Quite recently there has been renewed interest in an already popular subject in Nigeria’s political discourse, which is the issue of “ownership” of Nigeria’s Oil and Gas resources. During the Northern Elders’ Forum Summit in Kano, held between 10 and 11 march 2014, Dr. Usman Bugaje, the Convener of Arewa Research and Development Project (ARDP) presented the ARDP’s position at the Summit’s Conference where he commented on the well-known “bogus” interpretation of Nigeria’s political structure by the “prophets” of :resource control” and concluded his short remarks on contemporary dynamics of socioeconomic development around the globe, which he reminded the audience are increasingly based on ideas, creativity and innovations that are translated into marketable products rather than on export of primary raw materials.
The uproar that proceeded Dr. Bugaje’s comments from a section of our “national” media is hardly surprising; coming at the eve of a National Conference, or could be more properly termed “Goodluck” Jonathan’s National Dialogue that is expected by some to set in motion the process to actualize the “principle” of “resource control”. How this project of “resource control” would be maneuvered through the Conference remains to be seen. So far the 20 committees of the Conference do not give any clear indication of the Committee to specifically deliberate on the issue.
Of course the ARDP believes that the on-going Conference is neither representing Nigerian citizens nor is it representative of Nigeria’s political constituent structure as recognized by the Constitution to warrant serious expectations on its outcome. The Conference is neither backed by Law nor is it operating under lawful political parameters. It is certainly a Conference that essentially lacks legitimacy.
The 2005 “Obasanjo” National Conference was convened to plot the Third Term agenda, which was largely anchored on personal political ambition that was eventually squashed by a “national” coalition of forces determined to save the little democratic asset so far attained. We wait to see similar fate for the on-going Conference, particularly given the fact that despite its serious legal and political limitations a good number of the Conferees are patriotic and well-meaning Nigerians capable of salvaging the nation from the scourge of myopic political schemes capable of plunging the nation into socio-political calamity. How this project of “resource control” would be maneuvered remains to be seen.
Notwithstanding, however, the ARDP further believes in the imperative of discussing all issues surrounding the concepts of “resource control”, “fiscal federalism” or “true federalism” during the National Dialogue and hopefully come to grips with the meanings of these concepts and understand how they relate to historical reality of the Nigerian political system.
For all practical purposes, issues of Nigeria’s maritime boundary and ownership of oil and gas resources are almost settled in matters except, perhaps, appropriate implementation of the facts before the political leadership of our country. Opinions are free but facts are sacred.
The maritime boundary of Nigeria’s territorial waters has been increasing since law set it out as 12 nautical miles from the low water marks according to the Territorial Waters Act 1967 (CAP T5); LFN 2004. Section 1 Sub-Sections (i) to (iii) vested exclusive right of ownership of all petroleum resources on the Nigerian State. The Exclusive Economic Zone Act, 1978 CAP 116; LFN 1990 described the Exclusive Economic Zone of Nigeria, thus:
“There is hereby denominated a zone to be known as the Exclusive Economic Zone of Nigeria (in this Act referred to as the “Exclusive Zone”) which shall be an area extending from the external limits of the territorial waters of Nigeria up to a distance of 200 nautical miles from the baseline from which the breadth of the territorial waters of Nigeria is measured.”
Section 1(2) of the Exclusive Economic Zone Act further mandates that:
“Without prejudice to the Territorial Waters Act, the Petroleum Act or the Sea Fisheries Act, sovereign and exclusive rights with respect to the exploration of the natural resources of the sea bed, subsoil and super adjacent waters of the Exclusive Zone shall vest in the Federal Republic of Nigeria and such rights shall be exercisable by the Federal Government or by such Minister or agency as the Government may, from time to time, designate in that behalf either generally or in any special case.”
The UNITED NATIONS CONVENTION ON THE LAW OF THE SEA among other provisions delimits the boundary of each littoral nation’s territorial waters, and sets up the procedure wherein a country may extend their maritime limits. In 2009, Nigeria applied to the UN for extension of its Exclusive Economic Zone by 150 nautical miles.
