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Background and Context: Oil, Poverty and Governance in Nigeria

Corruption has a disastrously debilitating impact on the Nigerian government’s ability to deliver on its legal obligations to support the progressive realization of the rights to health and education. This report focuses mainly on five local governments in Rivers State, one of Nigeria’s oil-producing states in the Niger Delta, which in recent years have experienced a financial bonanza as a result of rising oil prices. This has not been translated into investment in health or education. Instead, as this report documents, funds have been embezzled and squandered. Governance at the state level in Rivers is plagued by many of the same problems that have crippled local government. Corruption, however, is not a localized issue. Based on its interviews and other sources, Human Rights Watch believes that the patterns of corruption and mismanagement revealed by our own field research—along with the human rights impacts of those issues—reflect a problem that exists in many other local governments in Rivers State and elsewhere in the oil-rich Niger Delta.

Corruption in the Niger Delta’s state and local governments has also directly fueled political violence and other forms of human rights abuse and has subverted ostensibly democratic processes. In Nigeria’s last nationwide elections in 2003, many politicians throughout the Delta were able to use the wealth at their disposal to mobilize violence and graft to support their bids for office.³ In previous reports Human Rights Watch has documented how hundreds of people throughout Nigeria lost their lives in election-related violence in the months leading up to the 2003 polls.⁴ In the Niger Delta the campaigns were bloodier even than the prevailing norm. Many electoral contests were rigged by candidates using resources acquired through corruption. One leading Nigerian observer group characterized the electoral process as being marred by “monumental fraud.”⁵

Since the politicians who won elections in those tainted polls have become entrenched in office, they have maintained the mantle of impunity that cloaked them during their campaigns. In some cases, civil society activists or journalists who call attention to the financial and other misdeeds of elected officials have been harassed or arrested by security forces.⁶ In other cases, militias once armed and sheltered by powerful political figures have committed widespread abuses against civilian populations after being abandoned by their former patrons.⁷ All of these abuses are directly fueled by the problem of corruption, and by making government less accountable to its electorate or the law, they serve in turn to reinforce the very patterns of corruption that helped create them.

Corruption therefore undermines accountability. With this as the backdrop, this report documents one way that corruption particularly affects poor, the sick and the young, by undermining the provision of basic services at the local level. Local Government Councils (LGCs) generally treat budgets and financial reports as closely guarded secrets, thereby taking away the ability of citizens to monitor where money is going. While local leaders are getting rich, provision of health care and education is falling into ruin.

State and Local Government in Nigeria

Nigeria has a three-tiered federal system of government that divides the country into 36 state governments and 774 Local Government Councils. The state governments receive large monthly allocations from the federal government and are responsible for providing a range of important services. State governments run public hospitals, public secondary schools, and universities, and are meant to invest in other basic public infrastructure as well. Some of these functions overlap to some degree with federal government efforts, while others—such as the day-to-day operation of public secondary schools—are the sole preserve of state governments.

While often over-looked, Nigeria’s local governments have a fundamentally important role in providing for basic social and economic rights, as some of government’s key responsibilities are largely devolved to their control. Most importantly, the LGCs are tasked with the principal responsibility for delivering and funding primary education and primary health care services across Nigeria.⁸

Nigeria’s local governments are responsible for the day-to-day operation of all of the country’s estimated 13,000 government-run primary health care centers.⁹ These facilities are charged with providing primary health care services including the provision of basic immunizations with federal government assistance, the treatment of ailments ranging from malaria to tuberculosis, and assisting women with childbirth.¹⁰ Local government responsibilities include building and maintaining the physical infrastructure of primary health centers, payment of all staff salaries and stocking facilities with medicines and other necessary resources.

The federal government is mainly responsible for articulating overarching health policies and with monitoring and evaluation. The states are meant to provide the LGCs with planning, logistical and financial assistance. The frontline responsibilities, however, rest squarely on the shoulders of the local governments.¹¹

In the area of education, local governments bear the main responsibility for ensuring the implementation of government education policies and for running Nigeria’s primary schools on a day-to-day basis through their Local Government Education Authorities (LGEAs).¹² Their practical responsibilities include building and maintaining primary school facilities and providing them with educational materials and other basic amenities. Where local governments do not meet their responsibilities, the basic physical infrastructure of the school system is left to decay, teaching materials are scarce or nonexistent, and effective oversight of the quality of teaching on offer in the schools is not carried out.

