Legal and Regulatory Frameworks for Resource Diversification in Nigeria

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

A central factor that affects the economic development of any country is the

legal and regulatory frameworks put in place to coordinate/operationalize resource

utilization. Such framework involves policy formulation, technical and commercial

operations, environmental protection, community relations, as well as revenue

generation and utilization. Since political independence in 1960, successive

governments have pursued the goal of structural change to diversify the economy

rather than over dependence on the oil sector. The major regulatory framework for

economic development in Nigeria has been the use of medium-term National

Plans.

The First National Development Plan of 1962-68 made agriculture and

industrial development a priority. The Second National DevelopmentPlan for the

period 1970-74 focused on reconstruction, rehabilitation and reconciliation of the

civil war battered economy. The Third development plan of 1975 - 80 emphasized

indigenization of the economy with the objective of having Nigerians own control

majority shares in industries and other investments. The Fourth National

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Development Plan covers the period 1981-85. It attempted to combat over

urbanization, through a vigorous pursuit of a policy of integrated urban and rural

development. Finally, is the Fifth Development Plan, 1988-1992 which tried to

correct structural anomalies in the nation‟s economy.

The Constitution of the Federal Republic of Nigeria (1999) provides for

three levels of government; Local, State and Federal. The full responsibility for

mineral exploitation is vested in the Federal Government; none of the states has

any direct control over the exploration and exploitation of minerals.

Consequently, ineffective and inefficient government institutional

framework in many instances has hindered optimal resource diversification in

Nigeria. The reasons being that most of the legal frameworks have not been strictly

enforced and cannot adequately cater for the requirements of the contemporary

Nigerian economy.

1.2 Statement of the Research Problem

Nigeria is endowed with vast arable land (that is suitable for agriculture),

large deposits of 54 different solid minerals in addition to petroleum and gas

deposits. However, the country has laid too much emphasis on crude oil

exploitation leading to a consequent neglect of other economic resources. This

neglect of other sectors could be traced to the inadequacy of government

2

instrumentalities required to encourage investment in such sectors. The

instrumentalities are usually in the form of legal and regulatory frameworks that

guide the conduct of business and resource utilization in Nigeria.

Even where necessary legal and regulatory frameworks exist there could

still be problems with their operationalisation due to corruption and institutional

weakness. There is therefore a need to investigate the impact of legal and

regulatory frameworks in Nigeria especially as a means of achieving resource

diversification.

1.3 Research Questions

The following research questions will be addressed:

a. What legal and regulatory frameworks have been in place to guide economic

development in Nigeria?

b. How effective have been the legal and regulatory frameworks towards

resource diversification for sustainable economic development in Nigeria?

c. What are the best practices with regards to legal and regulatory frameworks

for resource diversification?

d. What recommendations and implementation strategies can be proffered

regarding legal and regulatory frameworks for resource diversification in

Nigeria?

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1.4 Aim and Objectives
1.4.1 Aim

The aim of this study is to examine the place of legal and regulatory

frameworks for resource diversification in Nigeria with a view to proffering

recommendations and implementation strategies.

1.4.2 Objectives

The objectives of this study are to:

a. Establish the legal and regulatory frameworks put in place to guide

economic development in Nigeria;

b. Evaluate the effectiveness the legal and regulatory frameworks towards

resource diversification for sustainable economic development in Nigeria;

c. Identify the best practices with regard to legal and regulatory frameworks for

resources diversification;

d. Proffer recommendations and implementation strategies regarding legal and

regulatory frameworks for resource diversification in Nigeria.

1.5 Scope

This study focuses on the legal and regulatory frameworks in agriculture, the

oil sector, solid minerals development, energy and power, research and

development and human capacity development. It covers the period from 1960 to

date.

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1.6 Limitation

The study was limited by the inability to gather primary data. However, this

limitation was effectively overcome by the extensive use of secondary data.

1.7 Significance/Policy Relevance of the Study

This study is envisaged to help all tiers of government to evolve policies,

legal and regulatory frameworks that could guide business operation and resource

utilization in Nigeria. It would also add to the body of knowledge available on the

subject.

1.8 Theoretical Frameworks

Institutional theory focuses on the deeper and more resilient aspects of social

structure. It considers the processes by which structures, including schemes, rules,

norms, and routines, become established as authoritative guidelines for social

behaviour (Scott, 2004).

