Judgement against FG on 13 % derivatives: Revelation of ineptitude, absence of transparency and accountability

EnergyDay Editorial Board

The two judgements against the Federal Government, in respect of suits filed jointly by the duo of Akwa Ibom and Rivers and another by Bayelsa State can only suggest to a discerning mind the ineptitude manner the nation’s earnings from the oil and gas industry is spent.


It also revealed the absence of transparency, accountability and a thought for the future.

In clear terms, it is a revelation of how the endemic corruption in the system has blindfolded those charged with the management of our common wealth to ignore laid down procedures for personal interest.

No doubt, implications of those judgement amid numerous other outstanding, have far- reaching implications for the quality of our federal system and revenues sharing formula on one hand; and poor legal advice and administration on the part of the Attorney General of the Federation and Minister of Justice, the Accountant General of the Federation, the Nigerian National Petroleum Corporation and all those concern with resources allocation.


Just to call to mind, penultimate week, a Federal High Court sitting in Abuja ordered the Federal Government to pay $951 million to the Bayelsa State government as arrears of the 13 per cent derivative sum due to the state.

A couple of days after, another court ordered the Federal Government to pay over $3.3 billion to Rivers and Akwa Ibom states, as share of revenue from crude oil sales.

The amount formed the shares of the two states from the $62 billion the Federal Government recovered from some oil companies.

Needless boardering you with details of the judgement delivered by Justice Taiwo Taiwo ordered that $1.114 billion be paid to Rivers State, while $2.258 billion should be paid to Akwa Ibom State, being the amounts the states claimed against the Federal Government from the $62 billion recovered from oil companies.

But it’s important to note that the court also awarded a post-judgment interest of 10 per cent in favour of the plaintiffs until the final liquidation of the judgment.

It is also important to highlight the fact that Justice Taiwo held that the suit was founded on a Supreme Court judgment on how proceeds from sales of crude oil should be shared, adding that the defendant did not controvert the states’ claim on the recovery of additional $62 billion, in spite of several correspondences, hence, the law deemed unchallenged claims as true.

The court rejected federal government represented by the Attorney General of the Federation and Minister of Justice, Abubakar Malami’s argument that it could not pay the money it received from crude oil sales, adding that the defendant ought to have filed a bona fide defence to explain its position on the $62 billion oil earnings as required by law.

“By failing to file a defence to challenge the claims of $62 billion oil earnings of the two plaintiffs, I have no option than to hold that the Federal Government has no defence and I have no discretion to give judgment in favour of the plaintiffs.”

The above summation of the judgement bring to question many issues. First, was the Attorney General not aware of the position of the law? What happened to the money in discuss? Is it kept in a safe ppace or as usual shared already?

Who gave approval for the sharing for such windfall without taking into cognisance the implication or even considering investing same in infrastructural development? Now that a judgement is secured, how is the government going to make payment in an era of unending borrowings?

We at EnergyDay, view this very sad development coming at a time of difficult economic situations as an indication of the continued insensitivity of our leaders to the laws of the land and failure to plan for the future.

Unfortunately, the blame for this turn of events lies squarely on the doorsteps of the federal government that has not acted responsibly and responsively on the matter, having used to cavalier and lackadaisical way of doing things without regards to due process, rigour and best practices. The result is absence of transparency and accountability in every transaction involving her agents and agencies.

In the first place, it is disheartening that the suits were allowed to be instituted by the states, had the Federal Government done the needful, the idea of finding redress in the law court would not have arisen.


Given that the government had defaulted in the main, it ought to have sought a way of resolving the issue with the states concerned amicably, this would have saved it from the embarrassment such action had caused.

Like many embarrassing, poor pieces of legal advice coming from the office of the Attorney General of the Federation at least in our experience of this administration, the Office, has once again, failed to offer quality advice on the way to go for the government, this as much was adduced to by the judgement, which blamed the government for lack of diligent defence.

This brings to mind, the $9.6billion fine slammed on the Nigeria government in 2019 by a UK court over an alleged case centres on a contract signed in 2009 by Process and Industrial Developments, a company registered in the British Virgin Islands, and Nigeria’s Ministry of Petroleum Resources for the building of a refinery to convert natural gas into “lean gas” in Cross Rivers state in southern Nigeria.

The British judge had ruled that the firm founded by two Irish businessmen was entitled to take $9.6bn in assets from the Nigerian state as compensation for losses related to the said aborted gas-processing project. The award, which factored in 20 years of putative profits plus interest of more than $1m a day, was one of the biggest ever arbitration awards by a UK court.

This medium like many Nigerians and critical stakeholders, is miffed at the altitude of our legal department towards serious issues such as this that threatens the financial independence of the country. We can’t but express disgusting concern over the whole process in light of the fact that the economy is not in good shape, compounded by not only huge debts but also depleting Sovereign Wealth account.


EnergyDay findings on investment into the nation’s Sovereign Wealth account, discovered that the current administration has not made any contribution to the Fund, but rather has been withdrawing from it.

This is sad.

More disturbing is recent revelation by a media report that NNPC which hitherto is the main source of national income to be broke.

The report which cited a letter from NNPC to Nigeria’s Accountant General, the company would not pay any money to the Federation Accounts Allocation Committee (FAAC) in May.

The company said it would withhold N111.96 billion ($294.3 million) of its April earnings. An amount said to be required to cover the supply of petroleum products to Nigeria.

This state of affairs does not only raise fundamental question about the ability of the government and it’s agencies’ managing the economy; and the trajectory with which it is taking the ship of the economy. Worst still when legal issues are allowed to further complicate the situation.

We advise the government to rejig its economic team if any, seek quality advice from knowledgeable quarters and consult widely with organized private sector, as a way out of the mess we have found ourselves.

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