In the area of primary education, practical federal government intervention has been more substantial than it has been in health.¹³ Most controversially, the federal government has essentially stripped local governments of their responsibility for paying primary school teachers by deducting the money to pay their salaries from local government allocations “at source.”¹⁴ Essentially, the federal government appropriates money that would otherwise go into local government coffers and uses it to pay primary school teachers’ salaries directly. This came about because of the widespread failure of many local governments to pay their teachers. State governments have also inaugurated State Universal Basic Education Boards (SUBEBs) beginning in 2006, which are meant to coordinate the use of increased federal and state support to primary education.¹⁵ 

Because of the responsibilities delegated to local government, poor governance at this level has a dramatic impact on the delivery of services that are an essential component of the government’s human rights obligations to its people. One of Nigeria’s leading anti-corruption officials put it this way: “Local government corruption has a direct impact on every aspect of human rights and causes poverty. It affects the quality of life and even the right to life and retards progress at all levels of society.”¹⁶

Financing Local Government

Each month the federal government divides 20 percent of its total revenues between the country’s 774 local governments, using criteria that result in a roughly equitable distribution of income across most of the LGCs. Local governments supplement this with whatever revenues they are able to generate internally, but most depend on federal allocations for upwards of 80 percent of their total income.¹⁷ Federal law also requires state governments to make contributions to the treasuries of all LGCs within the state, but many states reportedly ignore that requirement altogether.

However, local governments do not actually receive the entire amount of their allocations. As described, the federal government withholds the funds necessary to pay the salaries of primary school teachers from LGC allocations. This and other much smaller deductions are known as statutory deductions. In Rivers State, the main focus area of this report, they consume up to one-third of many local governments’ theoretical allocations. No other category of local government employee is paid directly by the federal government; all other local government workers are paid by the LGC.  

Additionally, the actual amount received by local government is made uncertain by the procedure of federal government sending allocations to joint allocation accounts controlled by the state governments instead of directly to the LGCs. Many state governments appropriate a portion of those funds for their own use—without any legal justification—before passing the funds on to the LGCs. Some observers estimate that some states siphon off a huge proportion of local governments’ incomes each year. However, according to local officials and other sources, this is not a particularly significant problem in Rivers State perhaps because the state government’s own budget has become extremely large in recent years.¹⁸

Every local government in Rivers is required by state law to produce a budget each year. The local government chairperson submits the budget to his legislative council, which can suggest amendments to it and must ultimately approve it or vote it down. These budgets are only estimates of actual expenditure because they are based on what the local government expects that its income for the year will be. Actual income is almost entirely dependent upon the size of the allocations it receives from the federal government, which in turn depends largely on worldwide oil prices.

Budgets are divided into two categories of spending: “Recurrent Expenditures,” and “Capital Expenditure.” Recurrent expenditures include the payment of salaries, maintenance, staff training, the provision of basic materials, and all other operational needs. Capital expenditures largely encompass new construction, road construction and the purchase of particularly expensive items such as automobiles. The line between the two categories of expenditure is sometimes blurred, however, with some local governments listing large one-time expenditures, such as their “security votes” (see below), as capital expenditures even though there is no obvious reason why this should be the case. This confusing and sometimes arbitrary categorization of expenditures adds to the opacity of the budget-making process.

At the end of the financial year, each local government is required to produce a statement of expenditure which details how much it actually earned and how that money was spent, as against the estimates reflected in the budget. These documents are generally treated as tightly guarded secrets.¹⁹

Oil-producing states are entitled to 13 percent of the revenues generated by oil within their jurisdictions. This passes through the central government as well before making its way into state coffers.²⁰ According to figures published by the Nigerian Ministry of Finance, average total monthly allocations to the 774 LGCs have risen from just under $84.5 million (N11 billion) to roughly $460 million (N59.8 billion) between 1999 and 2006. According to one forthcoming World Bank report, “spending by local government authorities has been growing even faster than state government spending.”²¹

Oil and Governance

Nigeria’s oil industry had its beginnings with the discovery of oil deposits near the small Niger Delta community of Oloibiri in 1956, just four years prior to the country’s independence. From those humble beginnings, oil production has grown to dominate Nigeria’s economy. That trend was cemented by worldwide increases in the price of oil during the 1970s; the value of Nigerian oil production skyrocketed from $250 million in 1970 to $11.2 billion by 1974.²² Nigeria has since produced several hundred billion dollars worth of oil since independence, even as other sectors of the economy have withered away to comparative insignificance.²³ Nigeria’s net oil revenues topped $45 billion in 2005 and were expected to rise in 2006.²⁴

Most of Nigeria’s more than 130 million people²⁵ have gotten remarkably little in return for all of the wealth their nation has produced, in large measure because much of it has been stolen or squandered by those in government. Nigeria’s Economic and Financial Crimes Commission (EFCC) has estimated that more than $380 billion of public funds was stolen or squandered by those in government between 1960 and 1999.²⁶  