Scott (2004) further indicates that, in order to survive, organisations must

conform to the rules and belief systems prevailing in the environment because

institutional isomorphism, both structural and procedural, will earn the

organisation legitimacy.

There is substantial evidence that firms in different types of economies react

differently to similar challenges (Knetter, 1989). Social, economic, and political

factors constitute an institutional structure of a particular environment, which

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provides firms with advantages for engaging in specific types of activities there.

Businesses tend to perform more efficiently if they receive the institutional

support. Martinsons (1998) developed a Theory of Institutional Deficiencies

(TIDE) suggesting that relationship-based commerce will prevail where rule-based

markets cannot flourish due to institutional deficiencies.

Martinsons (2008) extends TIDE to show how the development of

relationship-based commerce could result from a country's lack of trustworthy and

enforceable set of rules for doing business. His theory suggests that factors such as

personal connections informal information, and blurred business government

relations (which also encourage corruption) constrain economic resource

diversification and development.

Institutional theory therefore, provides a good framework for analyzing and

explaining the dynamics involved in the study.

1.9 Methodology

The qualitative content analysis method of data analysis was employed in

the conduct of this study. Secondary data were obtained from sources such as

official documents, study tour reports, textbooks, presentations, briefs, newspapers

and the internet.

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1.10 Definition of Terms and Conceptual Clarifications

1.10.1 Resource Diversification

According to Kwanashie (2012), Resource diversification can be defined as

a strategy to increase the variety of business, service, or product types within an

organization. It involves growth strategy, taking advantage of market

opportunities, or it may be aimed at reducing risk by spreading interests over

different areas. It can be achieved through acquisition or through internal research

and development, and it can involve managing two, a few, or many different areas

of interest. Resource Diversification can also be a corporate strategy of investment

in acquisitions within a broad portfolio range by a large holding company. One

distinct type is horizontal diversification, which involves expansion into a similar

product area, for example, a domestic furniture manufacturer producing office

furniture. Another is vertical diversification, in which a company moves into a

different level of the supply chain, for example, a manufacturing company

becoming a retailer. The above concept of resource diversification is the one

adopted in this study.

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1.10.2 Legal Frameworks

Umozurike (2012), conceptualizes legal frameworks as deriving authority

from or founded on law: DE JURE having a formal status derived from law. Such

framework does not necessarily have basis in actual fact.

1.10.3 Regulatory Frameworks

Regulatory framework refers to a system of regulations and the means to

enforce them, which are usually established by government to regulate a specific

activity (Adekoya, 2011).

1.11 Organisation of the Study

This study is organised into five chapters: Chapter One is the introduction

while Chapter Two addresses the literature review. Chapter Three provides an

overview of legal and regulatory frameworks of resource diversification in Nigeria.

Chapter Four presents the lessons learnt from some countries toured by SEC 34,

2012while Chapter Five concludes and proffers recommendations and

implementation strategies.

8

References

1999 Constitution of the Federal Republic of Nigeria.
Adekoya, A.A. (2011), “Corporate Governance Reforms in Nigeria: Challenges
and Suggested Solutions” Journal of Business Systems Governance
and Ethics, Vol. 6, No.1.

Land Use Act of the Federal Republic of Nigeria 1978.
Martinsons M.G. (2008), Relationship based e-commerce: theory and evidence
from China :Information system journal vol. 18 issue 4, Pp331-358.

National Bureau of Statistics, 2003
Scott, W. R. (2004). “Institutional theory” P408-14 in Encyclopedia of Social
Theory, George Ritzer, ed. Thousand Oaks, CA: Sage.
Study Group Three, (2012), Foreign Study Tour Report of Malaysia, Resource
Diversification for Sustainable Economic Development in Nigeria.
Study Group Four, (2012), Foreign Study Tour Report of Canada, Resource
Diversification for Sustainable Economic Development in Nigeria
Study Group Six, (2012), Foreign Study Tour Report of Canada, Resource
Study Group Five, (2012), Local Study Tour Report of Kebbi State, Resource
Umozurike, U.O. (2012), “Legal and Regulatory Framework for Resource
Diversification in Nigeria”. Lecture to SEC 34 Participants of the
National Institute for Policy and Strategic Studies, Kuru, on tour to
Abia State, Umuahia, 26th April, 2012.
Yishau, O, (2012), 52 Years on, the gold mines remain dormant, The Nation,
October 1, 2012.

