IV. GOVERNMENT RESPONSES

The Nigerian federal government has announced on several occasions the priority it gives to development in the Niger Delta, including by establishing a Niger Delta Development Commission. But the announcements have not led to significant improvements on the ground. In particular, little of the money paid by the federal government to state and local governments from the oil revenue is actually spent on genuine development projects: there appears to be virtually no control or proper audit over spending by state and local authorities-despite the federal government's creation of an Independent Corrupt Practices Commission (ICPC) with the mandate to investigate such wrongdoing.⁷⁸

Resource Control
The percentage of revenue paid to the oil-producing states from the oil that is produced from their areas has been a matter of contention since oil was first discovered in Nigeria.⁷⁹ The 1999 constitution provides that at least 13 percent of the revenue derived from natural resources should be paid to the states where it is produced,⁸⁰ though there have been substantial delays in calculating and paying these sums. The federal government only began making payments in accordance with the increased allocation in January 2000, although they fell due from June 1999, and in practice has never paid the 13 percent minimum.⁸¹ Nonetheless, allocations from the federal government to the oil-producing states have increased markedly since 1999, rising to 25 percent of the amount paid out to states from the "federation account" in 2001 (the equivalent of just over U.S.$1 billion), from 12 percent in the second half of 1999 (or approximately $120 million).⁸² The main oil producing states-Akwa Ibom, Bayelsa, Delta, and Rivers-have about 10 percent of the population of Nigeria. These payments have not satisfied residents of oil-producing areas who feel they still do not receive adequate benefits from the oil. Individuals and groups from across the political spectrum in what is known as the "south-south" zone of Nigeria have demanded that the oil producing states assume "full control" over their natural resources, and pay tax from those revenues to the federal government. They also demand the repeal of a number of laws that give control over land and mineral resources to the federal government.⁸³

In addition to the general debates surrounding the issue of resource control, the federal government has consistently asserted that it is not obliged to pay to the coastal states revenue derived from offshore oilfields. Accordingly, in 2001, the federal government filed a suit seeking the interpretation of the Supreme Court on the issue of offshore revenue. In April 2002, the Supreme Court ruled in favor of the federal government, deciding that the seaward boundary of the coastal states ran along the low-water mark, rather than extending to the edge of Nigeria's territorial waters. About 40 percent of Nigeria's oil is produced offshore.

South-south leaders protested the judgment. For the oil producing states, the Supreme Court decision implied a sharp drop in the revenue they could expect to receive from the revenue allocation formula. Akwa Ibom State would be particularly badly affected: since a high proportion of the revenues paid to it had derived from offshore production, the state would theoretically be obliged to refund the federal government for funds paid out in contravention of the decision since 1999. In addition, the court ruled that the federal government must cease direct deductions from federally collected oil and gas revenues to pay for "first line items" before sharing revenues with states and local authorities. Among the first line items affected were the contributions of the Nigerian National Petroleum Corporation (NNPC), the government agency with which the oil majors operating in Nigeria are in joint ventures, to the budgets of its operating partners.⁸⁴ The ruling thus generated a funding crisis, as the federal government ceased making any payments to the Niger Delta states under the derivation principle, holding the money in an escrow account pending a resolution of the issue.⁸⁵ The government announced in July 2002 that it would make loans to the oil producing states while a task force determined the seaward boundaries of the littoral states in order to decide the percentage of oil production that would be counted for derivation payments.⁸⁶ In September 2002, President Obasanjo put to the National Assembly a bill proposing an end to the onshore/offshore dichotomy, apparently motivated by the desire to win the support of representatives from the Niger Delta states against an attempt to impeach him.⁸⁷

In August 1999, as required by the constitution, the federal government established the thirty-eight-member Revenue Mobilization, Allocation and Fiscal Commission, to negotiate a new formula for revenue sharing between the three tiers of government (that is, after the constitutional requirement of a minimum 13 percent of funds accruing from natural resources is paid out on a derivation basis). The rule in place since 1992 allocates 48.5 percent to the federal government, 24 percent to states, 20 percent to local governments, and 7.5 percent to special funds.⁸⁸ A bill proposing a new formula (41.3 percent to the federal government, 31 percent to states, 16 percent to local governments, and 11.7 percent for special funds, including the ecological fund) was submitted to the National Assembly in 2001, but withdrawn following the Supreme Court ruling of April 2002.⁸⁹ The government set up a new committee, the Federal Account Allocation Committee, to find a political solution to the resource control issue. In July 2002, Obasanjo signed an executive order providing for the federal government to take 56 percent of revenue, and state and local governments to take 24 and 20 percent, respectively: according to press reports, the formula meant that the federal government received _68.4 billion (U.S.$526 million), the states _45.1 billion ($347 million), and local governments _29 billion ($223 million) for the month of July.⁹⁰ Monthly grants were also made to Akwa Ibom and Ondo States, those worst affected by the Supreme Court judgment, pending resolution of the onshore-offshore dispute.

