Rivers wins $1.114Bn derivation proceeds in Production Sharing Contract verdict: Akwa Ibom nabs $2.256Bn

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By Ignatius Chukwu

Rivers State has won a big case at the Federal High Court that can swell its treasury to the tune of $1.114Bn, an amount more than its annual budgetary income. Akwa Ibom won even bigger, $2.256Bn, about twice its annual income.  

The amounts come from a case they filed in 2016 demanding for fair calculation from the Production Sharing Contract (PSC) which requires more share should price of oil exceed $20 per barrel. These amounts had accumulated for years before 2016.

The Federal High Court sitting in Abuja presided over by the justice, Taiwo O. Taiwo, thus ordered the FG to pay Rivers State  $1,114,551,610 ($1.114Bn) and Akwa-Ibom $2,258,411,586.00 ($2.258Bn).

These amounts would attract 10 per cent interest until they are paid up. The FG is likely to appeal the judgment.

The money is entitlement of Rivers and Akwa-Ibom States, based on the subsisting decision of the Supreme Court over production sharing contracts arising from the Deep Offshore and Inland Basin Production Sharing Contracts.

Justice Taiwo, delivered the judgment in Suit No. FHC/ABJ/CS/174/2021 filed by the  Attorney General of Rivers  State and  Attorney General of Akwa Ibom against the Attorney General of the Federation.

It would be recalled that in 2016 Rivers, Bayelsa and Akwa Ibom States, through their Attorneys-General had sued the Federal Government, represented by the Attorney General of the Federation at the Supreme Court in Suit No: SC.964/2016, seeking  a declaration that there is a statutory obligation imposed on the Defendant (the Federal Government)  pursuant to Section 16(1) of the Deep Offshore Inland Basin Production Sharing Act, Cap.D3 Laws of the Federation of Nigeria 2004, to adjust the share of the Federation in the additional revenue accruing under the Production Sharing Contracts if the price of crude oil at any time exceeds $20 per barrel.

The States had asked the court to declare that the failure of the Defendant to accordingly adjust the share of the Government of the Federation in the additional revenue in the Production Sharing Contracts (variously approved by the Defendant) following the increase of price of crude oil in excess of twenty dollars (20.00USD) per barrel in real terms, constitute a breach of the said Section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contracts Act and has therefore affected the total revenue accruing to the Federation.

Consequently, the total statutory allocation accruing to the Plaintiffs by virtue of the provisions of Section 162 of the Constitution of the Federal Republic of Nigeria 1999 as amended.

The three oil producing States further prayed the court to issue a consequential order compelling the Defendant to adjust the share of the Government of the Federation in the additional revenue under all the Production Sharing Contracts in Nigeria’s Oil Industry within the Inland Water Basin Deep Offshore areas as approved by the Defendant from the respective times the price of crude oil exceeded twenty dollars ($20.00USD) per barrel in real terms and to calculate in arrears with effect from August 2003 and recover and pay immediately  all outstanding statutory allocations due and payable to the Plaintiffs arising from the said adjustments.

It will recalled that at the Supreme Court,  the Attorney- General of the Federation opted for an out of Court settlement and consequently, terms of settlement were duly drawn up by the parties and  entered as the judgment of the Court.

The judgment specifically stated that the reliefs in the amended originating summons relating to the larger interest of the Federal Government of Nigeria and the entire citizenry of the Federal Republic of Nigeria  shall be diligently implemented. 

It was also agreed that the  Attorney General of the Federation, working jointly with the Plaintiffs should undertake to immediately set up a body and the necessary mechanism for recovery of all lost revenue accruing to the Federation Account  in the past and  up till the date of full recovery and accruing in future or an acceptable instalmental  payments thereof within ninety (90)  days next from the date of execution of these presents or its being made judgement of the Court.

Following the judgement of the Supreme Court and in compliance therewith the Attorney General of the Federation, the Defendant,  constituted a body to determine the respective liabilities including the amount due to oil mineral producing States as derivation proceeds.

The Report of that body stated among others that  Rivers and Akwa Ibom States were entitled to $1,114,551,610.00 and $2,258,411,586.00 respectively as Derivation proceeds. 

However, Attorney General of the Federation without recourse to the Governments of Rivers and Akwa Ibom States unilaterally claimed to  have settled with International Oil Companies (IOCs). And  it was this unilateral action on the part of the Attorney General of the Federation,   the Defendant in the judgment of the Supreme Court that led to the Plaintiffs,  that is, Rivers and Akwa Ibom States,  to fill the Suit at the Federal High Court in Abuja.

Based on the suit filed by the State, the Federal High Court presided over by Taiwo Taiwo declared that Rivers and Akwa Ibom States were entitled to $1,114,551,610 and $2,258,411,586 respectively as Derivation proceeds. 

The court also awarded a post judgment interest of 10 per cent in favour of the Plaintiffs until the final liquidation of the judgment.

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