Sections 44 (3) And 163: Nigeria’s Constitutional Socio-Econimic Albatross

Olajide Olagunju
Bakke Graduate University, Texas, USA
olajide.olagunju@bgu.edu

“……..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.”
(Section 44(3) Nigerian Constitution 1999)

“Any amount standing to the credit of the Federation Account shall be distributed among the Federal and State Governments and the local government councils in each State on such terms and in such manner as may be prescribed by the National Assembly.”
(Section 162(3) Nigerian Constitution 1999)

“(1)There shall be paid by the Federation to each Region a sum equal to fifty per cent. of- (a) the proceeds of any royalty received by the Federation in respect of any minerals extracted in that Region; and (b) any mining rents derived by the Federation during that year from within that Region. …(5) In this section “minerals” includes mineral oil. (6) For the purposes of this section the continental shelf of a Region shall be deemed to be part of that Region.
(Section 134 Nigerian Constitution 1960)

Many people globally including none-Nigerians are concerned and frustrated about Nigeria. These are not people looking to gain from Nigeria in any way. They are people who want to see Nigeria turn a new leaf socioeconomically. They are frustrated because they know the incredible wealth under the soil of Nigeria. They also know the energy and industry that the average Nigerian exhibits globally. They cannot understand why the potential and the reality are so embarrassingly far apart. This article is primarily designed to address that global frustration so that the energy of the frustration can be re-directed to making a change happen in Nigeria peacefully. The angle I am taking here is to explain the root of the Nigerian malaise. This approach is important because I notice that whereas people have all the best intentions in the world for the country, without understanding the ultimate reason for Nigeria’s growth challenge, they will continue to be frustrated, no matter their input, material, financial and otherwise. On the other hand, knowledge is empowering: if we know the one thing that makes Nigeria fail and fall perpetually since 1969 to date, a period of over fifty years, we can have more and more people focusing on the solution instead of the symptoms of the problem. Essentially I will show that it is Nigeria’s own law, notably her constitutional law, that is dragging her backwards in the last fifty two years. And the simple solution for Nigeria is to have the courage to amend the law that pulls her down.
I need to begin by emphasizing that we cannot see change in Nigeria if we keep focusing on how ‘bad’ the country is or how ‘incompetent’ its leaders are. This focus on symptoms may appear fair. However, we need to look beyond, behind and beneath an extremely challenged polity and seemingly incompetent leadership. We need to understand that the state of things in Nigeria is driven by an overarching legal framework that can only produce ‘bad’ leaders and a deplorable socioeconomic ambiance. In this context, I recall that I had at the beginning of the government of President Muhammadu Buhari given a published counsel on the one single action that could change the fortune of Nigeria. With the benefit of hindsight and having observed the many challenges of his government over six years including an almost total break-down of security especially in Buhari’s own immediate, northern, constituency, where terrorists, in addition to alarming and unimaginable social disruption, epitomized by their continued enslavement of Nigeria’s modern day heroine, Leah Sharibu, have once and again declared caliphates over expanses of the country’s territory, I am more than ever convinced that my one recommendation for change is the way out of Nigeria’s international shame, a shame which would probably not have been noticed if the country was not the size that it is, a global giant polity of about two hundred million disproportionally young population, which, if the trends of gross national insecurity continues, may be turned into a nation of refugees that would collapse the whole of the west and north African security infrastructure, to put it mildly, because of the sheer size of this dynamic and potentially dynamite population.
Therefore, in order to understand the problem of Nigeria and the solution to it, instead of reinventing the wheel, I think it is best to reproduce what I counseled Buhari’s government at inception in May 2015. It also helps to determine and understand the government’s failure or otherwise.
Under the caption “Nigeria: The Pivotal Task for the Incoming Government – Restoration of Fiscal Federalism”, I wrote on May 20, 2015 as follows:
“As the world, particularly residents and friends of Nigeria, witness a change of regime in the country on May 29, 2015, I place before the new government, led by Muhammadu Buhari and his deputy, Professor Yemi Osinbajo, the main task that they must accomplish to put Nigeria on the path of sustainable development again.
