JamzNG Latest News, Gist, Entertainment in Nigeria
Decades after maintaining federal control over resources and limiting the allocation of receivables to the country’s crude oil-producing states, former President Olusegun Obasanjo has changed his stance.
The former president publicly supported calls for increasing the derivation allocation by 13%, and acknowledged that oil-producing communities “haven’t gotten a fair deal so far” and that the 13% benchmark should be seen only as a “starting point” to negotiate to a higher level.
Obasanjo spoke on Monday at the inauguration of the $1 billion Crude Refining Unit of the Azikel Refinery in Obunagha, Yenagoa Local Government Area of Bayelsa State, where he also challenged the project promoters to complete the facility within 12 months.
Speaking to Bayelsa State Governor, Douye Diri, the former President said that oil producing states and communities have not received a fair deal from the exploitation of resources in their regions.
“You are right that oil producing states and communities have not gotten a fair deal so far. Thirteen percent is a start. You can keep talking,” he said.
The statement came as Diri renewed his criticism of the derivation formula and the Land Use Act, arguing that communities in the Niger Delta remain excluded from decision-making regarding resources extracted from their land.
The refinery owned by Azikel Petroleum under the Azikel Group is designed to process 25,000 barrels of crude oil every day.
The foundations were laid by Obasanjo about eight years ago, while the installation of a crude oil refining unit marked a major stage in the development of the project.
Obasanjo praised the President of the Azikel Group, Azibapu Eruani, for defending the project and urged him to ensure its completion within the next year.
“I have told Doctor Eruani that next March I will officially be 90 years old. This means that I will immediately get my boarding pass. So, he must ensure that the project is completed before I leave,” he said.
He also acknowledged the role of the African Finance Corporation and the African Export-Import Bank in supporting the investment, and called for continued assistance to complete it.
“My challenge to you, Dr Eruani, is to ensure that the refinery is completed within the next 12 months. By doing this, you can even double the capacity,” Obasanjo said.
In his remarks, Diri said the refinery represents an opportunity for the people of Bayelsa and the Niger Delta to participate more directly in an industry built on resources extracted from their communities.
He argues that the region’s long-standing unease about resource control stems from a perceived imbalance between where crude oil is produced and where the benefits of its exploitation are derived.
Obasanjo played an important but controversial role in the implementation and initial struggle over the 13% derivation formula for oil producing countries. Although his administration oversaw formal implementation of the payments, his interpretation of the law sparked intense legal and political battles with leaders from the Niger Delta.
1. Delayed Implementation and Commencement (1999–2000)
Although the 13% derivation principle was officially enshrined in Article 162(2) of the 1999 Constitution, the Obasanjo government delayed its initial implementation.
• Conflict: Obasanjo initially announced that payments would begin on 1 January 2000, not on 29 May 1999 when the constitution came into force. This prompted stakeholders in the Niger Delta to sue his government, demanding payments back to the day he took office.
• Defense: Obasanjo later asserted that he granted the implementation of the statutory 13% derivation without being forced by legal action.
2. Onshore/Offshore Dichotomy Battle
The fiercest struggle during Obasanjo’s tenure was his administration’s implementation of the onshore/offshore dichotomy.
• Policy: The Obasanjo administration argues that the 13% derivation formula should only apply to onshore oil production (crude oil extracted from land), which accounts for about 60% of total production. They assert that offshore oil (crude oil drilled from the continental/marine shelf) belongs exclusively to the Federal Government.
• Impact: This effectively cuts revenues allocated to coastal oil producing states such as Akwa Ibom and Ondo. By trying to exclude foreign income and subtracting some “first-line costs” (such as NNPC joint venture funding and foreign debt repayments) before calculating the percentage, his administration tried to limit actual payments to around 8% of total income.
• Resolution: This dispute was brought to the Supreme Court. On April 5, 2002, the court legally upheld the domestic/foreign distinction but declared the government’s cuts to “first-line costs” illegal. Due to huge political backlash, the National Assembly finally passed a repeal bill to eliminate the dichotomy, which Obasanjo then signed into law.
