Sagay: North and funding of oil industry
IN an interview published at pages 48 and 49 of The Punch of February 1, Professor Ango Abdullahi, a northern elder and power-must-return-to-the-North diehard, claimed that the Nigerian oil industry was developed with money from the North. According to him, “It is the North that developed the present day oil industry in this country. It is northern money; it is northern leadership that developed the oil industry.”
Perhaps, by constantly repeating this delusional lie, the northern political and intellectual elite think it will stick in Nigeria’s collective consciousness as the truth. The truth is that the northern elite is addicted to the proceeds of Niger Delta oil and gas. They have completely abandoned any pretence at productivity and internally generated revenue. The North is now completely dependent on the monthly federal allocation, which is the same thing as Niger Delta oil proceeds. The blatant falsehood about northern funding of the initial stages of the industry arises out of the psychological need to justify this total dependence on Niger Delta oil proceeds for survival and for virtually every need of daily existence. The reasoning goes like this. Oil exploration in the Niger Delta was financed by Northern groundnut proceeds and therefore the North is equally entitled to Niger Delta oil proceeds as the Niger Deltans themselves. But what is the truth?
The first oil prospecting in Nigeria was by a German company known as the Nigerian Bitumen Company. It commenced operations in 1908 and wound up its activities in Nigeria at the commencement of the First World War in 1914.
The second attempt at oil prospecting in Nigeria was in 1937 by a company known as Shell D’Arcy. Shell D’Arcy also stopped operations in 1940 because of the Second World War. In 1946 Shell Company was joined by British Petroleum (BP) to establish the Shell BP Company which finally discovered oil at Oloibiri in 1956. These companies were later joined by Elf, Texaco, Agip, Gulf Oil, Mobil Producing and other oil prospecting and producing companies.
From these early beginnings in 1908 to the present moment, that is 2014, the Nigerian State, including Northern Nigeria, has never spent one kobo in oil prospecting and oil producing, with funds other than from proceeds of petroleum products. The Nigerian Federal Government has at all relevant times been a beneficiary of the petroleum proceeds from the investments and activities of the oil multinationals. The so-called NNPC investments in oil prospecting have only occurred in northern part of the Nigeria, namely, the Benue trough, the Chad Basin and in Bauchi State. The funds utilized by the NNPC in these northern areas were obtained from proceeds of the Niger Delta oil operations.
Therefore, rather than the Federal Government investing money in Niger Delta oil operations, it is the proceeds of the Niger Delta petroleum that is fueling state, power and activities in Nigeria and supplying all the funds for the NNPC’s prospecting of petroleum in northern states.
By and large, all initial expenses for prospecting and producing are borne exclusively by the foreign multinationals. The Federal Government spends nothing of its own funds in the industry, except for cash calls which are paid for by proceeds of Niger Delta petroleum.
Thus if the Federal Government itself spent nothing in the development of the oil industry, except to plough back Niger Delta oil proceeds earlier collected by it, how and in what circumstances did the North per se fund the operations of the oil industry?
Pre-Petroleum Economy of Nigeria
Another misinformation that needs to be exorcised is the assertion that the Nigerian state survived solely on groundnut and cotton from the North before oil was produced in commercial quantities. This is patently false. The West produced cocoa, the Mid-West produced rubber, palm oil, palm kernel and timber, and the East produced palm oil and timber. In each case, the producers of these natural resources sold their produce and pocketed their proceeds for their personal use. By contrast the oil and gas of Niger Delta is taken away 100 per cent by the Federal Government leaving the producing communities and the owners of that resource nothing but environmental degradation and pollution. In the pre-oil economy of Nigeria, it was only the export duty of the agricultural products that was shared on the basis of 50 per cent derivation and 30 per cent distributable funds for all the regions. The Federal Government got 20 per cent.
It could thus be seen that every part of Nigeria contributed to the pre-petroleum economy of the country. Most importantly, individual producing farmers sold their products and pocketed the proceeds for the benefit of themselves and their families alone. This is not applicable to the people of the Niger Delta whose oil and gas has been appropriated completely by the Federal Government without any consideration of the right and interest and future of the people on whose land the oil and gas are found.
Indeed, under the revenue allocation formula of the First Republic, it was the North that benefitted financially from the contributions of the other three regions and not the other way round. It will be recalled that by Section 140 of the 1963 Constitution, 50% of oil proceeds went to the region from which they were extracted, 20% went to the Federal Government, and 30% was paid into a distributable pool.
In the allocation of the 30% from the Distributable Pool Account, the North received a disproportionate share which effectively meant contributions from the other regions. Thus, out of the 30% of the resources of all the four regions paid into that account, the percentage paid to each region was as follows:
(a) Northern Nigeria – 40% (b) Eastern Nigeria – 31%
(c) Western Nigeria – 18% (d) Mid-Western Nigeria – 6% (Section 141, 1963 Constitution).
Thus, at all periods, since 1914, the North has been and continues to be the major beneficiary of the financial output of the whole country. We must not forget what motivated the British Colonial Power to bring about the amalgamation of 1914. The reason behind the decision of the British Government to amalgamate the two territories (North and South) was purely financial or economic. The Northern Protectorate was not economically viable. It had become a great drain on the British tax-payer. On the other hand, the Southern Protectorate was not just economically buoyant, it was producing surpluses every year. The British design was, therefore, to remove the northern financial burden from its own neck and hand it on the neck of the hapless Southern Protectorate.
According to Lord Harcourt, the British Colonial Secretary, unification of Nigeria demanded both “method” and “a man”. The man was to be Lord Lugard and the method was to be the “marriage” of the two entities. According to Lord Harcourt: “We have released Northern Nigeria from the leading strings of the Treasury. The promising and well conducted youth is now on an allowance on his own and is about to effect an alliance with Southern lady of means. I have issued the special licence and Sir Frederick Lugard will perform the ceremony. May the union be fruitful and the couple constant”.
The comparative economic situation of the two halves of Nigeria has not changed in the last 100 years. Rather the economic power of the South has continued to increase vis-à-vis the North. This explains the fierce opposition of the northern elite to true federalism, and a National Conference, which might bring this about.
On the issue of funds and funding of the Federal Government, states and local governments, I think the northern political and intellectual elite should be grateful to the South, particularly the Niger Delta, the great provider.
• Professor Sagay is a Senior Advocate of Nigeria (SAN).