Nigeria endured almost thirty years of military rule between 1960 and 1999 and has been saddled with leaders whose time in office has been marked by the wholesale looting of public finds. During the administration of General Ibrahim Babangida who seized power in 1985 and ruled until 1993, as much as $12.2 billion in oil revenues are alleged to have “disappeared.”²⁷ Babangida was also widely accused of consciously working to institutionalize corruption as a tool of political control, destroying what remained of the integrity and independence of Nigeria’s civil service in the process. Babangida’s successor in office, General Sani Abacha, is believed to have personally stolen between one and three billion dollars during his four-year reign.²⁸ Many government officials at all levels followed their leaders’ example by looting whatever public resources to which they had access.²⁹

Corruption

The World Bank and the non-governmental organization Transparency International generally define corruption as “the abuse of public office for private gain.” The World Bank notes that this definition includes situations when “public officials accept, solicit, or extort bribes; and when private actors offer bribes to subvert or circumvent public policies for competitive advantage and profit.” Corruption can also occur in the absence of bribes. For example, the World Bank considers patronage or nepotism by government officials, theft of state assets, or the illegal diversion of state revenues as corruption.³⁰

The World Bank also distinguishes between two forms of corruption: state capture and administrative corruption. State capture is defined as the “actions of individuals, groups, or firms in both the public and private sectors to influence the formation of laws, regulations, decrees, and other government policies (that is, the basic rules of the game) to their own advantage by means of the illicit and non-transparent provision of private benefits to public officials.”³¹ Administrative corruption involves changing or altering the implementation of existing laws, rules, and regulations to “provide advantages to either state or non-state actors as a result of the illicit and non-transparent provision of private gain to public officials.” In this case, state officials can “simply misdirect public funds under their control for their own or their family’s direct financial benefit.”³²

Nigeria has suffered from both types of corruption on a scale that has crippled government’s capacity to invest in its people and provide for the realization of their basic human rights. For ordinary Nigerians, the consequences of government’s long-term failure to invest its resources in the country’s development have been dire. Nigeria’s Gross National Income has risen to $86.9 billion, but real per capita income stands at just 1/3 the level it had reached in 1980 and poverty is widely considered to be more widespread and more severe than it was at independence in 1960.³³ Somewhere between 50 and 90 million Nigerians live in absolute poverty—defined as an average income of less than one dollar per day—and 90 percent of Nigeria’s 140 million people are believed to live on less than twice that amount. ³⁴  Nigeria is ranked 159^th out of 177 countries in UNDP’s Human Development Index.³⁵

The Decentralization of Corruption in Nigeria since 1999

Under military rule, state and local governments were often starved of the resources they needed to govern, but their financial situation has dramatically improved since the return to civilian rule in 1999. Nigeria’s 36 state governments received more than $35.6 billion (over N4.6 trillion) in federal allocations between May 1999 and August 2006, while the 774 Local Government Councils (LGCs), were allocated an additional $23.4 billion (more than N3 trillion) by the federal government over the same period.³⁶ Average federal monthly allocations to both state and local governments have been steadily increasing, and sub-national government spending was four times higher in real terms in 2005 than it was in 1999.³⁷

These vast increases in state and local revenues have not led to progress in combating poverty or to successful government efforts to provide for the progressive realization of Nigerians’ rights to an acceptable level of basic health and education services.³⁸ Perhaps the single most important reason is that a large proportion of these revenues continue to be lost to corruption. Nigeria’s state governments have produced a constant stream of corruption-related scandals in recent years.³⁹ The head of Nigeria’s Economic and Financial Crimes Commission announced in October 2006 that 31 of Nigeria’s 36 governors face possible charges of corruption after leaving office.⁴⁰  

The picture is even worse at the local government level. The head of Nigeria’s Independent Corrupt Practices and Other Related Offenses Commission (ICPC), Emmanuel Olayinka Ayoola, told Human Rights Watch that corruption at the local government level is “rampant.”⁴¹ The Executive Chairman of the Economic and Financial Crimes Commission (EFCC) went further, telling Human Rights Watch that the conduct of many local government officials in Nigeria “is not even corruption. It’s gangsterism. It’s organized crime.”⁴²  

The Niger Delta: A Rising Tide of Discontent

Nigeria’s southeastern Niger Delta is the heart of the country’s oil industry, a fact that also makes it the driving force behind the Nigerian economy. For precisely that reason, the grinding poverty that afflicts the populations of Nigeria’s main oil-producing states throws Nigeria’s fundamental inequities and its failure to realize the basic human rights of Nigerians into sharp relief. A 2006 UNDP report described the Niger Delta’s human development situation as “appalling” and stated that the region was unlikely to meet any of the Millennium Development Goal targets, other than school enrollment, by 2015 “or anytime soon after.”⁴³ Infant mortality in rural areas of the South-South geopolitical zone that encompasses the Delta is higher than in any other part of Nigeria.⁴⁴  

