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| Former President Olusegun Obasanjo |
Describing the current allocation as merely “the beginning” of a fairer deal for the Niger Delta, while challenging the promoters of Bayelsa’s $1 billion Azikel Refinery to complete the facility within 12 months.
Speaking on Monday at the inauguration of the Crude Distillation Unit (CDU) of the Azikel Refinery in Obunagha, Yenagoa Local Government Area of Bayelsa State, Obasanjo aligned himself with Governor Douye Diri’s long-standing criticism of the existing revenue-sharing arrangement and the 1978 Land Use Act. The event marked a visible milestone for one of the more persistent private refining projects in the oil-rich region, eight years after Obasanjo himself laid its foundation stone.
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A Personal Challenge and a Policy Signal
Obasanjo, who turns 90 in March 2026, framed his remarks with characteristic directness and personal urgency. He told Azikel Group President Dr. Azibapu Eruani that the project must be finished before he “takes the boarding pass.”
“I have told Dr Eruani that I will be officially 90 years by next March. It means I will take the boarding pass soon. He has to make sure the project is completed before I exit,” he said. He went further, suggesting that once operational, capacity could be doubled.
Addressing Governor Diri directly, Obasanjo endorsed the governor’s position on derivation: “You are right that the states and oil-producing communities have not got a fair deal so far. Thirteen per cent is the beginning. You can continue to talk. The most important thing is that even the little you have received, you have used it well.”
The former president also acknowledged the technical team, the African Finance Corporation (AFC), and Afreximbank for their roles in advancing the project, noting visible progress since his earlier visit when the site was largely undeveloped.
The Azikel Project: Ambition Meets Delays
Azikel Petroleum, part of the Azikel Group, is developing a facility expected to process roughly 25,000 barrels per day and produce about 2.5 million litres of petrol and 2 million litres of diesel daily, along with other products including aviation fuel, kerosene, LPG, and heavy fuel oil. The project is frequently described as a full-scale or condensate-focused refinery unique in parts of Sub-Saharan Africa for its design. Total investment is put at around $1 billion.
Licensed in 2015 during the early months of the Buhari administration, the project has undergone redesigns that raised capacity and costs. Financing has involved African multilateral institutions; Afreximbank provided a significant senior secured loan facility in 2023. Eruani has positioned the plant as a vehicle for regional industrialisation, arguing that the Niger Delta must move from being a mere extraction zone to an active participant in the petroleum value chain. He praised President Bola Tinubu’s support for indigenous refining capacity.
Governor Diri hailed the refinery as vindication of years of agitation against perceived injustice in the oil industry. He criticised both the 13 percent derivation and the Land Use Act, under which surface rights largely rest with states while subsurface minerals belong to the federation. “The Land Use Act is unfair… That law is obnoxious and not good for any just society,” Diri said. He stressed that oil-producing communities seek meaningful participation rather than exclusive control: “We do not want to take all to ourselves. We just want to be co-players… Thirteen per cent is not enough for the states.”
Diri also called on oil companies operating in the Gbarain/Obunagha area to help rehabilitate access roads to the site and urged local residents to acquire skills to benefit from the opportunities the plant is expected to create.
The Long Shadow of Derivation Politics
The 13 percent figure is not arbitrary. Section 162(2) of the 1999 Constitution provides that the principle of derivation shall not be less than 13 percent of revenue accruing to the Federation Account from natural resources. This marked a restoration after decades of progressive erosion.
In the immediate post-independence period and under the 1960 and 1963 constitutions, regions retained 50 percent of revenues from resources in their territories. Military rule after 1966, the civil war, and the oil boom radically altered the formula.
Derivation fell sharply—to around 45 percent, then 20 percent, 1.5 percent, and 3 percent at various points—before the 1999 Constitution restored a constitutional floor of 13 percent. Obasanjo’s civilian administration implemented the provision, though not without pressure and litigation from oil-producing states.
