Nigeria’s oil-producing states have received substantial revenue allocations through the 13% derivation principle, totaling N2.85 trillion between 2022 and 2024. This constitutional provision aims to compensate these states for the environmental and economic consequences of oil exploration and production activities. The eight beneficiary states are Akwa Ibom, Bayelsa, Delta, Edo, Ondo, Rivers, Imo, and Abia. However, despite this significant influx of funds, a lingering concern remains about the effective management and utilization of these resources, particularly given the persistent debt burden faced by some of these states. The total domestic debt for these oil-producing states stood at N1.34 trillion as of the third quarter of 2024.
The 13% derivation revenue is directly linked to Nigeria’s crude oil production, which saw a notable improvement in 2024, reaching a total of 408,680,457 barrels. This increase is attributed to the government’s intensified efforts to combat oil theft and pipeline vandalism, which have historically hampered production. Security measures, including deploying armed drones, attack helicopters, and enhanced intelligence operations, have contributed to a more stable production environment. As oil production rises, so too do the allocations to the oil-producing states, offering a potential avenue for infrastructural development and improved public services. Yet, the rising debt levels in some states raise questions about their fiscal responsibility and the effectiveness of their development strategies.
An in-depth analysis of the derivation revenue distribution reveals Delta State as the highest recipient, receiving a total of N1.14 trillion over the three-year period. Akwa Ibom followed with N659.21 billion, and Rivers State received N438.63 billion. While Delta experienced a significant increase in its derivation revenue, other states like Akwa Ibom and Rivers saw declines. This fluctuation highlights the dynamic nature of oil revenue and the need for robust financial planning to mitigate the impact of revenue volatility. Furthermore, the analysis of state debt reveals a contrasting picture. While some states like Akwa Ibom, Imo, Bayelsa, Edo, Ondo, Abia, and Anambra successfully reduced their debt burdens, Rivers and Delta states witnessed substantial increases, raising concerns about their long-term fiscal sustainability.
The disparity in debt management among the oil-producing states reveals differing approaches to fiscal policy. States that reduced their debt demonstrate a commitment to fiscal prudence, either by prioritizing debt repayment or adopting more conservative borrowing practices. In contrast, the rising debt levels in Rivers and Delta, despite significant revenue inflows, suggest potential issues with financial management and raise questions about the prioritization of development projects. This disparity underscores the need for greater transparency and accountability in the management of public funds, particularly derivation revenue, to ensure that these resources are effectively used for the benefit of the citizens.
Civil society organizations have expressed concerns about the lack of visible development commensurate with the substantial revenue received by these states. The absence of tangible projects and improvements in key areas like healthcare, education, and economic development raises questions about the allocation and utilization of these funds. Calls for greater accountability and transparency emphasize the need for mechanisms to track the use of public resources and ensure that they are directed towards meaningful development initiatives. The contrasting experiences of different states highlight the importance of effective governance and prudent financial management in translating oil wealth into tangible benefits for the population.
Ultimately, the substantial revenue received by Nigeria’s oil-producing states presents both an opportunity and a challenge. While the 13% derivation principle provides a vital source of funding for development, the effectiveness of its implementation hinges on responsible fiscal management, transparency, and accountability. The contrasting debt trajectories of different states underscore the importance of prudent financial policies and the need for greater scrutiny of how these funds are utilized. The ongoing concern expressed by civil society organizations reinforces the need for strengthened oversight mechanisms to ensure that the derivation revenue translates into tangible improvements in the lives of the citizens in these oil-producing regions.