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CHAPTER TWO

LITERATURE REVIEW

2.1 Preamble

This chapter attempts a literature review on the legal and regulatory

frameworks for resource diversification in Nigeria. It covers general review of

existing literature regarding legal and regulatory frameworks for resource

diversification in order to highlight the general trends and best practices. It also

covers the case study review of the literature with particular reference to the

Nigerian situation and consequently establishes the gap in literature.

2.2 General Review

2.2.1 National Constitutions and Resource Diversification

According to the Organisation for Economic Cooperation and Development

(OECD, 2009), regulation, which is one of the three key levers of state power

(together with fiscal and monetary policy), is of critical importance in shaping the

welfare of economies and society. The objective of legal and regulatory policy

frameworks is to ensure that the regulatory lever works effectively, so that

regulations and regulatory frameworks are in the public interest.

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Armstrong (2003) considers legal and regulatory framework as an evolving

field which has gained popularity in recent times. He also acknowledges that good

legal and regulatory framework helps most developing countries develop market

that attract domestic and foreign direct investments build their markets

competitiveness, restore investor confidence, and promote economic growth and

national development. However, Li and Flier (2007) and Wilson (2006) note that

there are many challenges to ensuring good legal and regulatory frameworks in

developing countries especially when the business investors need to be convinced

that they are not independent of the society, host community or the natural

environment in which they operate.

According to Olusa (2007) the issue of legal and regulatory framework is

central to the diversification of economic resources of any country. In this regard,

laws and institutions are put in place in line with the peculiarities of each country,

which aim to boost the needed resource diversification. Inyang (2009) notes that

some incentives may be provided by various governments in order to attract

Foreign Direct Investment (FDI) in different sectors of their economy.

Alo (2003) observes that the National Constitution is the basic law and

usually provides the fundamental framework for resources exploitation and

development in most counties. Nevertheless, it also acknowledges that there are

usually other laws that are made to provide the detailed guidelines for particular
11

resources and sectors. In Turkey for instance, Cadwalader et al (2012) highlight

that the 1982 Constitution provides the basic framework, but other laws relevant to

resource development in Turkey are Agriculture Reform Law of 1984 relating to

Land Consolidation in Irrigation areas, Land Protection and Land Use Law of

2005, the Natural Resource Law, Law (Decree) No. 2012/3305 on the New

Incentive Scheme of Turkey and the Minerals (Exploration and Exploitation)

Ordinance 3 of 1984 among others.

Cadwalader et al (2012), state further that Article 163 of the 1982

Constitution of Turkey provides that the right to explore and exploit resources

belongs to the state. However, the state may delegate this right to individuals or

public corporations for specific periods. In spite of Turkey being a unitary state,

the Governor of a Province is empowered by law to approve on behalf of the state,

licences for the exploration and exploitation of mineral resources on land, in the

territorial waters and offshore areas outside the territorial waters. From the

foregoing, it is clear that the Constitution of Turkey is flexible in its provisions on

the right to explore and exploit the resources, a factor that is crucial to the

achievement of national development.

Similarly, Chevalier (2012) highlights that in the case of Canada, which

operates a federal system, Section 92 of the 1867 Act grants provinces their

legislative authority which includes direct taxation, management and sale of public

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lands belonging to the provinces, timber and wood thereon, health, administration

of justice. The provinces have substantial jurisdiction over their internal affairs.

The provinces of Canada produce and processover 60 minerals. The provinces

have responsibility for the ownership and management of natural resources within

their borders. The provinces are responsible for granting mining permits and access

to land. The companies that exploit these minerals pay taxes in the form of Federal

Corporate Income Tax of 15% and Provincial Mining taxes/royalties of 10% to

18%.

As observed by Suhaiza et al (2007) the above trend of keeping a convenient

balance between centralisation and devolution of the rights and responsibility for

resource exploitation is found in the constitutions of countries like Malaysia,

Morocco, The Gambia, Tanzania and Poland. The authors further conclude that in

the countries where the practical implementation of this balance enabled the

unhindered participation of all levels of government in the process of resource

exploitation, there has also been generally more efficiency in the exploitation of

resources. He believes that the guiding principle should be to engender a good

sense of belonging among the locals or indigenes of areas where the resources are

found while ensuring the general extractive right of the state represented by the

central government.

