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NEITI exposes doubtful 13% derivation spending in Niger Delta

By Ben Atonko

Extractive Industries Transparency Initiative (NEITI) has released its research paper saying the spending of 13 percent derivation for oil communities in Nigeria is shrouded in secrecy and impact not much felt by the communities.

According to NEITI, information about extractive industry governance, including revenue collection and utilization, eluded the real citizens for whom natural resources are meant to work.

The NEITI Occasional Paper Series Issue 8, October 2020 entitled “Perception of the Impact of 13% Oil Derivation Allocation” released recently maintained that the funds have not significantly changed the people’s living conditions for the better.

The volume covers three case studies: Delta, Imo and Ondo
States including the geopolitical zones of South-East, South-South and South-West. The case studies relied on data generated from both primary and secondary sources.

The study sought to see how communities in the three states feel about the 13% derivation fund and the state oil producing areas development agencies regarding compensation and mitigation of the negative impacts of oil production activities as well as redressing the underdevelopment arising therefrom.

It was found that 13 percent derivation has rather created opportunities for politicians and public office holders and cronies to line their pockets while the people suffer from lack of basic needs such as good roads, safe drinking water, health centres, electricity, markets, and streetlights.

Section 162, Sub-section 2 of the 1999 Constitution provides accrual of 13 percent derivation to oil-producing states and over N10 trillion has been sunk into the Niger Delta between 2000 and 2018 by the derivation principle. Yet, oil-producing communities of the Niger Delta are still living in poor environmental conditions

According to NEITI, the situation deepens the case for inclusion of community participation in governance as well as transparency and accountability in subnational revenue management in the Niger Delta region.

Little respect for transparency

The paper established that despite years of huge inflow of 13% derivation fund into the Niger Delta, majority of the respondents were unsatisfied with the state of the environment, waste disposal and sanitation. Over 80 percent of the respondents stated that the level of improvements on the environment, waste disposal and sanitation was very poor.

“Results of the study indicate a widespread perception that there is little respect for transparency and accountability in the management of the resources accruing to the local government from the derivation fund,” the organization said, adding that there is widespread ignorance about what percentage of the 13% derivation fund that gets to the grassroots.

“Such ignorance indicates that actual financial flows are shrouded in
secrecy. If the people do not know what accrues to the government and the oil bearing communities as well as what projects and activities are funded from it, it will be difficult for them to monitor and ensure that funds are utilized for the projects and services they were meant for,” said NEITI.

Same old stories

NEITI said pollution arising from oil production activities has continued to affect yields and harvest of farm produce.
Prior to the commencement of oil exploitation activities, communities were a beehive of farming and fishing activities which were the mainstay
of the people.
The advent of oil has caused significant drop in the yield of crops and for this reason, many families that had hitherto depended on agriculture as an income earning endeavour have had to change occupation. Fishermen and women who engaged in fishing have abandoned the trade.

This has significantly affected food sufficiency in the Niger Delta.

Moreso, the communities lack basic infrastructural facilities needed for decent living. There are no sanitary and sewage facilities. Potable water sources are polluted because they become sewage and waste disposal channel.

NEITI observed that oil-related activities of multinational oil corporations have continued to disrupt the natural equilibrium of the ecology as such biogeophysical displacement negatively impacts local communities.

“For example, canals can alter delicate hydrological systems, which
can destroy long-established fishing grounds, especially when they breach the boundary between fresh water and brackish water in the riverine areas (HRW, 1999).

“The regularity of spills has led to serious environmental pollution in the oil producing area.
“Community persons interviewed said these oil spills have not
only polluted their lands and made it less productive, but have also poisoned their agricultural products and water sources with dangerous hydrocarbons, including benzene.
“They held the view that the predominance of certain illnesses in the area is traceable to this pollution.
“Routine flaring of associated gas is still a common practice in oil extraction sites…Residents of communities believed that this is responsible for acid rains which cause sicknesses of the epidermis and others associated with the respiratory system as well as corrosion of roofing sheets.
“They also held the view that gas flaring is an abuse of their human rights to live in a safe environment,” said the paper.

Project abandonment
The organization discovered that project abandonment is common in in the area as development projects are left midway and the contractors vacate the site for several years.

Said NEITI, “Our investigation of perception from the KII and FGD reveals that the first area of priority should be the development of infrastructure for the communities.
“According to respondents, what the communities needed most were good roads, pipe borne or safe drinking water, electricity, markets, streetlights etc.”

Violence in Niger Delta
The result of all this, according to NEITI is a notable increase in incidents of organized violence, insurgency and criminality in the oil producing areas.
Said the paper, “These activities are mostly associated with the rather lucrative but illegal enterprise of oil theft.
“This has seen the invasion of the communities by different armed groups who utilized arms and violence to exert control over what they considered their oil ‘territories’ and bunkering ‘rights’” NEITI said, adding that insecurity which the activities of oil thieves have engendered was the reason government found it expedient to introduce an amnesty programme styled after Nigeria’s Presidential Amnesty Programme in the Niger Delta in 2009.”
According to NEITI, “The programme was targeted at ensuring that ‘combatants’ submit illegal firearms and embrace peace building initiative of the government.
“Despite these initiatives, the security situation in the oil producing areas remains generally bad, taking the character of inter ‘cult’ belligerence.”

It was found that one of the most notable consequences of the envious status of oil producing community is the militarization and attendant human rights abuses. The military personnel stationed on the premises of oil companies operating companies have been accused of stifling the people’s right to protest.


At the end of its work, NEITI gathered that the establishment of state oil-producing commissions to compensate for oil despoliation and redress underdevelopment of communities was good judgement, well-deserved and well-intended.

It recommended that poor quality of projects and impacts, leading to low public perception of use of oil derivation funds and the likelihood of their capacity to improve infrastructural needs, incomes and livelihoods of community members should change.

Civil Society was charged to stand up and assert its role of being the bridge between government and oil producing communities and facilitate and build capacity of communities to better understand, engage and follow up with their subnational governments on oil revenue flows and management through project conceptualisation/selection, execution, monitoring and delivery.
NIETI urged oil producing communities cultivate the habit of asking questions about oil revenue flow to their states and prioritise regular engagement with governments and oil producing areas development commissions on what specific projects to expend the money on.

The NEITI Occasional Paper Series is one of the advocacy and policy
instruments of NEITI, designed to stimulate debate and engender change about important issues in the extractive sector in Nigeria.

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