States Should Account for Derivation Funds

Several oil-bearing communities are displeased. Their misery stems from the misapplication of the 13 per cent derivation fund allocated to them by Section 162(2) of the 1999 Constitution (as amended). To press home their demand for a paradigm shift, leaders and concerned stakeholders have forwarded a deluge of petitions to concerned federal government agencies to strip the state governments of the responsibility of fiddling with the fund.

The latest of such appeals came from six states in the Niger Delta – Bayelsa, Rivers, Akwa Ibom, Edo, Ondo and Delta. Echoing the now familiar refrain, the petitioners, in their joint letter to the Nigeria Extractive Industries Transparency Initiative (NEITI), claimed that their respective state governments had misappropriated a whopping N7.28trn since 1999. According to them, passing the funds through the state governments has “left the actual oil and gas producing communities in abject poverty”.

While the amount cited could be contentious, it is an undisputable fact that most governors of these states that have had more than a fair share of the nation’s common wealth have not served their people well. Rather than use the derivation fund to develop the oil-bearing communities, the state governments use the funds to develop their state capitals and on frivolities not related to the development and needs of the oil-bearing communities. There are instances of holiday jamboree, Father Christmas-like donations and waste that trail each monthly allocation to these states. This situation has caused monumental fraud against the oil and gas-producing communities and replaced hope that effective utilisation of the fund would have brought. Poverty, lack of infrastructure, lack of means of livelihood, devastation, environmental degradation, pollution and health hazards stare people in the face everywhere in the Niger Delta. Insecurity is a common denominator of the clans there.

It is not surprising that both the president of the Ijaw National Congress (INC), Joshua Benamaisia, and the chairman, Movement for the Survival of the Ogoni People Provisional Council, Prof. Ben Naanen, are also in the forefront of the agitation to separate the fund from the regular monthly allocations of state governments. They want to have it administered by a new body. Law constitutionally sets the derivation fund aside before the commencement of Federation Accounts Allocation Committee (FAAC) meetings to share the remaining balance of 87 per cent of the total oil revenue and it has been a first-line charge since the enactment of the Revenue Act 1 of 1982 and managed independent of state governments. However, it has not been so since 1999. It is neither a part of the consolidated revenue of any tier of government nor a part of state/local government joint account.

As a stand-alone fund, it should be treated as such. There is a need for a comprehensive audit of the allocation to ascertain if it has been used appropriately or abused. Indeed, a reversal of the present practice is desirable. It is a project-based fund and must not be spent on causes other than what the law envisages.