Nigeria’s challenge, post-civil war, albeit hydra-headed, is one: the demise of fiscal federalism. All other challenges – insecurity, unemployment, poverty, low standards of public education and healthcare, mismanagement of huge petroleum resources, environmental degradation etc, resulted directly from the demise of fiscal federalism, which demise halted economic development. This challenge, although rooted in British colonial laws (Mineral Oils Ordinance of December 31, 1914 etc), was triggered by post-independence, specifically, civil war and post-civil war era military decrees, notably General Yakubu Gowon’s Petroleum Decree of 1969[1], General Olusegun Obasanjo’s Land Use Decree of 1978[2] and, particularly, Section 40(3) of General Obasanjo’s Constitution of 1979, which is reenacted verbatim in Section 44(3) of General Abdusalami Abubakar’s Constitution of 1999[3]. They combine to effectively destroy the basic tenet and thrust of Nigeria’s political union and Independence/Republican Constitutions of 1960 and 1963, namely, fiscal federalism, which propelled the country’s initial rapid economic development. The core of Nigeria’s economic woes, culminating in social upheavals, is therefore self-induced via the above retrogressive laws, which have emasculated fiscal federalism.
Whereas corruption is arguably the most notable symptom of Nigeria’s challenge, the demise of fiscal federalism, epitomized by the 1969 seizure of local petroleum resources, drives all of the country’s economic crisis and other conflicts – ethnic, socio-political et al. As indicated above, the federal seizure of oil and gas resources was legally contrived, through the 1969 Petroleum Decree, which legal theft is now incorporated in Section 44(3) of the 1999 Constitution. The Federation of Nigeria has thus made laws confiscating the oil and gas wealth of mostly minority peoples. The country adds the incomes from these resources to its Federation Account. The seized wealth is then shared among all federating states[4]. The federal government also decides what portion of these seized revenues it gives back, as derivation, to the governments of the states of the original local owners. For a time it was nothing at all. Later, it was set at 1.5%. Then it grew to 3%. It is now 13%. All of these figures have been determined mostly by federal military fiat. On the other hand, the original political union Constitutions of 1960 and 1963 had allowed local ownership of mineral resources plus 50% derivation, meaning the regions (now called states) received 50% of monies derived from, say, royalties on oil, and ceded 50%, not 87% as we now have in the case of oil and gas, to the federation, 20% for federal governance purposes – defense, foreign affairs etc[5] and 30% to be shared by all regions (states). Note that no region was otherwise required nor mandated under the original union Constitutions of 1960 and 1963 to cede to or share any part of its income/revenue with other regions. That pre-1969 situation is the direct opposite of what we now have under the new military Constitution of 1999. Meanwhile, there has never been any referendum jettisoning the 1960 and 1963 union Constitutions. Military coups d’etat leaders abrogated them. As argued above, however, it was the previous local ownership and self-reliance, that is, fiscal federalism, which facilitated the rapid economic development of the 1960s, from the grassroots up. With the demise of fiscal federalism, all the pre/post-independence industrial and general economic growth was lost.[6] Indeed, Nigeria’s consequent economic decadence has become so deep that people have forgotten that the country was once a rapidly industrializing nation, North, East, West and Mid-West, which, but for the loss of the incentive of fiscal federalism, would, by now, be competing effectively with leading industrialized nations.
A picture of what would happen when Nigeria fully resuscitates fiscal federalism has been clearly demonstrated by the country’s regional Government of Lagos State, starting with Governor Bola Tinubu and enhanced by Governor Babatunde Fashola. In 2004, the Federal Government under President Olusegun Obasanjo had withheld Lagos State’s Local councils’ share of essentially oil proceeds and continued to do so over a period of about three years, i.e. until the end of Obasanjo’s presidency in 2007. This compelled Lagos State to accelerate and expand its internal search for alternative sources of revenue.[7] This Lagos positive move against the challenge of economic annihilation has now culminated in Lagos State consistently earning internally generated revenue (IGR) far in excess of its share of federally collected and distributed oil and gas proceeds. This is apart from its share of value added tax (VAT), which is also collected and distributed nationally. In June 2014, Lagos State earned 11 billion naira from VAT alone, more than double its allocation from the essentially oil and gas funded federation account[8]. Also, the State’s IGR for June 2014 was 20 billion naira, five times its oil revenue share of 5 billion naira for the same month.[9] In April 2015, the State reported that it now generates an average of 23 billion naira IGR per month.[10] By contrast, in 1999, Lagos State’s average IGR per month was 600 million naira and her budget was 17 billion naira. By 2014, the state’s budget had risen to 500 billion naira.[11] Lagos has thus indeed become a “super West African state” able to compete with most countries in Africa.[12]
When we imagine what other States can achieve once they too begin to look inwards, that is, once they are no longer dependent on constitutional/statutory federal handouts from oil and gas of the Niger Delta peoples, we would see the potential in the country as a whole.
