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N171.2 billion Derivation Refund: Give More Attention to Oil Producing Communities- Policy Alert Tells AKSG …As Akwa Ibom State Expects N926.9 billion Refund

Governor Udom Emmanuel of Akwa Ibom State

Policy Alert, a Civil Society Organisation promoting fiscal and ecological justice in the Niger Delta, has called on the Akwa Ibom State Government to give more attention to oil producing communities and utilize effectively the N171.2 billion it recently received as 13 percent derivation revenue arrears from the Federal Government.

Executive Director of Policy Alert, Tijah Bolton-Akpan, who stated this in a statement endorsed by the group’s Communications and Stakeholder Engagement Officer, Nneka Luke-Ndumere andreleased on Monday, said that checks at the Federal Ministry of Finance and from the State’s third quarter budget appraisal have revealed that the State received the said fund during the third quarter of 2021.

It could be recalled that in June 2021, the Federal High Court sitting in Abuja had ordered the Federal Government to pay over $3.3 billion to Rivers and Akwa Ibom states, as share of recalculated oil derivation revenue in line with Section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contract (PSC) Act which obligates the federal government to adjust the share of the Federation in the additional revenue if the price of crude oil at any time exceeds $20 per barrel.
$2.258 billion (926.9 billion at the current exchange rate of N410.5/$US) is Akwa Ibom State’s share of the $62 billion the Federal Government recovered from some oil companies. 

According to Bolton-Akpan “We are delighted that the Federal Government has obliged to the refund ruling. This development explains why the State government recently reviewed their expected revenue on exceptional income: 13% derivation revenue arrears from N61.1 billion to N193 billion which is a 315.9 percent increase. However, Akwa Ibom people were not informed about this development during the presentation of supplementary budget even after the State had received the fund.

“This leaves a huge gap on transparency. We were disappointed that the Governor’s 2022 budget speech was silent on this development when he reviewed the performance of the 2021 budget, especially given that N137.9 billion Refunds from the Federation Account was proposed as capital receipts”.

Offering recommendations on how the funds should be spent, the statement pointed out that since they are refunds based on the 13 percent derivation, it would only be just and fair for the bulk of these receipts to be channelled into the development of oil producing communities in the State.

“We should not forget that this N171.2 billion coming into the coffers of the State seeks to address an injustice on 13 percent derivation which was originally designed to ameliorate the impact of oil exploration in oil producing communities. What is good for the goose is good for the gander. Akwa  Ibom State fought and got justice at the centre. Back home, the oil producing communities deserve justice as well.

“The State needs to begin taking the needs of oil producing communities seriously. Over the years, the state’s coffers have been enriched on account of these communities and as such, it is only fair that a legal framework be established to guide the targeted development of the goose that not only lays the golden eggs but also bears the brunt of oil extraction. Many states do this through the Oil Producing Areas Development Commission. It is high time Akwa Ibom State puts in place a similar structure to enable the orderly, fair and targeted re-channelling of a percentage of oil and gas proceeds to extraction-affected communities”.

The statement further noted that the State is expecting 926.9 billion naira from these refunds in tranches and called on citizens of the State to lend their voice to the conversation on how best this huge fund should be spent, especially given the implications this era of the energy transition on oil producing states.


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