The issue will remain a controversial one, and can be guaranteed to form a key point of debate during the lead up to the 2003 elections.

The Niger Delta Development Commission
In response to local demands for greater resource ownership and benefits, and in an attempt to defuse the demands for "resource control," President Obasanjo introduced to the National Assembly soon after his inauguration a bill to establish a Niger Delta Development Commission (NDDC). Many from the Niger Delta, however, rejected the bill since it did not address their concerns surrounding revenue allocation and resource control, and appeared likely to duplicate similar corruption-ridden bodies created by previous administrations.⁹¹ The law had a stormy passage through the National Assembly, but was eventually passed in July 2000.⁹²

The NDDC Act establishes a governing board for the commission, appointed by the president, and consisting of a chairman, representatives of each of nine "oil producing" states,⁹³ representatives of three other states, a representative of the oil companies, and representatives of various federal government departments. The commission is run on a day-to-day basis by a managing director. The commission is charged with a wide range of tasks, in particular, to:

conceive, plan and implement, in accordance with set rules and regulations, projects and programmes for the sustainable development of the Niger Delta area in the field of transportation, including roads, jetties and waterways, health, education, employment, industrialization, agriculture and fisheries, housing, and urban development, water supply, electricity and telecommunications.⁹⁴

The commission is funded by a combination of contributions from the federal government and oil companies: 15 percent of the allocations due to the member states of the commission under the "derivation principle" of revenue allocation; 3 percent of the total annual budget of any oil company operating in the Niger Delta; and 50 percent of funds due to the member states from the ecological fund, a separate federal fund set up for the remedy of ecological problems caused by oil production.⁹⁵ The commission has repeatedly complained, however, that these funds are not in fact paid to it-challenging both the government and the oil companies to pay up in full. Under the legislation establishing it, the NDDC must "have regard to the varied and specific contributions of each Member State of the Commission to the total national production of oil and gas." The commission has developed its own formula for the allocation of projects, with 60 percent of funds to be spent on the basis of oil production from each state.⁹⁶

The NDDC began operations early in 2001. The budget for 2001 submitted by President Obasanjo to the National Assembly in October proposed a _15.77 billion (U.S.$121 million) allocation for its work. The NDDC proposed a budget of about _40 billion ($307 million) for development projects during 2002-though by March 2002 only _17 billion ($130 million) of this had been approved by the National Assembly-and announced 641 projects spread across the nine states.⁹⁷ These projects cover different sectors, including infrastructure, electrification, water schemes, health, education, environmental protection, industrialization. The NDDC is working with the German development agency Gesellschaft für Technische Zusammenarbeit (GTZ) to develop a "master plan" for development in the Niger Delta region. The NDDC has also taken over projects that belonged to its predecessor, the Oil Mineral Producing Areas Development Commission (OMPADEC), and initiated an "interim action plan" for immediate projects.⁹⁸

The World Bank is preparing to make a U.S.$40 million loan to the NDDC for institutional support, strengthening the commission's internal and external communications, and strengthening the capacity of nongovernmental and community-based organizations working in the Niger Delta to engage with the NDDC and other development agencies.⁹⁹ The U.N. Development Programme (UNDP) is also providing technical and advisory support to the commission, among other things joining in the organization of a three-day conference on development issues in the Niger Delta in December 2001.¹⁰⁰

Recently, the Nigerian government, through the National Petroleum Investment and Management Service (NAPIMS), set up an oil industry development committee to monitor and rationalize oil company development projects.¹⁰¹

