By Stephen K. Dieseruvwe
Delta State being an oil producing state in Nigeria receives from the 13 per cent derivation fund as a benefit transfer scheme as stipulated in Section 162, Sub-section 2 of the Constitution of the Federal Republic of Nigerian. As a Constitutional provision, the derivation fund is paid to qualifying states monthly to assist their oil-producing communities in tackling environmental pollution and degradation, provision of basic amenities like healthcare, potable water, paved roads, and economic empowerment of the community people. Section 162, Sub-section 2 of the Constitution of the Federal Republic of Nigeria stipulates that the fund is for the exclusive use of oil and gas producing communities as compensation for loss of fishing rights and productive farmlands as a result of oil and gas exploration and production activities.
The Nigerian Extractive Industries Transparency Initiative (NEITI) also defines the fund as a financial incentive enshrined in the Constitution for oil-producing communities, based on their production input, to serve as benefits and encourage the community to create an enabling environment for more production of crude oil and gas. The total revenue disbursed to Delta State by the Federal Government from the revenues generated by Nigeria from oil and gas resources as 13 per cent derivation fund between January 2007 and July 2024 amounted to N2,204,470,142,182.00 (two trillion, two hundred and four billion, four hundred and seventy million, one hundred and forty-two thousand, and one hundred and eighty-two naira).
There have been three governors since 2007 until date. A breakdown of the 13% derivation fund received by each of the governors is as follows: Dr Emmanuel Uduaghan from May 2007 to April 2015 received N780,349,536,680.00 (seven hundred and eighty billion, three hundred and forty-nine million, five hundred and thirty-six thousand, six hundred and eighty naira). Dr Ifeanyi Okowa from May 2015 to April 2023 received N1,154,827,217,222.00 (one trillion, one hundred and fifty-four billion, eight hundred and twenty-seven million, two hundred and seventeen thousand, two hundred and twenty-two naira). Rt, Hon, Sheriff Oborevwori from May 2023 to July 2024 received N269,293,388,280.00 (two hundred and sixty-nine billion, two hundred and ninety-three million, three hundred and eighty-eight thousand, two hundred and eighty naira).
The 50% of the 13% derivation fund received under Uduaghan, Okowa, and Oborevwori meant to be utilised by DESOPADEC for the development of oil producing communities should have amounted to N390,174,768,340.00, N577 (three hundred and ninety billion, one hundred and seventy four million, seven hundred and sixty eight thousand, three hundred and forty naira), N577,413,608,611.00 (five hundred and seventy seven billion, four hundred and thirteen million, six hundred and eight thousand, six hundred and eleven naira) and N134,646,694,140.00 (one hundred and thirty-four billion, six hundred and forty six million, six hundred and ninety four thousand, one hundred and forty naira) respectively.
Although in contravention of Section 162, Sub-section 2 of the Constitution of the Federal Republic of Nigeria, which stipulates that the 13% derivation fund is meant for the exclusive use of oil and gas producing communities, the Delta State Oil Producing Areas Development Commission (DESOPADEC) enabling law only makes a provision 50% of the 13% derivation fund for the development of oil producing communities. As depicted in the graph, which shows the yearly share, if the provisions of the DESOPADEC law was followed to the letter, the amount accruable to DESOPADEC in the period under review (January 2007 to July 2024) would have been N1,102,235,071,091.00 (one trillion, one hundred and two billion, two hundred and thirty-five million, seventy-one thousand, and ninety-one naira), which the commission never received.
For this study, we were able to access the 2016 to 2023 budgets of Delta State. During this period, the state government budgeted N248.3 billion to DESOPADEC for its intervention activities. However, data obtained from the National Bureau of Statistics (NBS) shows that the state received about N1.3 trillion under the 13% derivation principle, which means DESOPADEC got only 19.17 per cent of the derivation fund disbursed to Delta State from the Federation Account. Going by the DESOPADEC law, the commission should have received N647.89 billion, not N248.3 billion, as budgeted. The question to ask is what the State government did with the balance N399.59 billion.