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2.2.2 Land Use

LOUAF (2008) opines that land is mostly used for crop cultivation, pasture,

tourism, industry and forestry. In line with this view, the Constitution of the

Republic of Turkey (1982) broadly provides for the productive use of land in the

country. Article 44 of the Turkish Constitution assigns Turkey the duty of

developing agriculture and prevention of soil erosion. Also, the Constitution

empowers the state to provide land to farmers without land as well as those with

inadequate land. In this regard, the state is further empowered by the Constitution

to re-define the size of land units allocated to farmers depending on the agricultural

region and the use of the land.

LOUAF (2008),further observes that the land tenure system of the Republic

of Niger depends on the indigenous holding as well as legal control by the central

regional government. The government at the centre regulates general land

administration with overriding powers for the public interest. For instance, the

terms of lease of a piece of land may be invalidated by the central government in

the overriding public interest. The Article 21 of the Nigerien Constitution provides

for individual right to own property. It also protects the right of the individual

property owner against deprivation of his property except in the public interest. In

addition, the 1993 Rural Code decentralises land administration and allows for the

registration of customary land rights. However, confusion exists over what rights

14

can be registered, and the seeming lack of capacity to manage land registration has

caused an increase in land disputes.

The highlighted land use practices show a general trend towards government

or central control and even ownership of land. The motivation is to seek the best

way to ensure that land is available as a factor of production in a sustainable way.

2.2.3 Tax Regimes

As highlighted by Ecovis (2012), there are various taxes that may be

applicable as sources of revenue in a country. Tax regimes also serve to encourage,

discourage or tailor investors towards certain sectors of an economy. The

constitution or other relevant laws usually stipulate the conditions and levels for

collecting each tax. The taxes include withholding tax, dividend tax, interest rate,

royalties and fees for technical and other services among others. The amount

payable as tax depends on the nature of the activity and the applicable tax regime.

According to Wilson and Mahbob (2007), Malaysia operates a strict unitary

Tax system based on location and residency. Any income derived from work

performed in Malaysia is subject to Malaysian tax regardless of residency status,

whether as corporate body or individual. Non-residents are charged at a flat rate of

28% only for income derived in Malaysia and are not able to claim tax relief.

The Moroccan tax law was amended in 1996 to create the direct and indirect

tax system or regime, with the indirect taxes providing greater sources of revenue.

15

Other reforms in the system include the exemption of certain types of income from

taxation. Examples are income derived from agriculture up to year 2020, and

businesses set up in the Western Sahara region. Corporations can distribute tax free

dividend of common-stock to all common-stock holders, while only 75% of

amount paid for purchase of raw materials and products or start-up expenses and

donations are taxable. Personal income tax is paid by individuals and workers,

while VAT rate is 19%, but a reduced rate of 7% applies to specific items. Other

forms of tax are business tax, patent tax, stamp duty/notarial tax, tax on interest,

urban property tax, municipal tax, customs duty and import tax levy. In addition,

treaties for the prevention of double taxation provide relief from foreign taxes paid

on worldwide income by means of foreign tax credit. To encourage foreign

investment, Morocco has territorial principle for taxation applicable to

corporations, hence has agreement with 17 developed nations for the prevention of

double taxation. Some of these countries are UK, USA, Belgium, Canada,

Germany, Norway, Romania, Spain, Tunisia among others. (Morocco Tax Rates,

2010).

The Canadian Tax System is centrally controlled by one agency, the

Canadian Revenue Agency (CRA). This agency collects all taxes and then

distributes the proceeds to the respective tiers of government according to their

entitlements, which is regulated by the various tax laws in force in Canada.

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It could thus be seen that the general trend with respect to tax regimes is to

achieve a balance between generation of revenue and encouragement of

investment. This is done by a combination of focused direct and indirect taxation.

The trend is generally in favour of heavy indirect taxation especially on local

consumption. Efforts are made to avoid double taxation or even get tax reliefs in

sectors into which investment is being sought.

2.2.4 Public Private Partnership (PPP)

Sinda and Kapinga (2012) observe that public-private partnerships (PPPs)

have become a catchphrase in new development projects. PPPs take various

forms but usually involve a contractual relationship between a private party and a

public entity to provide public services or develop public infrastructure. This

model is often used in large developmental projects such as in building roads,

bridges and ports.