Agitations for higher shares have been persistent. At Obasanjo’s 2005 National Political Reform Conference, South-South delegates pushed for 25 percent or more and walked out when consensus stalled around 17–18 percent. Niger Delta leaders have repeatedly argued that environmental degradation, infrastructure deficits, health impacts from spills, and the social costs of extraction justify a larger return. Critics of the current arrangement point out that while oil-producing states have received trillions of naira cumulatively since 1999, visible transformation in many host communities has lagged, raising questions about both the quantum of funds and their utilisation by state governments.
Recent FAAC data continues to show significant monthly flows. In one recent month (July 2026 figures cited in public data), the 13 percent derivation pool distributed over ₦197 billion, with Delta, Akwa Ibom, Bayelsa, and Rivers receiving the largest shares. @statisense
Obasanjo’s intervention carries particular weight because he was the president who operationalised the 13 percent rule. His statement that it is only “the beginning” effectively legitimises continued negotiation rather than treating the constitutional minimum as a ceiling.
Land Use Act, Ownership, and Federalism
Diri’s attack on the Land Use Act echoes a decades-old grievance. The 1978 decree (now Act), enacted under the military regime of which Obasanjo was head of state, vested land ownership in state governors while placing control of minerals under the federal government. In the Niger Delta, this has been widely viewed as facilitating centralised control of oil while leaving communities with limited proprietary leverage over the resources beneath their soil. Academic and legal critiques have linked the Act to weakened environmental justice claims and reduced bargaining power for host communities.
The broader debate sits within Nigeria’s unresolved questions of fiscal federalism. Non-oil-producing states and regions often resist higher derivation, arguing it would starve the federal purse and exacerbate regional inequalities. Oil-producing states counter that they bear concentrated environmental and social costs while the benefits are nationally shared. The Petroleum Industry Act’s 3 percent host community fund (drawn from operators’ operating expenditure) is a parallel but distinct mechanism that does not substitute for derivation.
Local Refining and Structural Change
Azikel’s progress occurs against a national backdrop of expanding domestic refining capacity, most notably the Dangote Refinery. Successful private plants in the Niger Delta could shift the region’s economic role from pure extraction toward processing, job creation, skills development, and reduced product importation. Eruani and Diri both framed the project in these terms—industrialisation rather than continued rent-seeking.
Yet the project’s long timeline (licensed 2015, foundation around 2018, still not fully operational in late 2026) illustrates the capital intensity, regulatory hurdles, financing challenges, and infrastructure constraints that have slowed modular and mid-scale refining across Nigeria. Road access, power reliability, and offtake arrangements remain practical hurdles even as the CDU installation signals technical progress.
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Implications and Outlook
Obasanjo’s remarks are unlikely to trigger immediate constitutional amendment—raising the derivation floor requires legislative action and broad political consensus—but they reinforce the legitimacy of the demand at a time when fiscal pressures, energy transition debates, and Niger Delta restiveness remain live issues. They also highlight a pragmatic strand in the former president’s thinking: higher shares matter, but effective utilisation of existing revenues is equally critical, as is private-sector industrial investment that creates lasting economic activity beyond monthly FAAC allocations.
For Bayelsa and the wider region, the Azikel project represents both a symbolic and practical test. If completed and operated successfully, it could demonstrate that local capital, African development finance, and sustained political support can deliver downstream capacity in the very communities that produce the crude. Failure or further prolonged delay would reinforce scepticism about the region’s ability to convert resource wealth into productive industry.
The conversation Obasanjo joined in Obunagha is older than the 1999 Constitution and older than the current generation of governors. It concerns the terms on which Nigeria’s most valuable natural resource is governed, who captures the rents, who bears the externalities, and whether the federation can evolve a more durable bargain. Thirteen percent was a hard-won floor. Whether it remains the permanent ceiling is now once again an open political question.
Samuel O. Sulaimon is the founder and Editor-in-Chief of Naijapiz. He covers News, Sports, Finance, Faiths, Education, Politics and Technology.
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