In conclusion, Nigeria demonstrated great economic potential between 1960 and 1969, vestiges of which remained up to the 1980s. However, since her seizure of local/regional oil and gas fields, she has lived by default in social, political and economic crisis. And the reason for the gradual economic collapse and crisis of Nigeria from the 1970s upwards is that the whole country, instead of promoting real development, now runs on free oil money from its minority regions. When this ‘legal’ theft of local oil and gas stops, there will be sustainable peace and development in Nigeria as all regions, zones, states and grassroots would be challenged, motivated and galvanized to grow again.
If the incoming government builds its policies around the above knowledge and understanding, it will succeed and Nigeria would work again, economically and socio-politically.”
From the above, it is clear that it is bad law, specifically, bad fiscal law, that has made Nigeria to retrogress from 1969 to date. One can only imagine how leaders of Nigeria and the country itself would have fared and would fare under a good fiscal law such as section 134 of 1960 Constitution cited above. Hence the need to change the current law in the1999 Constitution. What is the key and specific change that needs to be made in the 1999 Constitution to make it promote economic growth and, per consequence, restore peace? Section 44(3) needs to be completely expunged. It is an insensitive blatant disenfranchisement of local grassroots’ patrimony, especially in the context of section 44(1) enacted to protect people against forceful seizure of their property, and the abundantly sufficient caveat in section 44(2). More importantly section 44(3) single handedly destroys healthy fiscal federalism in the peculiar context of Nigeria, and promotes underdevelopment by the forceful dispossession and expropriation of local ownership. Local grassroots ownership would have mitigated, not only misuse of land and natural resources, but also the current widespread environmental pollution, which destroys grassroots livelihood wherever minerals, notably mineral oil, are found.
Similarly, sections 162 to 168 should be expunged. Note particularly section 162, which literarily entrenches economic laziness and incentivizes a leadership-without-responsibility by providing that the wealth and patrimony of Nigeria’s grassroots and ‘federating’ states seized in section 44(3), should be shared to all states via section 162(3) of the 1999 Constitution. Section 162(2) provision that the sharing formula should be based on “population, equality of States, internal revenue generation, land mass, terrain as well as population density” has done nothing to ameliorate the resultant economic backwardness of the federating states and the nation in general. In any event, why would you legislate to give people money merely because they exist, or have a land, or live in a particular terrain, or have a large population, or have a particular level of revenue? Section 162 is largely a provision, on its surface, that blatantly promotes irresponsibility. It tells a ‘federating’ state, for example: “If you just explode your population, the federal government will give you more money!” The constitutional provision in the same section providing for payment of 13% derivation to the states of the original owners of the expropriated and nationalized natural resources has also done nothing to mitigate the attendant economic stuntedness of the whole country. Neither have the ‘compensated’ natural resource bearing states themselves developed but continue to retrogress and struggle economically. The case of Kogi State in central Nigeria is of particular interest. Nasarawa State, also in central Nigeria, has for long been branded “Home of Solid Minerals”. Kogi has more minerals than Nasarawa. Kogi’s coal can power Nigeria’s electricity for hundreds of years. Kogi’s limestone can produce forty five million tons of cement per annum for close to a hundred years. Kogi has struggled to pay its staff. When you multiply Kogi State, a relatively small state by Nigerian standards, by the thirty six states in Nigeria plus Abuja Federal Capital Territory, the disconnect between the potential of Nigeria and its reality becomes more graphic. Why is Kogi State so embarrassingly poor? The law of Nigeria has nationalized all of Kogi’s minerals. Kogi, legally, does not own one ounce of all its thirty-some minerals. That is the essence of section 44(3) of the 1999 Constitution. All the other states in Nigeria suffer the same legal disenfranchisement, by Nigeria’s own law. Hence all the states of Nigeria, as a rule, are not growing. They are all economically stunted. Therefore the country itself is not growing. On the other hand, violence is growing and illiteracy (76 million adults, representing 38 per cent, this year, 2021, by official estimation). Legal theft’s violent nationalization of grassroots peoples’ natural resources creates in the latter’s collective psyche a disruptive disconnect from their own patrimony. It also makes ‘their own’ local ‘leaders’ unanswerable to these local people. There is deep disconnect between the local people and their local ‘leaders’. This is because the latter no longer owe allegiance to their own local/grassroots people: the local grassroots political ‘leaders’ now ‘depend’ on the expropriating ‘federal’ centre, not their own local grassroots people, for local governance expenditures. That is the law. And if there is no ownership, how can there be a commitment?
