Between 2022 and 2024, the oil-producing states in Nigeria received a total of 2.85 trillion Naira (about $6.9 billion) in revenue from a special fund called the 13 percent derivation revenue. This fund is designed to provide financial support to states that produce oil, helping them address the economic and environmental challenges that come with oil extraction. The information comes from a report by DANDALI, which analyzed budget reports from these states.
The eight states that benefit from this fund are Akwa Ibom, Bayelsa, Delta, Edo, Ondo, Rivers, Imo, and Abia. Even though these states have seen an increase in the money they receive from this fund, they are also facing significant domestic debt, which stood at 1.34 trillion Naira (around $3.2 billion) as of the third quarter of 2024. This data was provided by the Debt Management Office of Nigeria.
The 13 percent derivation fund is established by the Nigerian Constitution to ensure that states involved in oil production receive additional financial support from the national government. The intention behind this fund is to help these states deal with the negative impacts of oil extraction, such as environmental damage, while also promoting local development and improving infrastructure.
In 2024, Nigeria’s oil production saw a notable increase, with the country producing over 408 million barrels of crude oil. In December alone, the average daily production was about 1.484 million barrels, which was still below the amount that Nigeria is allowed to produce according to the Organisation of the Petroleum Exporting Countries (OPEC). Throughout 2024, oil production fluctuated, with some months experiencing lower output than others. The government is actively working to increase production to 2 million barrels per day in the coming year.
The increase in oil production has a direct impact on the 13 percent derivation fund. As more oil is produced and sold, the revenue generated increases, leading to higher allocations for the oil-producing states. This money is intended to help these states deal with environmental issues and fund development projects. However, despite the increase in funds, there are ongoing concerns about how effectively the states are managing this money, especially given their rising debts.
For example, Delta State has been the biggest recipient of the derivation fund, receiving a total of 1.14 trillion Naira over the three years. In contrast, other states like Akwa Ibom and Rivers have seen their revenues fluctuate, with some years showing increases while others showed decreases. While Delta State’s derivation revenue increased significantly from 2023 to 2024, Akwa Ibom experienced a drop in its earnings during the same period.
Read Also: Dangote Refinery Cuts Diesel Price To N1,020 Per Litre
Despite the overall increase in revenue, many of these states are still struggling with high levels of debt. The total domestic debt for oil-producing states was 1.34 trillion Naira as of late 2024, which is slightly lower than the previous year. However, states like Rivers and Delta have seen their debts increase significantly, raising concerns about their financial management.
Interestingly, while some states have managed to reduce their debt, others have continued to borrow more money despite receiving substantial revenue from the derivation fund. For instance, Rivers State’s debt rose sharply from 225.51 billion Naira in 2022 to 389.20 billion Naira in 2024. Conversely, Akwa Ibom managed to reduce its debt from 219.62 billion Naira to 126.00 billion Naira during the same period.
The differences in how states handle their finances are striking. While some states have successfully decreased their debt, others are accumulating more, which raises questions about their long-term financial health. The report highlights the need for transparency and accountability in how these funds are used. Civil society organizations have expressed concerns that despite the significant revenue flowing into these states, there is little visible improvement in public services, infrastructure, and overall living conditions for residents.
Leaders from civil society groups have pointed out that the large sums of money received by states like Rivers, Akwa Ibom, and Delta should lead to noticeable improvements in areas like healthcare and education. However, they argue that the lack of tangible development projects raises questions about how these funds are being managed. They advocate for better governance and accountability to ensure that the revenue collected translates into real improvements for the communities in these oil-producing regions.
In summary, while oil-producing states in Nigeria are receiving significant revenue from the 13 percent derivation fund, the management of these funds and the rising debt levels in some states present ongoing challenges. The situation calls for increased transparency and accountability to ensure that the money is used effectively for the benefit of the communities affected by oil production.