From the foregoing, it is glaring that the utilisation of the 13 per cent derivation fund has been trailed by controversies as they appear not to be in sync with the level of development in the oil producing communities in Delta State, as many oil-producing communities continue to bear the negative consequences of oil exploration and production. This a clear failure to appropriately utilise the derivation funds received for the benefit of the citizens. A snapshot analysis reveals that intervention activities and physical developments in the oil-producing communities do not reflect the derivation fund received by the state.
The Delta State Oil Producing Areas Development Commission (DESOPADEC) was created to execute development projects in oil-producing and impacted areas. But many of the oil producing communities have not been feeling the impact of the commission for a number of reasons. One of the reasons is that the state government commits only fractions of the 13% derivation fund to the intended interventions in the oil-producing communities.
As a result of the underfunding of DESOPADEC, mismanagement of funds and fraud is pervasive, leaving many oil-producing communities to suffer from the negative impact of oil exploration and production. The Delta State Oil Producing Areas Development Commission (DESOPADEC) is not transparent with its finances, and appointments into commission are treated as political compensation. In its exclusive report on 23rd April 2021, titled “ANALYSIS: How state governments cheat oil-producing communities in use of 13% derivation fund”, Premium Times reported that the commission has been variously accused of breaching the statutory process in the disbursement of its funds, with a large part of the funds committed to recurrent expenditure, including payment for office spaces rented mostly outside the oil-producing areas.
In another study of the impact of the 13 per cent derivation fund in the Niger Delta region, Delta State is amongst the four States that use a distinct commission in the utilisation of the 13 per cent derivation fund. In Delta State, the Delta State Oil Producing Areas Development Commission (DESOPADEC) is mandated to manage 50 Percent of the 13% derivation fund for the development of oil producing communities. But from our analysis of available data, between January 2016 and December 2023, only 19.17% was allocated to DESOPADEC from the 13% derivation fund, to carry out her statutory functions of developing oil producing communities in Delta State.
In the summary of findings from their assessment in January 2021 of the quality of health, water, education, social development skills and electricity accessed by the selected oil communities within the Niger Delta, including Delta State and the perception of the members of the assessed communities, a study revealed the following: (a) access to electricity is minimal, (b) absence of potable drinking water, (c) deplorable health care facilities; (d) poor educational infrastructure.
In addition, there was a lack of a structured framework for commissioning infrastructure projects across the communities, which has left a number of oil producing communities with little or no infrastructure. Furthermore, indigenes of the oil producing communities across the Niger Delta states desire that the derivation funds should be given directly to oil producing communities for effective management as the facilities that exist, are not reflective of the resources taken from them or the damages done to their environment.
Finally, their study revealed that the funds paid to the Niger Delta states by the FAAC, in compliance with the provisions of Section 162 (2) of the Constitution, have had little or no impact on its citizens.
In a review of the utilisation of the 13 per cent derivation funds, it noticed that it is plagued by a number of issues, which diminish the impact of the 13 per cent derivation funds in the Niger Delta. These issues include: discretionary transfers by governors; lack of consultation with recipient communities; poor governance structures; corruption, poor project quality, lack of project maintenance; lack of transparency, and accountability.
Consequently, we recommend the following: uniform vertical transfers of derivation funds to curb the practice of discretionary transfers currently practiced by Niger Delta states, the prescription of adequate budget preparation procedures that ensures a proper needs assessment of the intended beneficiaries are carried ahead of prospective budget implementations, the development of resource allocation criteria that are ‘downwardly accountable’, particularly to the intended beneficiaries of the derivation funds, consistent publishing of fiscal information and ensuring access to such information, earmarking a considerable proportion of the derivation funds for specific sectoral development such as health, education, facilitation of portable water, and drawing up memorandum of understanding between the States and Oil Producing Communities.
Finally, the enabling law of DESOPADEC and similar special intervention agencies in Niger Delta states are not designed to effectively and efficiently undertake their responsibilities in a transparent, fair, and conscientious manner The management structure of DESOPADEC is steeped in cronyism and rent-seeking with little or no room for accountability and auditing.
A comprehensive review of DESOPADEC’s enabling law and reform of its management structure are imperative for oil producing communities to truly feel the impact of their status as envisaged in the adoption of the derivative principle.
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Stephen K. Dieseruvwe is an Urban & Regional Planner, Researcher, Development Practitioner, Monitoring & Evaluation Practitioner, and Road Safety Specialist writes from Asaba, Delta State.
