Empowering Miners and Mining Rennaissance in Nigeria

Derivation Principle

Do you understand what the Derivation Principle is all about?

Derivation principle or formula has nothing to do with resource control. In Nigeria, mineral rights exclusively belong (100%) to the federal government while the states and individuals are left with nothing (0%). Only on paper are some states preferred over others because they are endowed with natural resources – predominantly crude oil and natural gas resources. Those states are given a miserly 13% of funds derived from a complex and fuzzy equation whose variables are subject to whims of politicians and ethnic agenda.

You may consider so-called crude oil rich states in Nigeria as those states the federal government feeds off from and has chosen them to become beneficiaries of a token compensation system for hosting its joint venture schemes with multi-national corporations. Therefore, can or has the federal government, as a mere token for appeasement, prepared the arbitrary derivation formula (usually a certain percentage from an ambiguous calculation) it wishes for them. Since offered as conciliation, it logically explains why the federal government has always set arbitrary values it considers politically and economically expedient for maximum profitability and sustained control. That is democratically, morally and fundamentally wrong.

Today’s magic percentage (13%) has neither a sound basis nor a traceable mathematical derivation formula. In deed, there has been a standard or balanced equation for derivation percentages in 50 years of various applications. Each has been a political imposition designed to benefit the federal government or favor certain geo-political zones at expense of resource-endowed states. For example, present 13% resulted from a political compromise between opposing ethnocentric parties in an erstwhile Constitutional Conference – being the mean of the sum of 8% and 18% proposed by both dominant and opposing parties. What a stupid way to derive an important formula or percentage upon which lives and rights of many revolve without serious consideration of technical and other data!

As expected, in all 50 years of the derivation tragedy – see Fig. 3, notorious percentages have become constant aberrations that continue to generate perpetual conflict especially for a state like the Akwa Ibom state (a Niger Delta state.) Nigeria does not need any derivation principle: what is needed is the devolution of powers in a diversified economy such that States can, for a start, have partial ownership and control of its resources. The Derivation formula or percentage may be determined at any figure derived from any arbitrary set of variables (usually from non-technical variables). It does not significantly matter if such percentage is consistent with equity or sound judgment. What matters is whose interest and gains are secured.

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