The EEZ and the resources therein are the property of the FEDERAL REPUBLIC OF NIGERIA, wholly and corporately and not by a severable part of it.
It is necessary to examine the legal authority for the present status quo. This will be found in the “Resource Control” Judgement of the Supreme Court of Nigeria in Attorney Generals of Abia State and 36 Others v Attorney General of The Federation of Nigeria (2001).
The case centered on a dispute between the Federal Government of Nigeria (“FGN”) and the eight littoral states of Akwa Ibom, Bayelsa, Cross River, Delta, Lagos, Ogun, Ondo, and Rivers as to the seaward boundary of each of these littoral states (“the States”) in view of the fact that the determination of this issue would resolve whether or not these States were entitled to a minimum of 13% of all revenue accruing to the Federation Account on the basis of the derivation of natural resources from each of these littoral States.
It was the case of the Federal Government of Nigeria that the natural resources located within the continental shelf of Nigeria are not derived from any of these States as their boundaries ends at the low water mark of the land surface of each of these littoral States. On the other divide, the littoral States, argued that their territories extended beyond the low water mark unto the territorial waters and also unto the continental shelf and the exclusive economic zone. They therefore contended that natural resources from both offshore and onshore are derivable from the respective littoral States territory and in respect of which State is entitled to “not less than 13%” allocation of all revenues derived from these natural resources.
A principal issue before the Supreme Court of Nigeria for resolution between the litigants was “a determination by this Honourable Court of the seaward boundary of a littoral State within the Federal Republic of Nigeria for the purpose of calculating the amount of revenue accruing to the Federation Account directly from natural resources derived from that State pursuant to the proviso to Section 163 (2) of the Constitution of the Federal Republic of Nigeria, 1999.” In other words, the Court was asked to determine what constituted the southern or seaward boundary of each of the eight littoral States for the purposes of determining what would accrue to them as derivation revenues.
It must be noted that Section 162 (2) of the 1999 Constitution of the Federal Republic of Nigeria empowers the National Assembly to determine the formulae for distribution of funds which have accrued in the federation account of the nation, provided that not less than 13% of the revenue accruing to the Federation Account shall be payable to States from which the natural resource (in this case, crude oil) is derived directly.
The Supreme Court in the leading judgement of Hon. Justice Ogundare, held amongst others as follows:-
- That the Black’s Law Dictionary defines natural resources as “any material in its natural state which when extracted has economic value.” The Supreme Court held that whilst natural resources like coal, natural gas, crude oil, potassium, etc. fall within this definition, other items like ports, wharves, agricultural products, etc. are not natural resources.
- That the southern boundaries of all the eight littoral defendant States must be the southern boundaries of the old Western and Eastern Regions as defined in Laws of Nigeria of 1954, i.e. the sea. This is also defined in Section 11 of the Nigeria Protectorate Order in Council, 1922 and of Lagos State as defined in the Colony of Nigeria (boundaries) Order in Council, 1013.
- On what was the boundary mark of the sea and the sea States, i.e. littoral States, the Supreme Court held that “if the boundary is with the sea, then, by logical reasoning, the sea cannot be part of the territory of any of the old regions.” The case of the States that the boundary extended to the exclusive economic zone or the continental shelf of Nigeria was therefore rejected as untenable on this ground.
- That the States as riparian owners, are entitled to the seaward extent of their land territory because by Common Law, all of the sea shore, i.e. the seaward limit of their internal waters, belongs to the Crown.
- Finally, held on the FGN’s claim, that the seaward boundary of a littoral State for the purpose of calculating the amount of revenue accruing to the Federal Account directly from any natural resources derived from that State… is the low water mark of the surface thereof or… the seaward limits of the inland waters within that State for a State like Cross River State that has a lot of Islands.
The littoral States in turn also filed counter claims against the Federal Government. A counter claim is similar to an independent action; the rules of the courts however allows it to be heard together with the main claim where the disputes between the parties are similar and so it would be more economical to hear the claim and counter-claim together.
On the littoral States counter claims, the Supreme Court held:
- That the Federal Capital Territory is not a State or a Local Government within a State as defined in the 1999 Constitution and accordingly, they were not qualified for distribution of moneys deriving from the Federation Account.
