People & Money

Niger Delta May Get Another Federal Commission to Manage 13% Derivation Fund

The proposal to set up National Derivation Commission (NDC) will definitely run into strong opposition in the Niger Delta. It would mean that the 13% derivation top-up will fall under federal control. The FGN would find it difficult to justify this revenue grab given that the NDDC it controls seem to have an even worse reputation for corruption than the Niger Delta state governments.

The Federal Government is looking to bring an end to oil-producing state governments’ alleged deprivation of Niger Delta communities of the benefits of the 13% derivation fund through the establishment of a National Derivation Commission (NDC). The proposed commission will disburse the derivation funds towards development projects in the Niger Delta.

The Senior Special Assistant to the President on Niger Delta Affairs, Senator Ita Enang, made this known on Monday when he led the Host Communities of Nigeria (HOSCON) on a visit to the Deputy Senate President Ovie Omo-Agege in Abuja, expressing optimism that the proposed commission will address the challenges of deprivation and underdevelopment in the oil-producing region.

He lamented that the oil and minerals producing communities have been deprived of their entitlements by the state governments in the region, pointing out that the NDC will have the responsibility of monitoring and ensuring that money that comes to Delta and any other state as derivation is applied for the development of the area where that mineral was gotten from.

Senator Ita Enang did not explain the strategies that the FGN will put in place to make the proposed National Derivation Commission an oasis of probity in a political setting steeped in corruption. In 1993, the FGN established Oil Mineral Producing Area Development Commission (OMPADEC) with the intention to invest more in the social and economic development of the oil-producing Niger Delta.

OMPADEC’S mandate was transferred to the new Niger Delta Development Commission (NDDC) in June 2000. Little has changed in terms of the probity with which the NDDC executes its mandate or the resulting contribution to the socio-economic development of the Niger Delta. The NDDC is usually in the news for outrageous corruption than for any addition to development or welfare in the Niger Delta.

Also Read: MOSOP Vows to Block Resumption of Oil Exploration in Ogoniland

The 13 percent “derivation fund” is a product of the 1999 Nigerian Constitution. It functions like a “top-up” set aside from the federation account and distributed to the oil-producing states in addition to monthly allocation from oil export revenue.

The Niger Delta States have simply been managing public resources like it is managed in Nigeria’s prebendal political system – to reward members of victorious political coalitions and to invest in building personal political networks.

Nigeria generates 90% of its revenue from Niger Delta’s oil, making the region central to the survival of Africa’s largest economy. Yet poor governance, poverty, insurgency, and underdevelopment remain endemic in the region despite the billions in concessional funding directed to the region.

Between 2009 and 2019, the government spent N500 billion on a peacebuilding programme after an insurgency that threatened Nigeria’s oil production and the broader economy. But the funds, meant to cover stipends, education, training, and entrepreneurship development costs for amnesty participants, only “fed corruption and created bigger long-term problems,” a 2020 study published on The Conversation found.

Despite the flow of Nigeria’s petrodollars into the region and the inability to translate the funds into infrastructure development and enhanced livelihoods, the Niger Delta States have also taken on massive debt.  Delta State was Nigeria’s third most indebted as of the end of 2014, according to the Debt Management Office. The oil-rich state owed creditors $233 million, roughly five times its annual internally generated revenue. In 2019, Niger Delta States featured prominently on the list of Nigeria’s ten most indebted states.

Senator Enang also made known that he had “articulated the position” on the mismanagement of Niger Delta derivation funds by state governments to President Muhammadu Buhari and the creation of the new commission.

The proposal to set up National Derivation Commission (NDC) will definitely run into strong opposition in the Niger Delta. It would mean that the 13% derivation top-up will fall under federal control. The FGN would find it difficult to justify this revenue grab given that the NDDC it controls seems to have an even worse reputation for corruption than the Niger Delta state governments.

Also Read: Oil Exploration to Recommence in the Chad Basin-Timipre Sylva

Nigeria is currently ranked as the fourth most corrupt country in West Africa. Since 2015, when the President assumed office and launched his much-advertised ambition to clamp down on corruption, the country has fallen 10 places on the annual Corruption Perception Index (CPI) report by Transparency International – from 136th position five years ago to 146th in 2019, out of 180 countries globally.

Development experts like Paul Collier of Oxford University have advocated bypassing public sector corruption through competitive outsourcing of the execution of development and social projects to private sector companies. Applied to the Nigeria Delta, this could see the budget of the Niger Delta Development Commission for instance administered to a private company on the basis of attractive quotes for projects.

While this may be a desperate proposal to work around the problem of pervasive corruption, Nigerian politicians have tended to lament corruption while being extremely reluctant to experiment with new policies or institutional designs that could reduce it.

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