The Role of Oil in the Niger Delta Conflict

The Role of Oil in the Niger Delta Conflict

Since the exploration of oil in Nigeria, the country’s economy underwent a trans- formation towards a strong oil dependency. In the process, Nigeria became a

classical rentier state. 2 Within this setting, a dispute over the control of oil revenues evolved between the federal government and representatives of the Niger Delta.

1 In the theoretical literature, the efficiency of the military usually just determines the minimum capacity to act, which rebels have to develop as they seek to survive (Collier & Hoeffler, 2000 , p. 5;

Gates, 2002 , p. 121; Fearon & Laitin, 2003 , p. 75; Weinstein, 2005 , p. 599; Collier et al., 2009 , p. 4). 2 A rentier state is defined by Beblawi as a state that generates its revenues by a concentration of

exports and “only a few are engaged in the generation of this rent (wealth), the majority being only

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The relationship between the Nigerian federal government and the oil- producing states is important for understanding the origin of the Niger Delta conflict. The roots of these tensions can be traced back to the nation-building process. Since the amalgamation of two British Protectorates in 1914, several conflict lines have exacerbated Nigerian nation-building. Because of their hetero- geneity, the Islamic North and the Christian South were treated as if they did not belong together by the British rulers (Omeje, 2006 , p. 25 f.; Adejumobi & Aderemi, 2002 , p. 192 f.). In 1939, the southern part was divided into a western and an eastern part, each representing one main ethnic group – the Yoruba and the Ibo. After independence (1960), the North was able to form a government without cooperating with the southern politicians. With more than 250 different ethnic groups, the interests of most ethnic minorities were thus hardly represented in the newly

independent Nigerian state. 3 In each region the economic and political interests of the dominant ethnic group eclipse the political positions of minorities. As a result loyalties are more focused on the individual region instead of the nation state (Ikime, 2002 , p. 54).

The strongest outbreak of the tensions in Nigeria was the Biafra War (1967–1970). When the secessionists annexed the oil fields in the Niger Delta, control over oil became a central topic in Nigerian politics for the first time. 4 At the time the war started, with less than 11% of GDP (1966), oil exports did not constitute the main source of income, clearly trailing agriculture which amounted for over 55% of GDP. However, the growth rate in the oil sector was 38% in the final years preceding the war – almost 20 times higher than agricultural growth. Consequently, the oil sector was already of strategic relevance (Adejumobi & Aderemi, 2002 , p. 195). Oil revenues proved to be increasingly crucial for the state’s capacity to act, resulting in the federal government’s intention to gain more control over the oil sector (Ikporukpo, 2002 , p. 211). Therefore, it enforced the Petroleum Act of 1969, which vested “the entire ownership and control of all

petroleum in, under or upon any lands [. . .] in the state”. 5 The circumstances of how this legislation was promulgated had, and still have, significant impact on the

tensions between the Niger Delta and the federal government, because:

[it] was initially a war instrument against a secessionist regime but it was never repealed. In the eyes of many activists on the issue, the government thus continues metaphorically to wage war against the same oil-producing communities it sought to ‘liberate’ during the Biafran war. (International Crisis Group, 2006b , p. 4)

With oil prices rising since the 1970s, there was a strong state-driven extension of the Nigerian oil sector. This led to the classic “Dutch Disease” syndrome: a contraction of the agriculture sector and the loss of international competitiveness of

3 Due to this ethnic-linguistic diversity Nigeria is today subdivided into 36 states. 4 Oil control was an important strategic feature for the Biafra movement, although it was not

“a basic cause of secession” (Isumonah, 2002 , p. 32). 5 Petroleum Act (1969), }1,1.

204 C.A. Lutz

non-oil exports, due to an appreciation of real exchange rates (Jerome, 2007 , p. 95). As a result, oil resources constitute 90% of foreign income and over 70% of government revenues today. It was this transformation of the economy that made Nigeria one of the most oil dependent states in the world (Ross, 2003 , p. 19 f.). Political elites solely focused on the control of oil rents and the use of them for maintaining their patrimonial networks, because “it is at the level(s) of the collec- tion, and distribution of oil revenues, that state ownership of oil represents real power” (Obi, 2007 , p. 22).

The dispute about revenue distribution in Nigeria is dominated by two basic principles. Representatives of the Niger Delta stress the “principle of derivation”, which awards oil rents to the states where the oil revenues are generated. They justify their demands mainly with historical and environmental reasons. Before oil was extracted in economically profitable quantities and the regionally diversified agricultural sector constituted the main source of revenues, all rents flowed to their states of origin. Even more important for today’s oil production are the

environmental effects, especially oil spills 6 and gas flaring, 7 which primarily affect local residents (Ukiwo, 2008 , p. 81). However, the federal government and especially northern elites stress the “principle of need”, which allocates incomes by the share of responsibility in public goods creation to the different layers of the state – favoring the nationalization of revenues. Advocates for the centralization of revenues argue that this practice ensures a minimum national standard of living and minimizes regional differences. Furthermore, it has been argued that all oil deposits were vested in the crown, and with independence were transferred to the Nigerian state and not to the Niger Delta region (ibid., p. 80).

In the independence constitution (1960) the principle of derivation was reduced to 50%. At this moment, the overall importance of the oil sector was still small and each region had quite a strong and export-oriented agricultural production. Thus, the representatives of the dominant ethnic groups did not have an incentive to modify the distribution formula (Anugwom, 2005 , p. 102). But the more oil rents contributed to the national budget, the more revenue generation was centralized. In 1970, the derivation principle shrunk to 45% and 5 years later dropped to only 20% (Ebeku, 2006 , p. 292 f.). Ukiwo attributes this to the weak position of the oil-producing regions after the Biafra War (2008, p. 87). In the wake of peak prices for oil, the federal government cut the share of derivation down to a mere

6 Between 1976 and 1990 almost 2,800 oil spills with over two million barrels of oil entering the environment were registered in Nigeria (Daniel-Kalio & Braide, 2002 , p. 441). In the 2005–2009

period, Shell alone reported between 150 and 250 accidents per year, with the volume of oil losses rising from 15,000 barrels in 2005 to over 100,000 barrels in 2008 and 2009 (SPDC, 2010 , p. 2). The latest major accident occurred in December 2011 with at least 40,000 barrels of oil spilled (The Guardian, 22 December 2011, http://www.guardian.co.uk/environment/2011/dec/22/ nigerian-shell-oil-spill accessed 10 February 2012).

7 Gas flaring refers to the burning of gas caused by oil drilling. In Nigeria is world’s number one gas flarer, with over 16 billion of cubic meters gas flared per year (Environmental Rights Action,

2005 , p. 12). For the adverse effects on health conditions of the local residents, see Ibid., p. 24.

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1.5% in 1982, provoking tensions between the oil-producing states and the federal government as political elites in the Niger Delta considered this process a discrimi- nation of their ethnic groups (Omeje, 2006 , p. 39). As a result of the early opposi- tion, derivation was doubled to 3% in 1993. With the transition to democracy the derivation share on oil revenues increased to 13%.