- That the 13% basis for computing the derivation to the States and upon which the States are counter claiming against the FGN could not be upheld by the Supreme Court as the 1999 Constitution gives the appropriate authority, in this case the President, pending a resolution by the National Assembly, a discretion on the percentage to apply provided that it is not less than 13%.
- That the FGN, as a trustee to the States of the Federation, was liable to render an account to all the States. To be entitled to an order of the Supreme Court compelling the FGN to render an account of all revenue deriving from all natural resources, the States must have firstly demanded for the accounts and the FGN after the demand or repeated demand has failed, refused or neglected to provide the accounts.
- That the FGN was constitutionally not empowered to deduct as a first charge from the Federation Account sums of money to service the country’s external debts.
- That it was unconstitutional for the FGN to pay moneys directly to the Local Governments from the Federation Account to cater for primary education as by the 1999 Constitution, the primary responsibility for this function is with the States and Local Governments.
- That it was constitutionally wrong for the FGN to charge the salaries, allowances and recurrent expenditure of the judiciary to the Federation Account instead of the Consolidated Revenue Fund.
- That charging of the funding of the joint venture contracts and the Nigerian National Petroleum Corporation priority projects to the Federation Account are inconsistent with the provisions of the 1999 Constitution and therefore invalid and unconstitutional.
The Supreme Court further held that the under-listed policies of the FGN are unconstitutional
- The exclusion of natural gas as a constituent part of derivation in computing natural resources.
- Non-payment to States of proceeds from the Capital Gains Tax and Stamp Duties tax revenues.
- Unilateral allocation of 1% of the revenue accruing to the Federation Account, to the benefit of the Federal Capital Territory, Abuja.
- The 1999 Constitution having come into force on May 29th, 1999, the principle of derivation also came into force on the same date, i.e. May 29th, 1999. The FGN is therefore obliged to comply forthwith with the Constitution from that date.
It may be argued that the issue for determination before the Supreme Court in this case not about resource control but about the onshore/offshore dichotomy, particularly when it comes to the distribution of revenue accruing to the Federation Account.
Retired Justice of the Supreme Court of Nigeria, Karibi-Whyte, JSC ruled in an interlocutory decision before the final decision of the Supreme Court in this case
“I therefore am of the firm opinion that the Plaintiff’s claim is limited and confined to the determination of the seaward boundary of littoral States. I so hold. Any other consideration will be preposterous and manifestly inconsistent with the fundamental principles of adjudication.”
There is a difference between derivation from natural resources on the one hand and the control of natural resources existing in a State, whether littoral or not, on the other.
Derivation may be described as the recognition of a prior beneficial right that was subsequently expropriated. Thus, payment of a derivation is a form of compensation and/or reparation for an expropriated interest.
Resource control on the other hand is generally centered on ownership or dominus of the resources (either de facto or de jure), which is why resource control is a politically sensitive matter.
Who Owns the Oil?
The legal determination of the cases before the Supreme Court of Nigeria provide the political roadmap to determine both the issue of resource control and the issue of dichotomy between onshore and offshore revenue.
Nigerian State owns the petroleum resources both onshore and offshore. Inherently and historically the 36 “provincial” States of the Nigerian federation are pure administrative units created by the Nigerian State at different historical times essentially to achieve “unity in diversity” and can only be referred to as federal units and NOT federating units as erroneously implied. The conception and reference to the States where petroleum resources are explored and produced, as “oil producing states” is not only fluid but also misnomer. The only oil producing state in Nigeria is the Nigerian State, which wholly invested in its exploration and production to date.
Regarding Nigeria’s maritime boundary, it is the total landmass of the country that is the key element in delineating its offshore maritime boundary. And, the International Law of the Sea refers to the “Sovereign” States at the Coast such as Gabon, Cameroon, Nigeria, Benin Republic, Togo, Ghana, etc., as the beneficiaries of maritime boundary and not littoral States.
Dr. Kabiru Chafe
Editor’s Note: The Article first appeared in the April 2014 Edition (Vol 1, No 4) of the ARDP Newsletter. Download the complete newsletter here.