Nigeria’s legal theft of its grassroots’ patrimony has therefore not only destroyed the country’s peace and its economy, it has traumatized the economically disenfranchised grassroots peoples themselves. The legal theft has also created an entitlement mentality and a very deep sense of dependence in the rest of the country who live off the monthly proceeds of Nigeria’s legal theft. The current scenario is that each state governor continually and desperately looks forward to signing for and collecting cash allocation in billions of naira every four weeks at the centre , Abuja, while not promoting industry and general economic development in their own locality and state. Therefore, no one is growing, not one state is growing sustainably. And with the increase in violence, growth becomes more and more a mirage. The violence is itself, of course, a fallout of low productivity, due to the absence of a healthy fiscal federalism, and therefore resulting in massive unemployment, which redirects youth energy to violence.
The above status of the law and governance practice, which has taken the focus of government away from promoting industry and general economic growth and shifed governance to simply the distribution of rent, has also been accompanied by a globally notorious corruption in the country. This is in addition to the fact that in spite of the constant cash handouts and bailouts from the ‘federal’ centre to the peripheral states, mostly to pay government staff, the result on ground everywhere is more and more official indebtedness. The federal government that is giving the cash handouts and bailouts is itself heavily indebted, owing China alone more than 32.9 trillion naira officially as of December 2020. There is no basis to predict that these debts will suddenly go or lead to any meaningful development. Heaping debts upon debts at state or federal levels, under whatever guise, will not restore Nigeria economically. Neither will it restore peace. This is not because the mounting debts may be difficult to pay but because Nigeria’s path to growth, given its economic history and proven development drivers, from mid-1950s to date, do not support that position. Nigeria grew on relatively full fiscal federalism in the past. It has not grown under absence of full fiscal federalism to date. If it would grow in future, the only meaningful path is full fiscal federalism. This is such a simple logic and common sense that only lack of patriotism would prevent full fiscal federalism from being implemented.
In place of section 162 to 168 of the 1999 Constitution, therefore, the development-promoting sections 130 to 139 of the 1960 Independence Constitution, which was wholly adopted in the 1963 Republican Constitution, should be reinstated, mutatis mutandis. The resulting effect of the adoption and implementation of this article’s proposed simple legal amendment would be a gargantuan leap in economic development, North and South of Nigeria, as we have witnessed in the past when the proposed law was the norm. The change will bring back an economic leadership-with-responsibility, similar to what we witnessed between the 1950s and 1960s. This will put Nigeria’s teeming population back to work again and thereby lead to peace and increasing prosperity for the country, just as is currently the case with Nigeria’s compares such as the United Arab Emirates, which, in the five decades that Nigeria has been retrogressing, has attained indisputable global heights, especially economically.
In conclusion, Nigeria’s current 1999 Constitution is to blame for Nigeria’s woes. The 1999 Constitution will therefore remain Nigeria’s perpetual albatross except it is changed to a development-focused constitution that suits the complexity of its over 500 ethnic groups. Those who want Nigeria to move forward and have peace would be playing the ostrich if they fail, refuse or neglect to focus on this root cause of her socio-economic malaise – a poverty and conflict-producing 1999 Constitution. If the change we have proposed above occurs before 2023, the government of Muhammadu Buhari would have achieved a feat that no other government has attained since 1966. He would have thus created for himself and his government an uncommon and unforgettable legacy. What will history record?
Olajide Olagunju, Phd, FCIArb, FICMC, Attorney-at-Law