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PETER OBUTTE & IDIAGHE LILIAN Centre for Petroleum, Energy Economics & Law University of Ibadan, Ibadan, Nigeria Presented at the 6 th NAEE Conference.

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Presentation on theme: "PETER OBUTTE & IDIAGHE LILIAN Centre for Petroleum, Energy Economics & Law University of Ibadan, Ibadan, Nigeria Presented at the 6 th NAEE Conference."— Presentation transcript:

1 PETER OBUTTE & IDIAGHE LILIAN Centre for Petroleum, Energy Economics & Law University of Ibadan, Ibadan, Nigeria Presented at the 6 th NAEE Conference 22nd-23rd April 2013, Lagos, Nigeria RECLAIMING NIGERIA’S NATURAL RESOURCE FRONTIERS AFTER A.G FEDERATION V. A.G. ABIA & 35 ORS

2 Introduction Resource Ownership Resource Allocation Territorial Laws A.G Federation V. A.G. Abia & 35 Ors. and its implications Conclusion and Recommendation

3 Introduction The occurrence of mineral oil is a natural endowment. The optimum utilization of such a resource requires astute management and administrative effectiveness. It has been noted that the first challenge facing any resource-rich country is to ensure that the public gets as much of the value of resources that lie beneath its land as possible. In fundamental ways, the politics and economics of Nigeria has been shaped by control of and the revenues from oil.

4 Introduction contd’ The politics of resource control has its genesis in the manner by which revenues from petroleum related economic activities have become the main stay of the Nigerian economy. The Constitution treats natural resources as a national heritage and economically the Nigerian State is endowed with the requisite power over resources. Since the late 1940s, several criteria have been used to allocate revenue among the states. The principles adopted till date include derivation, fiscal autonomy, and national interest, equality of states, population, balanced development, social development and absorptive capacity.

5 The principle of derivation has however unequivocally attracted the most significant attacks and protestations. Resource control and allocation in Nigeria has been made particularly famous by the decision of the Supreme Court in Attorney General of the Federation v. Attorney General of Abia State and 35 others and the Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act 2004 respectively. Both with far reaching implications for Nigeria’s territory.

6 The principle of permanent sovereignty over natural resources is embodied in a couple of Nigerian legislations which promulgation were aimed at appropriating this right to the Nigerian State. They include the- 1. Petroleum Act Territorial Waters Act of Constitution of the FRN Petroleum Industry Bill

7 Section 1 of the Petroleum Act 1969 vests the entire ownership and control of all petroleum in, under or upon any lands in the State, including land covered by water in Nigeria, under the territorial waters of Nigeria or forming part of the continental shelf. Section 1 (3) of the Territorial Waters Act of 1967 confers sovereign jurisdiction on Nigeria of the open sea within twelve nautical mines and declares it as territorial waters of Nigeria.

8 Section 44 (3) of the 1999 Constitution vests the Federal Government of Nigeria with overriding powers of control of the nation’s natural resource revenue; by enacting that the entire property in and control of all minerals, mineral oils and natural gas in under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria shall vest in the Government of the Federation and shall be managed in such manner as may be prescribed by the National Assembly

9 Section 2 of the Petroleum Industry Bill vests the entire property and control of all petroleum in, under or upon any lands within Nigeria, its territorial waters, or which forms part of its Continental Shelf and the Exclusive Economic Zone, in the Government of the Federation

10 Nigeria is a federal state by virtue of Section 2(1) of the 1999 Constitution. The Section enacts that: “Nigeria is one indivisible and indissoluble sovereign state to be known by the name of the Federal Republic of Nigeria.” Subsection 2 of the same Section also enacts that Nigeria shall be a Federation consisting of States and a Federal Capital Territory. The net effect of the above provision is to make any alterations to Nigeria’s territorial composition a matter for constitutional amendment.

11 The constitutional power conferred in the federal Government to own and control the mineral resource in Nigeria which is rather absolute, has not gone done well with some parts of the country. Reactions to this include:  The Kaiama Declaration by Ijaw Youths of the Niger Delta on December 11,  Disgruntled voices of the south-south governors

12 The principle currently used in the allocation of resources is the derivation principle. The principle contemplates that the receipt of revenue from the Federal Government by State should be proportionate to their contribution to the national revenue. This can be gleaned from the proviso to Section 162 of the Constitution which enacts that: “provided that the principle of derivation shall be constantly reflected in any approved formula as being not less than thirteen per cent of the revenue accruing to the Federation Account directly from any natural resources.”

13 The principle of derivation as contained in the above portion of the Nigerian Constitution places the constitutional minimum at 13%, below which the allocation to states must not fall, while it leaves the maximum to the discretion of the National Assembly. Furthermore, the revenue accruing to the Federation Account comprises revenue from natural resources including petroleum resources, whether exploited on-shore or off-shore. The South south governors contended that the revenue from off-shore petroleum resources have not been included by the federal government, which ought not to be so seeing that it forms part of their respective states.

14 It became necessary to determine the seaward boundary of a littoral state, and in 2001, the then Honourable Attorney General of the Federation late chief Bola Ige filed a law suit requesting the Supreme Court to determine the “seaward boundary of a littoral state” The determination would enable the ascertainment of the revenue accruing to states and the federation respectively from natural resources as contained in Section 162 (2) of the constitution.

15 The federal Government argued that the boundary of a littoral state ends at the low water mark of the sea, and does not extend beyond it. By implication, the area of the sea up to 12 nautical miles from low-water mark, denominated as territorial sea, with its bed and sub soil, is not part of Nigeria’s territory.