Security in the Oil Producing Areas
As documented in this report, Mobile Police, army and navy are widely deployed throughout the oil producing areas. In addition, the government has taken steps to create special units dedicated to security for the oil industry. In April 2000, the Nigeria Police Force, in collaboration with the NNPC, established a "task force" on pipeline vandalization. From April 2000 to December 2001, the police investigated 101 reported cases of vandalization of oil pipelines, and arrested a total of 589 people; 490 of these were charged with various offenses. None of these cases had reached trial by the end of 2001.¹⁰² Similar task forces were set up in several states of the Niger Delta, including not only police but also the navy, army, and SSS. In Delta State, the government passed a law in August 2001 banning militant groups blamed for disruption of oil activities in the state. According to press reports, membership of one of the groups is punishable by seven years' imprisonment.¹⁰³ Despite these efforts at patrolling pipelines and arresting culprits, pipeline ruptures for the purposes of illegal bunkering of crude oil or tapping petroleum products continue to be a serious problem, sometimes with fatal results for those involved. Often, those involved are people with high-level contacts in government and the security forces, enabling them to escape efforts at prevention and punishments.¹⁰⁴

In theory, acts of vandalization against oil facilities can still be prosecuted under military government laws that were apparently overlooked when a number of repressive decrees were repealed immediately before the transition to civilian government in May 1999. These laws on their face violate international human rights standards and should be repealed. The Petroleum Production and Distribution (Anti-Sabotage) Act of 1975 provides for the head of state to constitute a military tribunal to try persons charged with offenses under the act, and states that those convicted may be sentenced either to death or imprisonment for up to twenty-one years.¹⁰⁵ Sabotage is given a very wide definition, relating to various acts that might interrupt the production or distribution of petroleum products.¹⁰⁶ The Criminal Justice (Miscellaneous Provisions) Act of 1975 also makes damage of oil pipelines and installations triable before the High Court.¹⁰⁷ The act also provides that an "armed patrol" may arrest without warrant persons reasonably suspected of committing an offense under the act. In practice, however, it seems that these laws are not being used.

In November 2001, the federal government set up a Special Security Committee on Oil Producing Areas, "to address the prevailing situation in the oil producing areas which have, in recent past, witnessed unprecedented vandalisation of oil pipelines, disruptions, kidnappings, extortion and a general state of insecurity."¹⁰⁸ The committee was made up of the chiefs of army, navy, and air staff; the inspector general of police; the head of the State Security Service; a representative of the national security adviser; the managing director of the NNPC and the director of the Department of Petroleum Resouces; the secretaries to the governments of the nine oil producing states; and the managing directors of the five biggest multinational oil companies operating in Nigeria. The committee's terms of reference were, among other things, to "identify lapses in the protection of oil installations including causes and sources of facility vandalisation and sabotage and recommend appropriate measures to enhance oil installations' security" and to "appraise the negative impact of youth and community agitations and recommend measures to reduce youth restiveness, communal agitations, and other incidents of sabotage of pipelines in oil communities."¹⁰⁹

The committee submitted its report to President Obasanjo in early 2002. Though it remains unpublished, Human Rights Watch obtained a copy. The committee noted that disruption of oil operations by community disturbances, pipeline vandalization, and illegal bunkering has reduced production by as much as 15 to 20 percent on an ongoing basis; that is, by 300,000 to 400,000 bpd.¹¹⁰ "Most threats," the committee stated, "originate from host communities," where youth are often armed; however, "Another major threat to the oil industry ... arises from the activities of a `cartel or mafia', composed of highly placed and powerful individuals within the society, who run a network of agents to steal crude oil and finished produced from pipelines in the Niger Delta region."¹¹¹ The committee indicated that many of the militant youth groups "could be enjoying the patronage of some retired or serving military and security personnel."¹¹²

Despite its relatively limited mandate, the committee chose in its report to the president to focus on the deeper causes of unrest in the delta and not only consider the short-term application of force to quell it. The committee concluded that: "While the primary assignment of the Committee is to look at the ways and means of instituting effective security of oil operations and installations, it became quite obvious during its deliberations that the root causes of insecurity in the areas had to do with the neglect, frustration and the sense of abandonment shared by the people." Thus, "[e]nduring peace anywhere, particularly in the oil producing areas, can not be achieved by militarisation or the security approach." The committee therefore recommended two ways to tackle the problems it had considered: "The first approach is the development of infrastructure, such as roads, housing, electricity, water, employment generation and economic empowerment of the people of the area. This approach, once initiated and recognised by all the stakeholders, would make it easy for the implementation of the second one, which is effective enforcement of law and order."¹¹³

