production, making an increase in the allocation necessary.

“PANDEF therefore calls for an increase in the derivation allocation from the current minimum of 13% to a minimum of 50%, to enable oil-producing communities and states to address the longstanding developmental deficits, environmental damage, health hazards and social and economic consequences of oil and gas exploration and production,” he said.

The group urged the National Assembly, the federal government and other relevant authorities to review the existing revenue-sharing arrangement to enable oil-producing states to tackle persistent developmental deficits and the effects of oil and gas activities on their communities.

Onshore/offshore dichotomy

PANDEF also called for the abolition of the onshore/offshore dichotomy in revenue allocation, urging the National Assembly, the federal government and the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) to initiate the necessary constitutional and legislative measures.

“The meeting further calls on the federal government, the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), and the National Assembly to urgently address the longstanding and contentious issue of the onshore/offshore dichotomy in revenue allocation,” Mr Igali said.

The onshore/offshore dichotomy refers to the distinction between oil revenues from onshore and offshore production when applying derivation principles.

PANDEF argued that offshore petroleum operations could also affect coastal communities whose livelihoods depend on marine ecosystems and fishing grounds.

It said oil spills and other incidents associated with offshore oil and gas activities could damage marine ecosystems, disrupt fishing and undermine the economic well-being of coastal populations, regardless of where the petroleum resources are located.

The group maintained that coastal communities should not be excluded from the benefits of derivation because oil and gas resources are located offshore, given the potential environmental and economic consequences of such operations.

It urged the National Assembly to work with the federal government and RMAFC to address the issue through appropriate constitutional and legislative reforms.

Nigeria’s 11 oil-producing states are Abia, Akwa Ibom, Anambra, Bayelsa, Delta, Edo, Enugu, Imo, Kogi, Ondo, and Rivers.

What the PIA says about funding oil-producing communities

The Petroleum Industry Act (PIA), signed into law in August 2021, established a framework for the development of communities affected by petroleum operations. Under Section 240(2), oil and gas companies are required to contribute an amount equivalent to three per cent of their actual annual operating expenditure in the preceding financial year to the Host Communities Development Trust Fund for communities affected by their operations.

The fund is intended to support development projects in host communities, including infrastructure, education, healthcare, economic empowerment and environmental protection. The three per cent contribution is calculated from the operating expenditure of the relevant companies, not from the 13 per cent derivation allocation paid to oil-producing states.

The 13 per cent derivation allocation, meanwhile, is guaranteed by Section 162(2) of the 1999 Constitution, as amended, which stipulates that the principle of derivation must account for not less than 13 per cent of revenue accruing directly to the Federation Account from natural resources.

PANDEF is demanding that this minimum be increased to 50 per cent, arguing that oil-producing states need more resources to address environmental degradation, health risks and developmental challenges associated with petroleum operations.

2027 general election

PANDEF also expressed concern about the state of the nation, stressing the need for peace, security, national cohesion and responsible governance as Nigeria approaches the 2027 general elections.

The group urged people in the South-south to vote according to their conscience and elect candidates at all levels whose programmes, commitments and demonstrated capacity align with the region’s aspirations.

It said voters should support candidates who could contribute meaningfully to peace, progress and development in the Niger Delta.