Many governments recognise the importance of encouraging private

sector‟s active participation in national development; thus they put necessary legal

and institutional framework in place to enhance it. Examples include the

Tanzanian Private Partnership Act, 2010, which involved the operation of

Tanzania port facilities by private investors for some period of time. It is expected

that the Act will bring private companies to the formal sector, enable the transfer

17

of skills, technology and quality, and also ensure that foreign direct investment

has positive spillover effect on the economy.

Similarly, The Gambia Chamber of Commerce and Industry (GCCI)

encourages an economic environment that brings about enterprise and promotes

economic development and prosperity through private and public partnerships (The

Gambia Investment Guide 2010). Infrastructure and utilities are critical success

factors in diversification and until they remain functional and readily available, it is

difficult for economic visions and dreams to be realised. The Gambia is committed

to providing the enabling environment for Public Private Partnership with

appropriate incentives for interested investors towards the actualisation of its

developmental objectives. In order to encourage investors, government‟s

incentives include: no currency exchange control, up to five years tax free for

urban projects, eight years for rural projects and 20% non-quota restriction of

expatriates etc. Investors in The Gambia are charged 2-3% tax on turnover or 35%

on profit.

According to The Gambia Investment Guide (2010), genuine investors with

a minimum of ten million dalasi or $250,000 (#50million) to invest in The Gambia

are guaranteed land in the Trade Development Area (TDA). Application is made

through the intervention of the Gambia Chamber of Commerce and Industry

18

(GCCI), provided all necessary conditions governing the grants of such certificates

are met, facilitates and promotes business development.

According to Suhaiza et al (2007), the Malaysian Public Private Partnership

Unit (3PU) was established with the objective to promote Public Private

Partnership (PPP) as the main drivers of socio-economic growth by equipping the

private sector with the key mechanisms of PPP policies, mechanisms and

frameworks. The Malaysian Incorporated Policy, introduced in 1981, and followed

by the Privatization Policy in 1983, Guidelines on Privatization in 1985 and

Privatization Master Plan in 1991, are among the economic policies introduced to

foster the involvement of the private sector (EPU 2012). The initiative has yielded

positive results.

2.3 Case Study Review

According to Afolabi (2012), the various Constitutions of the Federal

Republic of Nigeria (1960; 1963; 1979; 1999) have always provided that the

nation‟s resources shall be harnessed in ways that promote national prosperity and

a self-reliant economy. Nigeria‟s legal system is based on English Common Law,

Islamic Law and Nigerian Customary Law. Most business transactions are

governed by the Common Law, as modified by statutes to meet local demands and

conditions. The principal laws regulating foreign investment are the Nigerian

19

Investment Promotion Commission Decree No. 16 (Cap, N. 117 LFN 2004) and

the Foreign Exchange (Monitoring and Miscellaneous Provisions) Decree No. 17

(Cap. F. 34 LFN 2004), both from 1995, supplemented by laws on company

formation, labour, tax and other relevant legislation.

Afolabi (2012) further asserts that the Nigerian Investment Promotion

Commission (NIPC) Act, Decree No. 16, 1995 (Cap, N. 117 LFN 2004), was

enacted to encourage, coordinate and monitor enterprise establishment and

operations. The Act lays out Nigeria‟s current investment framework. According to

the law, 100% foreign ownership is allowed in almost all industries and investors

can repatriate all profits and dividends. It also established NIPC as the one-stop-

agency to promote, facilitate and monitor all investments in Nigeria. The NIPC

provides numerous services, including the grant of business entry permits, licences,

authorisations and incentives (Afolabi, 2012). Other laws that guide investment

and local businesses in Nigeria include Land Use Act, 1978, Companies and Allied

Matters Act 1990 (Cap. C. 20 LFN 2004), Industrial Promotion Act, Decree No.

181, 1990 (Cap. 17 LFN 2004), Labour Act Chapter 198, 1990 (Cap. L1 LFN

2004), Nigeria Export Processing Zones (EPZ) Act No. 63, 1992 (Cap. N. 107

LFN 2004), National Agricultural Land Development Authority Decree No. 92,

1992 (Cap. N. 4 LFN 2004), NAFDAC Decree, 1993 (Cap. N. 1 LFN 2004),

20

Stamp Duties (Cap. 58 LFN 2004), Investments and Securities Decree No. 45,

1995 (Cap. 124 LFN 2004) and Pesticide Registration Regulations, 2005.

