Nigeria Bill to Transfer Control of Natural Resources to States Passes Second Reading in House of Reps., But It’s Likely to Fail

A bill aimed at modifying the 1999 Constitution to transfer control of natural resources – including oil fields, minerals and natural gas – federal government to individual states has set the second reading to the House of Representatives.

The proposed amendment aims to decentralize the structure of the governance of Nigeria resources, granting states greater autonomy on the exploration, management and generation of natural resources in their jurisdictions. If it is adopted, it would considerably modify the existing budgetary framework, where the federal government has an exclusive control over key natural resources.

The Bill, Titled “A Bill for An Act to Alter the Provisions of the Constitution of the Federal Republic of Nigeria, 1999 to decentralize the Governance of Natural Resources in the Federal Republic of Nigeria to Transfer Mines and Minerals, Including Oil Fields, Oil Mining, Geological Surveys and Natural Gas from the exclusive Legis. List to the competitor legislative list and for related matters, ”was sponsored by house speaker abbas tajudeen and three other legislators.

Within the framework of the current structure, natural resources such as oil, gas and minerals are managed exclusively by the federal government, as stipulated in point 39, part 1, second appendix of the exclusive legislative list of the 1999 Constitution. This provision prevents states from legislating, regulating or benefiting directly from an extraction of resources in their territories.

Essentially, only the federal government can issue mining and oil exploration licenses, regulate the extraction of natural resources and collect income. The proposed amendment aims to remove this exclusive power from the federal government and to place it under the simultaneous legislative list, allowing federal governments and states to regulate and legislate on resource management.

If the bill is adopted, this would mean that states can issue licenses of exploration of oil exploitation and exploration, regulate extractive activities and collect income related to independently resources, without requesting the approval of the federal government.

The economic and political realities that can block the bill

However, while supporters argue that the amendment would strengthen tax federalism and stimulate local economies, it is unlikely that the bill will become law due to strong opposition from states with few or no natural resources.

One of the main reasons why the bill will find it difficult to adopt is the economic disparity among the states in terms of natural resources deposits. Only a handful of states, mainly in the Niger Delta, have significant mineral resources, in particular crude oil and gas, which explain most of Nigeria’s income. This means that states that have no substantial wealth of natural resources would lose a major source of funding if the federal government ceases to control and redistribute resources.

Currently, most of the Nigeria states are strongly dependent on the monthly allocations of the federal government income pool, which is largely funded by oil sales. Without these shared income, many states, especially those in the North and certain parts of the Southwest, could fight financially. The legislators representing these states will probably oppose the bill, knowing that the decentralization of resources control would incline economic power to states producing oil such as rivers, Bayelsa, Delta and Akwa Ibom, while leaving other states with limited means of generation of income.

This same opposition scheme took place with the bills for reforming presidential tax, which have been widely resisted, in particular by the leaders of the North, who argue that they would impoverish the region. The tax reform initiative, defended by the presidential committee of tax policy and tax reform, aims to revise the complex tax system of Nigeria by introducing the VAT model based on bypass. This approach would allow states that generate more VAT to maintain a larger share of income, promote economic responsibility and encourage self -sufficiency.

Although the federal government has presented reforms as a means of stimulating tax compliance and increasing internal revenues (IGR), North leaders have argued that reforms would promote richer states with solid economic activities, while leaving less developed states behind.

The same argument should be used against the bill on resource control, because the legislators and governors of the North would probably insist that their states are disproportionately affected by such a change in policy.

A long -standing request for resource control

Despite the probability of failure, the bill represents a long -standing request for oil producing states and defenders of fiscal federalism, which argue that the current income sharing formula is unfair. Oil -rich states in the Niger Delta have long prompted greater control over the richness generated by their land, arguing that the federal government takes too much while giving too little.

Supporters of the bill believe that allowing States to control their natural resources would encourage local economic development, reduction of conflicts in oil -rich areas and promote competition between states. They argue that decentralization would also lead to more efficient resources management, as states would be directly responsible for the guarantee of their extracted and effectively used resources.

However, similar invoices have been presented in the past and have not progressed beyond the second reading. The last major attempt to modify the laws on the control of resources in 2016 was greeted by strong resistance from the legislators representing non -producing states of oil, which feared that their states became financially unstable if the federal government lost control of the allocation of resources.

What is the next step for the bill?

After adopting its second reading, the bill will now be moved to the Chamber Committee on the constitutional modification for examination. If the committee approves it, the bill will make a third reading before being sent to the Senate for competition.

However, for the modification to become the law, it must obtain the approval of two thirds of the House of Representatives, two thirds of the Senate and two thirds of the 36 Chambers of State of Nigeria, as required by article 9 of the 1999 Constitution for constitutional amendments.

Given the strong regional fracture on the control of resources and tax policies, the bill faces a difficult battle. Although it highlights increasing frustrations with the centralized economic system of Nigeria, it is unlikely that it will obtain the broad support necessary to pass, because the majority of states should lose more than they would win.