How and when did we get it wrong.........
HOW CRUDE OIL TAXES WERE SHARED FROM 1958 - Kalu Aja.
Well before the independence of Nigeria, as at 1958 this was how crude oil taxes were shared…
1958:
1. Oil Producing States retained 67.4% of Mining Rents and Royalties
2. Federal Government got 20% of Mining Rents and Royalties
3. Non-oil states got 12.6%
So the crude oil and gas was owned by the oil producing states, that how the British left it.
In 1970, General Yakubu Gowan passed decree No 13, this was how crude oil taxes were now to be shared.
1970
1. Oil Producing States retained 45% of Mining Rents and Royalties
2. Federal Government got 55% of Mining Rents and Royalties
3. Non-oil states got 0%
So in the military’s wisdom, the non-oil states did not deserve to get any share of oil revenues. Oil was only for the oil producing states and the Federal Government.
Then 1975, General Murtala Muhammed introduced decree 6, this is how crude oil taxes were shared
1975
1. Oil Producing States retained 20% of Mining Rents and Royalties
2. Federal Government got 80% of Mining Rents and Royalties
3. Non-oil states got 0%
Again the military decided the oil producing states should “manage” 20%. of oil revenues non-oil states got zero…
In 1976, Gen Obasanjo created a technical commission called the Aboyade Technical Commission, this was the result
1976
1. Oil Producing States got 0% of Mining Rents and Royalties
2. Federal Government got 100% of Mining Rents and Royalties
3. Non-oil states got 0%
Obasanjo, also introduced the Consolidated Revenue fund aka FAAC, thus, the oil taxes were centrally pooled, then shared to all states.
This was the important junction in Nigeria fiscal federalism, this was when crude oil was federalized, taken from the states, managed by the federal government then shared back to the states. In essence, crude oil was no longer based on derivation but on metrics like equality, fiscal efficiency and absorptive capacity…
In 1979, President Shehu Shagari set up the Okigbo Commission, to review the sharing of oil revenues. The Commission agreed to retain the Obasanjo 0% allocation to oil producing state and continue with FAAC but they tweaked the sharing formula in FAAC…. they came up with
1979
[center]Equality of States 50%
Population 40%,
Land mass 10%[/center]
So here we see population of states and land mass introduced
in just 9 years, the oil producing states saw their share of crude oil taxes go from 67.4% to zero. It took until the year 2000 for the implementation of 13% back to the oil producing states.
So in summary, its 67% to 0% to 13%.
Oil revenues were in essence transferred from the states to the federal government by decree, even today, if Exxon Mobil pays VAT on operations in an oil producing state, that VAT is shared by the federal government to all states of the federation. Oil is a federal baby….
What is the effect? Well massive inefficiency in the oil and gas sector.
It’s fair to say the FGN has mismanaged the oil industry, NNPC is essentially broke…can’t manage its assets to return a profit
We still flare gas, i.e. we legally “burn” money, The FGN has taken the oil wells but can’t pay Joint Venture cash calls...the FGN can’t clean the oil spills, they can’t even pass a PIB...
So why hold the oil? If they can’t manage it? Well because the FGN has built a massive bureaucracy funded by crude oil, the FGN pays for primary education and primary health care, then also funds religious pilgrimages and football.
These powers the FGN has given to itself outside the constitution have been made possible because the FGN has grabbed a hold of the oil wealth of the nation. for instance primary schools are the function of the Local Governments and the Constitution recognizes that and allocates money to them, but the revenues for the local governments are paid to the states….via a "joint" account.
Right now, we have a problem, there is no more oil and salaries must be paid, salaries that had been paid by crude oil.
The Federal Government enjoyed a monopoly on telecoms in Nigeria, the result was that a phone became a luxury, only for the rich, in 2001, the FGN left the business of communication, became a regulator and tax recipient, and today everyone has a phone, I mean everyone…
What is the fascination in crude oil that the FGN still wants to own it? if the Federal Government can hand over Telecoms, regulate and tax the telecoms companies...why not do the same for crude oil? Before 2001, the FGN funded NITEL, today the GSM companies fund the FGN.
Thing have to change. Nigeria can’t say its practicing a federal system of governance without fiscal federalism, that will be like driving a car without wheels.
So what should we do? It’s a no brainier, give the oil back to the people, Tax the oil business....simple
1. The FGN has to get out of business, and set itself as a regulator of business and recipient of business taxes, the gains are obvious, its costs are reduced, and its revenues go up.
2. Give the oil and non-oil assets back to the states and local governments, let states retain the proceeds of exports from their states. In essence if cocoa is exported, the state or origin of that cocoa get a share of the Company income tax by derivation
This is not just a call for resource control, it’s a call for responsibility allocation, as long as the FGN is responsible for collecting 95% of taxes and Local Government are paid their allocation via states, we can’t really expect and demand much.
“To him who little is given…little is expected”
It’s our problem, we can fix it...
By: Kalu Aja"

lalasticlala OAM4J allow the people to know a little of history and how we found ourselves here!!!