Oyejide and Soyibo(2001) observe that under current Nigerian laws,

taxation is enforced by the three tiers of government: federal, state and local. Each

tier has its sphere delineated in the Taxes and Levies (Approved list for Collection)

Decree No. 21 of 1998 (Cap.T2 LFN 2004). The taxes and levies for collection by

the Federal Government approved and published by the Joint Tax Board (JTB), are

Companies Income Tax, Value Added Tax (VAT), Capital Gains Tax,

Withholding Tax and the Nigerian Social Investment Trust (NSITF) Tax.

Oyejide and Soyibo(2001) further observe that the Federal Inland Revenue

Service (FIRS) is responsible for issuing Taxpayer Identification Number (TIN) to

every company, enterprise and individual in collaboration with the State Boards of

Internal Revenue and LGAs. The current law guiding taxation of personal income

is the Personal Income Tax (Cap P8 LFN 2004). Under the law, federal and state

tax boards are empowered to identify persons living in or earning income from

Nigeria who are required to pay tax, and to assess incomes and tax their incomes

using specified guidelines and rules. This law also guides the tax official in

identifying the residence of potential taxpayers, as well as the source and origins of

their incomes for the purpose of taxing the income. There are two forms of taxes

21

that are administered under the Act, namely Pay-As-You-Earn (PAYE) and taxes

from self-employed persons.

The current Company Income Tax rate in all sectors is 30%. The tax is

payable on profits accruing in, derived from, brought into or received from a trade,

business or investment. Value Added Tax (VAT) is charged at a flat rate of 5% of

net value added, based on eligible transactions once consumed. No individual,

business, organisation or government agency is exempted from the tax. Only goods

and services and specifically specified activities are exempted.

Capital Gains Tax is chargeable at the rate of 10% on capital gains arising

from the disposal of capital assets. Nigerian laws subject certain activities and

services to Withholding Tax. During transactions, when a payment is due from one

person to another, the person making the payment is expected to deduct tax at the

applicable rate and remit it to the relevant tax authority. This should be done not

later than 30 days after the deduction. It is an advance payment of 10% tax.

Individuals and organisations are entitled to demand withholding tax credit note.

The Education Levy commenced implementation in 1995 and is imposed on

companies registered in Nigeria that are liable to pay tax on their assessable profits

as defined in Companies Income Tax Acts as the case may be. The rate of the tax

is 2% of the assessable profit. The Education Levy is used by the Federal

22

Government to upgrade facilities of various educational institutions. The

assessment of the Education Levy and that of the Companies Income Tax are done

concurrently. Nigerian Social Investment Trust Fund (NSITF) Tax is governed by

the NSITF Act. This tax requires everybody employed in a Nigerian incorporated

company to contribute a certain percentage of their salary to the fund. Expatriates

are however excluded from this requirement.

The Constitution placed mining of solid minerals in the Exclusive

Legislative List. Ajani (2012) captures the dilemma of Kwara State Government in

respect of solid minerals exploitation when he states that Kwara State has large

deposits of various mineral resources awaiting exploitation by investors, but is

encumbered by laws. The absence of a well-coordinated formal exploitation of the

solid minerals in Nigeria has given rise to illegal exploitation of some of the

minerals by individuals, as well as local and foreign firms. This has resulted in

enormous loss of revenue which would have been used for economic development

of the State and the Nation.

On Public-Private Partnership (PPP), Omidire (2012) notes that resource

diversification in Nigeria is dictated by the aspiration of all the states in Nigeria to

collaborate with the private sector in the exploration and exploitation of the rich

solid mineral potentials for the socio-economic transformation of their states,

23

thereby contributing to the national efforts to diversify the economy through the

non-oil sector.

Onyeaso (2012),opines that, while regulations are necessary, they should not

be negative or inhibitory. They should be fashioned with the purpose of facilitating

the realisation of natural economic objectives rather than clouding the vision of

institutions. Unavoidably, Nigeria‟s weak regulatory procedures have become the

subject of scrutiny and criticism. This is in an attempt to position our regulators to

protect investors.It has been noted that unless the regulatory and enforcement

framework of the Investments Securities Act (ISA) is strengthened, there would be

a continued breach of securities law. In view of this, the Federal Government of

Nigeria has resolved to transform the capital market to a reference point in Africa

where there is investor confidence, market integrity, sound regulatory framework

and international standards of legal and regulatory frameworks.

To achieve this purpose, two committees have been set up: to review the

Investments Securities Act 2007 and; to design a code of governance for capital

market regulators.