The committee recommended the upward review of the derivation component of the payments to states to "not less than 50%," as well as laws to make it mandatory for oil producing companies to increase local content in their operations, and other measures related to infrastructure construction and employment generation. The committee also recommended the repeal of the Land Use Act, Petroleum Act, "and other laws which dispossess oil producing areas of their land"-a longstanding demand of politicians and most other spokespeople from the Niger Delta. It also recommended that the federal government pass a law prohibiting the oil companies from hiring "ghost workers" who are paid to do nothing-a frequent practice when youth demand employment, but no jobs are available, which generates conflict between those so favored and others who would also like to be paid for no work. With regard to the specific security strategy, the committee recommended the creation of an "integrated oil producing areas security and safety system" with an operations center to coordinate all the law enforcement agencies, including the navy, army, police, SSS, and other relevant authorities. The committee recommended new training and new equipment, including communications equipment, "fast assault craft," and other vehicles.

78 The commission was created by the Independent Corrupt Practices and Other Related Offences Act of 2000, and has a mandate to receive and investigate reports of a wide range of offenses of corruption as created by the act. It was formally inaugurated in September 2001, and in June 2002, the Supreme Court confirmed the constitutionality of the act. Responsibility for prosecution of offenses under the act rests with the attorney-general of the federation.

79 For the history of revenue allocation in Nigeria, see The Price of Oil, pp. 39-52.

80 Section 162(2) of the 1999 constitution provides that: "The President, upon the receipt of the advice from the National Revenue Mobilisation, Allocation and Fiscal Commission, shall table before the National Assembly proposals for Revenue Allocation from the Federation Account, and, in determining the formula, the National Assembly shall take into account allocation principles especially those of Population, Equality of States, Internal Revenue Generation, Land Mass, Terrain, as well as Population Density: provided that the principle of derivation shall be constantly reflected in any approved formula as being not less than 13 percent of the revenue accruing to the Federation Account directly from any natural resources."

81 Some payments began to be made from the first quarter of 2000, but the amounts are still in dispute, and the allocations have never been backdated to June 1999, when the constitution came into force. In early 2002, a federal government-appointed committee reported that the states were only being paid 7.8 percent on a derivation basis. "Report of the Special Security Committee on Oil Producing Areas," submitted to President Obasanjo, February 19, 2002, paragraph 31.

82 SPDC, People and the Environment: Annual Report 2002, p.10. Nigeria is a member of the Organization of Petroleum Exporting Countries (OPEC) and its current (since November 2001) production quota set by OPEC is 1.787 million bpd. However, production is frequently reported to be closer to 2 million bpd. The government has stated that it aims to achieve 4 million bpd production by 2010.

83 These laws include the Land Use Act and the Petroleum Act. See The Price of Oil, pp.54-56 and 75-78.

84 In order to enable it to pay its "cash call" obligations to the joint ventures, the government announced the commercialization of NNPC, and that these obligations would be treated as expenses rather than revenue allocation. See Jacinta Moran, "Nigeria's NNPC to take greater role in JVs: to assume responsibility for cash-call payments," Platts Oilgram News, May 20, 2002. Cash calls were partially paid in June even though this arrangement had yet to be finalized. "Nigeria pays oil JV cash calls despite court ruling," Reuters, June 4, 2002.

85 In July 2002, violence broke out in Ilaje, Ondo State, when youths protested because the Ondo State Oil Producing Area Development Commission had not disbursed a promised _150 million for youth empowerment following communal conflict in the area. The state government explained that the money had not been paid to the commission because of the resource control suit.

86 Emma Ujah, "Thirteen % derivation - oil states know fate soon," Vanguard, June 26, 2002; Emma Ujah, "Government gives reasons for loans to oil states," Vanguard, July 12, 2002.

87 "Resource Control Bill-Beyond the Euphoria," This Day, September 10, 2002.

88 The balance of 4 percent was originally allocated 3 percent to OMPADEC (see below, footnote 91) and 1 percent to oil producing areas through derivation, but was reallocated after the creation of the Niger Delta Development Commission to the three tiers of government. See "Nigeria: Selected Issues and Statistical Appendix," IMF, August 2001.