16 Article 3 of the United Nations Convention on the Law of the Sea 1982 states that “every State has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, measured from baselines determined in accordance with this Convention.” This provision has been enacted through other municipal legislations in Nigeria, including Territorial Waters Act, Exclusive Economic Zone Act and Sea Fisheries Act.

17 Section 1 of the territorial waters Act enacts that “the territorial waters of Nigeria shall for all purposes include every part of the open sea within twelve nautical miles of the coast of Nigeria (measured from low water mark) or of the seaward limits of inland waters. The above provision is reiterated in the Sea Fisheries Act 1992.

18 It has been put forward that the SC therefore erred in treating the case as one for the determination of boundary as prayed by the FG rather than one for the interpretation of Section 162 (2) which when properly and purposively construed, does not require the determination of boundary. The Apex Court took it for granted that “derivation” refers to revenue from natural resources located within the land territory of a state.

19 By this decision, the Supreme Court affirmed the sovereignty of Nigeria over the territorial sea and at the same time declared that the territorial sea does not for part of the territory of Nigeria. The only decipherable reason for this is that acceptance of the territorial sea as part of Nigeria’s territory would mean accepting that it is also part of the territory of the littoral states and thus conceding their claim to 13% of the oil revenue derived from it On the other hand, since the Constitution enacts that Nigeria’s territory consists of the aggregate of the territories of all 36 states of the federation and the FCT, therefore, Nigeria cannot have any other territory outside this aggregate

20 The decision rolled back Nigeria’s frontiers therebye exposing Nigeria to territorial compromise at the international level. Further, it also impacts on the Exclusive Economic Zone, fishing rights as well as harnessing off-shore wind potential for renewable energy.

21  One of the far reaching implications of the Supreme Court decision is to reiterate the huge potential of the proviso to Section 162 (2). It enacts as follows: “provided that the principle of derivation shall be constantly reflected in any approved formula as being not less than thirteen per cent of the revenue accruing to the Federation Account directly from any natural resources.”  It throws the floor open for over viable natural resources to also be exploited, since it specifically uses the phrase “any natural resource.”  Nigeria has other viable natural resources. Why the obsession with oil?

22 In 2004, in a vain effort to salvage the damage done by the decision, the Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act 2004 which represents a reversal of the error of the Court’s position was enacted. Its only section reads: “1 (1) As from the commencement of this Act, the two hundred metre water depth Isobath contiguous to a State of the Federation shall be deemed to be a part of that State for the purposes of computing the revenue accruing to the Federation Account from the State pursuant to the provisions of the Constitution of the Federal Republic of Nigeria, 1999 or any other enactment. (2) Accordingly, for the purposes of the application of the Principle of Derivation, it shall be immaterial whether the revenue accruing to the Federation Account from a State is derived from natural resources located onshore or offshore.”

23 the abolition of on-shore off-shore dichotomy does not salvage the damage done to Nigeria’s territorial sovereignty. It seeks only to make the revenue from the resources off-shore out of the reach of the governors of the littoral states while it accrues such revenue to the federal Government of Nigeria even though the court’s judgment operates to disentitle Nigerian State to such resources. While the Court’s decision and the 2004 Act saves the day in the country, at the international level, the damage subsists.

24 “The Stone Age came to an end not for a lack of stones and the Oil Age will end, but not for a lack of oil. Sheik Ahmed Zaki Yamani, the former Saudi Oil Minister

25  On Wednesday April 11, 2012 the Punch Newspaper contained the headline that revenue allocation from the Federal Government to the States could not be made, because the national treasury is said to be empty as a result of the alleged failure of the Nigerian National Petroleum Corporation (NNPC) to remit oil earnings in March into the Federation Account.  Besides the non-remittance of the March earnings, the corporation has a carry-over of N203bn indebtedness to the Federation Account from 2011.

26 A grave damage subsists under international law for Nigeria’s territorial integrity. In the absence if a constitutional amendment, the Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act 2004 which represents a reversal of the error of the Court’s position is only good for revenue computation.

27 RECOMMENDATIONS  There should not only be a stipulated minimum but there should also be a constitutional maximum, so that the maximum is not left to the discretion of the Federal Government.  The Supreme Court should revisit this decision; seeing that its decision has created irreconcilable conflicts with a plethora of legislations.  A constitutional amendment to making the up to 12 nautical miles from the low-water mark with its bed and subsoil part of Nigeria’s territory as well a further clarification of the derivation principle to include onshore and offshore natural resources is imperative.

28 Nigeria’s other 33 viable resources should also be exploited to create income for their host states. This flows from the potential of the proviso to Section 162 (2) Nigeria has other viable mineral resources of which oil and gas is just one; they include coal, lignite, tin, columbite, wolfram, uranium, mica, gold, rutile, barite, lead-zinc, graphite, talc, asbestos, diatomite, fireclay, kaolin, iron ore, limestone, bitumen, marble, phosphate, thorium, gypsum, and salt.

29 Further, had the Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act 2004 read as follows: “1 (1) As from the commencement of this Act, the two hundred metre water depth Isobath contiguous to a State of the Federation shall be deemed to be a part of that State” and nothing more, it would have salvaged the damage done by the decision of the supreme court. The second part of the section which read: “for the purposes of computing the revenue accruing to the Federation Account from the State pursuant to the provisions of the Constitution of the Federal Republic of Nigeria, 1999 or any other enactment,” wasted the opportunity to redress the issue.

30 THANK YOU FOR YOUR ATTENTION


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