The Niger Delta’s people have also had to cope with the environmental impacts of a poorly regulated oil industry. Every year the network of pipelines that crisscross the region’s maze of creeks and mangrove swamps records hundreds of oil spills that often spoil farmland and waterways.⁴⁵ Multinational oil companies have continued the environmentally harmful practice of flaring excess natural gas despite repeated promises to phase it out. Flaring has produced one of the best-known symbols of the Delta’s problems in the controlled infernos that light up the night sky for miles around them. Many residents of the Delta complain that these and other harmful practices have led to health problems and made it harder for them to earn a living off the land.⁴⁶  

Political discourse throughout the Niger Delta often centers on allegations that the federal government and multinational oil companies have conspired to abuse, impoverish and marginalize the region’s population. Shell, Nigeria’s largest and most venerable industry player, has been singled out for especially harsh criticism in many quarters.⁴⁷ Shell, for its part, claims that it has made significant investments in communities throughout the Niger Delta including $32 million in spending on sustainable community development in 2005 alone.⁴⁸

Resource Control

Public anger over the Niger Delta’s continuing impoverishment has coalesced into a disorganized but very broad political movement demanding greater local control of the region’s oil wealth from both the federal government and multinational oil companies. Under military rule, public expressions of discontent were largely peaceful, but in many instances the federal government nonetheless responded with heavy-handed force.⁴⁹ State brutality in the Delta reached a crescendo in 1995 with the hanging of Ogoni activist Ken Saro-Wiwa and eight others after a sham trial.⁵⁰  

The overall situation has not improved since the return to civilian rule in 1999. Government has made no real dent in the underlying poverty that fuels popular discontent, and the region’s problems are now compounded by rising levels of insecurity and violence. The federal government has failed to tackle these problems and has often responded to them by exacting reprisals on civilian populations.⁵¹  

The rising tide of violence in the Niger Delta has transformed the nature of the Niger Delta’s political struggle. In place of the non-violent struggles of the past, well-armed militant groups have emerged at the forefront of the “resource control” movement. Their activities are a volatile blend of political violence and criminal activity, the latter centered on the illegal trade in crude oil stolen from pipelines across the region, commonly known as “bunkering.” Shell estimated that between 20,000 to 40,000 barrels of oil per day were lost to bunkering in 2005; some estimates from outside the company range considerably higher.⁵² The most prominent of these new groups has been the Movement for the Emancipation of the Niger Delta (MEND), a loose coalition that emerged in early 2006 and is now spread throughout the Delta. Militants associated with MEND and other groups have clashed with military forces, staged armed attacks on oil company installations and kidnapped expatriate oil workers for ransom and publicity.⁵³   

State governments in the Niger Delta already control a far larger proportion of Nigeria’s national income than they did in 1999 because they are now entitled to a share of the oil resources they produce. At the end of military rule, the oil-producing states of the Delta were seeing no more benefit from Nigeria’s oil revenues than states that had no oil at all. ⁵⁴ However, since 1999 the federal government has returned 13 percent of its oil revenues to the governments of the states that generate them.⁵⁵ High oil prices in recent years have translated this seemingly modest percentage into an extraordinary windfall that has made the major oil producing states far richer than their counterparts across the rest of Nigeria.

In 2004, Nigeria’s 36 states received a combined total of just under $6 billion in transfers from the federal government; nearly one-third of that total went to the country’s four major oil-producing states of Akwa Ibom, Bayelsa, Delta and Rivers. ⁵⁶  These four states, all in the Niger Delta, make up less than 11 percent of Nigeria’s total estimated population.⁵⁷ State governments in the Niger Delta have generally failed to translate their newfound wealth into any real effort to combat poverty, improve health care and education, or otherwise meet their human rights obligations to their constituents. The loss of increasing state and local government allocations to corruption and mismanagement has made government’s betrayal of the Niger Delta’s people an increasingly localized affair.

Nigeria’s leading anti-corruption official, Nuhu Ribadu of the EFCC, cast the state of governance in the Delta in dramatic terms: “The elite in the Niger Delta is the richest segment of the Nigerian population, but this is not translated into health, education or infrastructure.…Resources that go into the Niger Delta are just going to feed the patterns of corruption—it is going to complete waste and corruption.”⁵⁸

The human toll exacted by the breakdown of governance in the Delta has been just as dramatic as the sheer scale of the theft that has helped perpetuate the region’s poverty. Nowhere is this more true than in Rivers State, which as Nigeria’s largest oil producer has the wealthiest state government in the nation.⁵⁹ Whether or not Rivers’ state and local governments are actually any more corrupt than those in other parts of Nigeria, the situation there stands out simply because of the amounts of money that flow into the state with little in the way of positive results.