We own Nigeria. Nothing anybody can do about it. If not for US the colonial master will still be here.. We chase them out.. We are the superior. Respect our conglomerate. You know who we are. Y'all can't f u c k with us.


NDA just dey waste their time.

But I feel Ken Saro Wiwa sha.. RIP!

The solution to this issue can only be achieved from the confab report which was thrown to the archives.

Please no one should bother to quote the nitwit above me. No need to grant him publicity he seeks.

thanks 2 late Aguyi ironsi 4 his effort 2 make nigeria one united country. let work 2geda 4 a better nigeria

tempest01:
The solution to this issue can only be achieved from the confab report which was thrown to the archives.

"The Archives" is not an incinerator, moreover even if it were, there are copies out there that can easily be printed. we can contribute money for printing if the government has no ink.
On a lighter note, the President is at liberty to look at it, take the progressive parts and jettison the areas that were not addressed properly, but to shred a 9billion naira document capable of bringing rapid peace and development to the country, I don't see that happening.

Hmmm!!!

In 1976, Gen Obasanjo created a technical commission called the Aboyade Technical Commission, this was the result
1976
1. Oil Producing States got 0% of Mining Rents and Royalties
2. Federal Government got 100% of Mining Rents and Royalties

All this while I thought it was an Hausa head of state that adjusted revenue allocation, not knowing it was a southerner who sold us short.

abu12:
thanks 2 late Aguyi ironsi 4 his effort 2 make nigeria one united country. let work 2geda 4 a better nigeria

and u people were shouting Araba, all over the place.

SMH.

OK. We've heard you. But what is the reason for this post. Is it to further put more petrol in the fire coz you know Nairalanders just love jumping into conclusion and start fighting for no reason. Though I know you wanna educate the enlightened ones as to the root cause of this problem. I agree to fiscal federalism as well but what will happen if the governors continue embezzling.. No one to stop them again

vickylincon:
OK. We've heard you. But what is the reason for this post. Is it to further put more petrol in the fire coz you know Nairalanders just love jumping into conclusion and start fighting for no reason. Though I know you wanna educate the enlightened ones as to the root cause of this problem. I agree to fiscal federalism as well but what will happen if the governors continue embezzling.. No one to stop them again

I have aptly pointed out in another thread, true federalism is not an end in itself rather it is a means to an end.

Lalasticlala this article deserves exposure.

There you have it! So it was Obasanjo and Murtala that royally screwed the Niger Delta states after all! Even though these two guys literally stole Niger Delta oil on the stroke of a pen and called it "legitimate", fraud will always be fraud in conception and execution!

From the foregoing, I cannot but concede that 13 percent derivation is a big joke. Nigeria should go back to resource control, the only way out of this mess. What is indefensible is simply indefensible.

Bombing pipelines however is not the way to go. I would prefer a process that gives back incremental control of resource to the Niger Delta States. That is, if resource control is too much for the country to give back to the Niger Delta straight away, it could still be a gradual process, which gives non-oil states enough time to find alternative source(s) of revenue.

NavierStokes:


I have aptly pointed out in another thread, true federalism is not an end in itself rather it is a means to an end.

good

The military destroyed this country.

Nzeogwu, Ironsi, Gowon, Ojukwu, Murtala, Obasanjo, Buhari, IBB, Abacha and Abdulsalami are the reason this country is messed up.

Link to an interesting article on the subject, for those who care to read:
http://www.medwelljournals.com/fulltext/?doi=sscience.2010.246.253


Lalasticlala I wonder why justice hasn't been done to this thread. Can we have a wider read please.

Thanks
NavierStokes

hucienda:
Interesting.

Should resource control be implemented and the Niger Delta remain as is, then they would have no one but themselves to blame.

Only one way to find out.