Publications

Antidote to Violence?

Lessons for the Nigerian Federal Government’s ten percent
community royalty from the oil company experience

Transnational Crisis Project – Niger Delta Report no.1

February 9th 2010

Conflict involving oil wealth in the Niger Delta has had catastrophic consequences locally and globally. It has sent Nigeria’s oil production plummeting: at times over a million barrels of oil per day have been “shut in,” contributing as much as $17 per barrel to global energy prices. It has helped mire the delta in a morass of insecurity, violence, sabotage, and neglect. Transnational organized crime has spiked, thousands of lives have been lost, and the Nigerian oil industry has been so hobbled as to destabilize world energy markets. Amongst this all, the delta’s residents have long demanded a stake in the nation’s oil wealth: petroleum accounts for more than 40% of Nigeria’s GDP and 80% of government revenue, but benefits seen locally are few.

In October of last year, President Umaru Musa Yar’adua responded. He announced that Niger Delta communities are to receive a 10 percent ‘royalty’ of selected national oil profits. This move, his government claims, will be the “antidote to violence” in the Niger Delta. Right now the policy exists only in skeleton form: a Federal-level committee is meeting to work out details.

Transnational Crisis Project’s first Niger Delta report provides recommendations to the Nigerian Federal Government (FG) as it crafts its new royalty. As an idea, the President's proposal is both heartening and not. The crippling social and economic realities affecting millions of Niger Deltans beg a monetary fix. But the area is poisoned by too much mismanaged money already, and wealth funneled to locals to purchase security often buys insecurity. The oil companies have learned this. Shell, Chevron and others spend over half a billion dollars each year on oil-producing communities in the Niger Delta. Much of their effort is sincere, and success stories do exist. But rents transferred to locals often ignite the very sorts of conflicts they aim to extinguish. And too often, village-level fights over oil rents give birth to the delta’s most persistent security threats. Despite best efforts, the promise of uninterrupted production remains elusive – and what little is known about the planned royalty raises fears that these patterns will repeat.

This report combs the history of oil company-to-community wealth sharing for lessons relevant to FG’s royalty. President Yar’adua’s government has shown initiative on the Niger Delta crisis. Its new ten percent community royalty is part of that initiative. Royalty funds could help address governance issues across the delta, explore alternatives to the conflict economy, mark FG as a force for development in the area and cure the breached social contract between locals and government. But if mishandled in quest of short-term gains, it could worsen all of these. The oil company experience sharing wealth to locals has much to teach, if FG will listen. There is also the matter of President Yar’adua’s health, and an election is coming. Meanwhile the twin dangers of corruption and runaway expectations loom, and how 31 million locals will react to the royalty will remain unclear if FG does not consult with them.

“What will end the war,” MEND spokesman Jomo Gbomo has said, “is the introduction of true federalism which will eventually be beneficial to every Nigerian.” No detailed definition of “true federalism” has been forthcoming, but he is right to say so. The ten percent community royalty is a chance to right Nigeria’s faltering federal experiment, even in an environment like the Niger Delta where answers, alliances and intentions are never sure. But as the oil company experience shows, though sharing rents with locals is needed for peace, ill-conceived or botched transfers are sometimes best left undone. In the Niger Delta, something is not always better than nothing.

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