The federal government and international oil companies operating in the country are to calculate and negotiate arrears of contractual obligations to the latter and the benefitting states, arising from last week’s decision of the Supreme Court over the sharing of crude oil proceeds whenever its price is above $20 per barrel.
The federal government opted for an out-of-court settlement in the suit filed by three oil-producing states in the Niger Delta, on the interpretation of Section 16(1) of the Deep Offshore and Inland Basin PSC Act, because it knew it had a bad case.
The Supreme Court in a landmark judgment last Wednesday, had ordered the federal government to adjust its share of proceeds from the sale of crude oil whenever the price exceeds $20 per barrel.
The order, which was made in a ruling in a suit filed by the Attorneys-General of Rivers, Bayelsa and Akwa Ibom States, was a fallout of the terms of settlement between the Attorney General of the Federation (AGF) and the plaintiffs.
The seven-man panel of the apex court, which included the Chief Justice of Nigeria, Justice Walter Onnoghen, in a unanimous ruling, ordered that the 13 per cent derivation that is due to the oil producing states be paid upon recovery, in accordance with Section 162 of the 1999 Constitution (as amended).
The plaintiffs, the Attorneys-General of Akwa Ibom State, Uwemedimo Nwoko; Bayelsa State, Wodu Kemasukde; and the Rivers State, Emmanuel Aguma (SAN), now deceased, had in November 2017 approached the court for an interpretation of Section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contract Act in suit number SC964/2016 filed on their behalf by Lucius Nwosu (SAN).
The section requires the federal government to adjust the shares of the revenue accruable to the federation whenever the price of crude oil exceeds $20 per barrel.
The plaintiffs asked the court to determine whether there is a statutory obligation imposed on the federal government pursuant to the section to adjust the share of the federal government in the additional revenue accruing under the various productions at any time the price of crude oil exceeds $20 per barrel.
However, the apex court in its ruling read by Justice John Inyang Okoro adopted the terms of amicable settlement between the AGF and the Attorneys-General of Rivers, Bayelsa and Akwa Ibom States as its judgment in the matter.
According to the terms of settlement signed by the three states and the AGF, the cost of recovery shall be netted off and payable from the gross recovered sum from time to time, prior to placement of net recoveries in the Federation Account.
The lead counsel to the three states, Lucius Nwosu (SAN), said the settlement out-of-court was arrived at when the defendants knew that they would lose the case. They, therefore, opted to cut short the time to be wasted in the court.
He said, “The settlement out of court was invoked because when there is a dispute between the state governments and the federal government, it goes to the Supreme Court in its original jurisdiction, which will now sit as a trial court, no longer as an appellate court.
“And the rule is that if the defendants perceive that the case in court is true and correct, he is at liberty, rather than go through the pain of defeat, to agree to settle out-of-court and pay whatever is required. And that is like seeing the truth and admitting it to be correct. That was how the settlement out of court came about. “When they looked at the case, they saw that it was straightforward.”
The terms set by the apex court, he said, was for the parties to set up a committee to within a period of time, sit down and calculate the backlog of unpaid contractual obligations to the federal government and the benefitting states. He explained, “The terms are that they are going to put machinery in motion to go and recalculate and recover what had not been paid. And don’t mind what some people are saying that it is in trillions of dollars because even if they are printing American dollars, when will they finish printing $1.4trillion?
“The minister of state said before the press that Nigeria lost $70 billion due to the non-implementation of that law. Everything is by negotiation. It is the federal government, not me that will negotiate. But when they were chewing, they should have known that they were taking what wasn’t theirs.
“So, they can negotiate it downwards and then be asked to go and sin no more. Of course, they might not pay once, that will be a killer. But they are very rich overseas.
“Most of the things they do here, if we did it to them, they won’t mind asking you to mortgage your entire country to them and you must sign that mortgage that this country now belongs to them, just like the Chinese are doing in Zambia now.”
Nwosu asked the federal government to respect the decision of the Supreme Court, saying that since it is in charge of the coercive instrument of state, it should deploy them to respecting judgment of the highest court of the land.
He equally called on the international oil companies operating in the Niger Delta to obey Section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contract Act.
On the implication of the judgment, the learned silk disclosed that with the Supreme Court’s decision, more revenues would accrue to federal, states and local government councils across the country as the oil companies would increase remittances to the federation.
According to him, the court’s judgment would also increase the monies that accrue to the oil producing states under the 13 per cent derivation.
He further stated that by the terms of the Deep Offshore and Inland Basin Production Sharing Contract (PSC) signed by the Nigerian National Petroleum Corporation (NNPC) and oil companies in 1993, the revenue that accrues to the federation “shall” be adjusted upwards when oil price exceeds $20 per barrel.”
The SAN noted that contrary to the widely held belief that the Niger Delta states would make a kill with the judgment, the federal government remains the major beneficiary of the ruling. He contended that when oil price exceeded $20 per barrel, the successive ministers of petroleum failed to activate this agreement due to corruption and complicity of officials of government.
According to him, “The agreement was that when oil price exceeds $20 per barrel, the proceeds that will accrue to the federation shall be adjusted upwards. The law was made in 1993 and the language is ‘shall’ which means that it is compulsory. Since then, oil price has exceeded $100 per barrel but the ministers of petroleum never ever adjusted upwards the revenue that is due to the federal government under the PSC they executed with the oil companies. The oil companies failed to remit what they are supposed to remit due to corruption and complicity of some officials.
“If they had adjusted the revenue upwards, the 13 per cent derivation payable to the oil-producing states would have increased six times and the money to be shared by the federal, states and local governments would also have increased three times. So, the federal government and all the states were also short-changed.”
