Public Wealth Management and Distribution in the Extractive Industry in Nigeria

Few issues surrounding public wealth management in Nigeria enjoy broad geo-political agreement and support. The most vexed question is that of which level of government ought to have control over extractive resources. Behind the resource control debates is the question of the appropriate resource revenue sharing formula the country ought to adopt. Under current arrangements, states receive 13% of the revenues generated from natural resources located within their territory, leaving the federal government with control of 87% of the country’s resource wealth. Agitations by oil-producing states for state resource ownership and control have been raging for decades but have not resulted in any change in resource ownership and control. Although the federal legislature has the constitutional authority to change the current sharing formula to give states more share than they currently have, it has not yet exercised that authority. In order to ensure that extractive companies pay adequate revenue to the state, the government imposes an assortment of fiscal instruments, including: royalties, petroleum profits tax, capital gains tax and value-added tax. In order to ensure that revenues generated from the resources benefit both present and future generations, the country operates a sovereign wealth fund. The operation of this fund has been riddled in managerial controversy, even its constitutionality has boggled the minds of Nigerian legal pundits. This chapter analyses these issues, proffering views on how they may be better understood and approached.