89 Bature Umar, "On-Shore, Off-Shore-Obasanjo Withdraws Revenue Allocation Bill," This Day, May 15, 2002; Chuks Okocha, "House-New Revenue Formula Unconstitutional," This Day, July 19, 2002.

90 Nneoma Ukeje-Eloagu and Kunle Ademokun, "Revenue Allocation-FAAC meets today, may implement new formula," This Day, July 25, 2002; Kunle Ademokun, "Government, states, LGs share _280 bn in July, August," This Day, August 29, 2002.

91 Among the bodies preceding the NDDC were the Niger Delta Development Board, established on the recommendation of the pre-independence Willink Commission, and the Oil Mineral Producing Areas Development Commission (OMPADEC), established by General Ibrahim Babangida in 1992. See The Price of Oil, p. 46.

92 In particular, opponents to the draft bill objected to the initial proposal that 50 percent of the financing for the commission should come from the 13 percent of revenue that the 1999 constitution provides shall be allocated on a "derivation principle." In effect, they argued, the commission would actually take away money that should already go to the oil producing states under the new constitution. The National Assembly amended the draft bill to reflect some of these concerns, including reducing the percentage of funds to come from the federation account to 15 percent and increasing a proposed levy on the oil companies from 0.5 to 3 percent of their budget. President Obasanjo vetoed these amendments in March 2000, but in May both houses of the National Assembly passed the bill again by a two-thirds majority, overriding the president's veto. After further argument and requests to agree amendments, the president finally accepted this version of the bill.

93 Abia, Akwa Ibom, Bayelsa, Cross River, Delta, Edo, Imo, Ondo and Rivers. The selection of these states is itself controversial, since several are not within the Niger Delta, properly speaking-that is, they do not share in the particular development and environmental problems of those states with extensive mangrove and fresh water swamp-though they do produce some oil.

94 NDDC Act, section 7(1)(b).

95 Ibid., section 14.

96 "Niger Delta decides on formula to execute developmental projects," Guardian (Lagos), December 16, 2001.

97 OPECNA Bulletin, May 2, 2002; Upstream, April 12, 2002.

98 Godwin E. Omene, "Interim Action Plan and Framework for Development of the Niger Delta Region," paper presented to the International Conference on the Development of the Niger Delta, held in Port Harcourt, December 10-12, 2001.

99 Human Rights Watch telephone interview with World Bank official, Abuja, August 30, 2002; project documents available on the World Bank website, www.worldbank.org.

100 See "Nigerian commission charts improvements for Niger Delta," UNDP press release, January 18, 2002. The papers from the conference are available at www.nddconline.org.

101 "SPDC Response to Human Rights Watch Questions," May 31, 2002.

102 Report of the Special Security Committee, paragraph 47.

103 Jaiyeola Andrew, "7-year jail term for members of illegal youth associations in Delta," This Day, August 24, 2001.

104 This was confirmed by the government's own investigation into security in the oil producing areas. See Report of the Special Security Committee, paragraph 40.

105 Section 1, Petroleum Production and Distribution (Anti-Sabotage) Decree no.35 of 1975 (Cap. 353, Laws of the Federation of Nigeria).

106 The act provides that: "Any person who does any of the following things, that is to say-

(a) wilfully does anything with intent to obstruct or prevent the production or distribution of petroleum products in any part of Nigeria; or
(b) wilfully does anything with intent to obstruct or prevent the procurement of petroleum products for distribution in any part of Nigeria; or
(c) wilfully does anything in respect of any vehicle or any public highway with intent to obstruct or prevent the use of that vehicle or that public highway for the distribution of petroleum products,
shall, if by doing that thing he, to any significant extent, causes or contributes to any interruption in the production or distribution of petroleum products in any part of Nigeria, be guilty of the offence of sabotage under this Act."

And that "Any person who aids, incites, counsels or procures any other person to do any of these things is equally guilty of sabotage."

107 The Criminal Justice (Miscellaneous Provisions) Decree no.30 of 1975 (Cap. 78, Laws of the Federation of Nigeria), Section 3(1) and (2).

108 Report of the Special Security Committee, executive summary.

109 Ibid., terms of reference.

110 Ibid., paragraph 35.

111 Ibid., paragraph 40.

112 Ibid., paragraph 51.

113 Ibid., executive summary.