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Should Natural Resources belong to the Government or the Community?
February 25, 2016

Should Natural Resources belong to the Government or the Community?

Communities/towns should be allowed a 100% control of their lands and the resources in their lands. This is an integral part of true fiscal federalism.

What does this mean? This means that if Auchi (a community in Edo State) has granite reserve (a natural wealth) worth $1Billion. The govt should not take away the land from the Auchi people by the fraudulent Land Use Act. The govt should allow the people (residents) of Auchi community benefit from the natural resources there by giving them a 100% control over how the resources should be exploited.

First, the community does not have the technical know-how and financial resources to convert its natural resources into wealth. This is where equity participation comes in. This is where the govt and private investors come in. Now, it is the duty of the govt to issue out licenses to operators, it is the duty of govt to regulate the sector, it is the duty of the govt to ensure that the private investors do not cheat the land owners.

This is how it works. The community automatically converts certain percentage of its ownership of the land into equity participation in the exploration activity with the private investors. If the private investor needs $10million to explore these resources, the community will have to give up, lets say 40% of its land ownership in order to allow it participate as joint venture in the investment process. Now, the community has converted its landownership into wealth for life. For every truck of granite that leaves Auchi community, the community knows how much is its share because it has invested in the exploration process by giving up some percentage of its land ownership by converting it to investment.

Now, how does the govt make money from this arrangement?

The government can impose a 70% tax on every profit generated from the granite exploration on both the community and the private investor. Because the source of this wealth is natural and not man-made, there is nothing wrong in govt imposing as high as 70% tax on every profit made from sales.

In summation, if a 120 tons truck of granite cost N300,000 and profit is pegged at N100,000. The govt (state and federal) collects N70,000 through tax while the community and the private investor collects N30,000. Out of this N30,000, the community collects its percentage (as agreed in the equity agreement).

In total, lets say the Auchi community collects N5,000 from every truck of granite that leaves Auchi. Auchi community can never as poor as it currently is. If we apply this same rule to the oil communities, we can say, for every barrel of crude oil sold, the host community gets $1 or even less. With just $1 per barrel going to the host communities in Nigeria while the state and fg has the rest, we have solved every major problem, including injustice, militancy, oppression, exploitation, etc.

With this kind of arrangement, you have solved the Nigerian problem!

The above solution solves two major problems, first, it gives the community a sense of ownership and participation in the affairs of the state while on the second hand, it gives the government so much comfort in redistributing the wealth of the rich parts of the state to the poor parts without making the rich parts feel cheated.

The above illustration shows how true fiscal federalism will work in practical terms.

Also, the communities will not be allowed to have so much money without having some sort of fiscal responsibilities.

Under the present structure of Nigeria, the federal government owns everybody, every land and every resources, thereby alienating the communities from their natural wealth. This is wrong. The above model will be adopted under a restructured Nigeria.

This is another reason why we must support the #RestructureNigeria campaign and continue to advocate that Nigeria entrenches #TrueFiscalFederalism

Tony Osborg writes from Kano


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