It could be seen from the literature reviewed so far that the mechanisms for

ensuring good legal and regulatory frameworks exists in Nigeria but the will and

capacity to enforce the laws, monitor and ensure compliance need to be

strengthened. According to (Okike 2007) and Amaeshiet al (2008), this is because
24

the CAC and most of the main agencies for regulating and supervising all

corporations and related business matters in Nigeria are weak and perfunctory in

performing their duties.

2.4 Gap in Literature

Previous works have focused largely on public policy, policy analysis and

Nigeria‟s national development. However, less attention has been given to the

relationship between legal and regulatory frameworks and resource diversification

for sustainable economic development in Nigeria. This study attempts to fill this

gap.

References

25



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Diversification in Nigeria: Globalisation and the Prospects of Resource
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Senior Executive Course, No. 34, 2012 of the National Institute for
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Ajani, A. (2012), “Kwara State: History, Geography, Occupation and Culture”,
(Paper presented to Participants of Group One, Senior Executive
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Alo, O. (2003) Issues in Corporate Governance.Financial Institution Training
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Amaeshi K. &O. Amao (2008), “Corporate Social Responsibility (CSR) in
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Amaechi, K. Adi, B.C.Ogechie, C. and O.O.Amao, (2006), “Corporate Social
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Armstrong, P. (2003) Status report on corporate governance reform in Africa,
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Cadwalader et al (2012), “Constitution Amendment Benefit the Turkish Power
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26

Chevalier,P. (2012),The Canadian Mineral Development Model, Natural
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Ecovis(2012), “Turkish Tax System,” http://www.ecovis.com/index.php?id=
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Ngwake C.C (2009) Environmental Responsibility and firm performance:
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OECD Regulatory Policy Committee, Indicators of Regulatory Management
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Okeahalam C.C &Akinboade O.A (2003). A review of corporate governance in
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presented to the Participants of Group One, Senior Executive Course,

27

No. 34, 2012 of the National Institute for Policy and Strategic Studies,
Kuru).

Olusa G.J. (2007), Business Ethics and Corporate Governance in Africa, Business
and Society 44(10) 94 – 106.

Omidire, O.O. (2012), Brief on Kwara State, lecture to NIPSS SEC 34 SG1, Ilorin
2nd May, 2012.

Onyeaso N. (2012) Blackflairs LLP; http://www.hg.org/article.asp?id=19931
Retrieved 30/09/2012
Oyejide T.A. &A.Soyibo(2001),A paper presented at the Conference on Corporate
Governance, Accra, Ghana. 29-30 January 2001.

Performance Management and Delivery Unit: Brief to NIPSS Delegation on
PEMANDU, July2012.

Sinda A.A and W.B. Kabinga (2012), Akono and Company advocates “Tanzania,
The Public Private Partnership Act. 2010 and its implications for the
Business Community” Snr Denton Arusha Publications.

Suhaiza, I.et al (2007), Critical Success Factors of Public Private Partnership
(PPP) Implementation in Malaysia.

The Gambia Investment Guide, Oct. 2010.

Wilson, I (2006) “Regulatory and Institutional Challenges of Corporate
Governance in Nigeria Post Banking Consolidation”.Economic Indicators
Nigerian Economic Summit Group (NESG) April - June 2006

Wilson, S. and S. Mahbob (2007), “Decentralisation and Fiscal Federalism in
Malaysia.”In Mahbob.

28

CHAPTER THREE

OVERVIEW OF LEGAL AND REGULATORY FRAMEWORKS OF
RESOURCE DIVERSIFICATION IN NIGERIA

3.1 Preamble
This chapter gives an overview of legal and regulatory frameworksfor

resource diversification in Nigeria from a historical perspective. It will consider

how the constitutional provisions have encouraged or impaired resource

diversification in the country. It alsoconsidersthe place of land resource ownership,

Public Private Partnership, Fiscal Responsibility, Tax Regime, Revenue

Mobilization and Allocation and resource exploitation.

3.2 National Development Blueprints
The major regulatory framework for economic development in Nigeria has

been the use of medium-term National Plans.The First National Development Plan

of 1962-68 made agriculture and industrial development a priority.It emphasized

the introduction of modern agricultural methods through farm settlement, co-

operative (nucleus) plantations, supply of improved farm implements (e.g

hydraulic hand presses for oil palm processing) and expanded agricultural

extension service.

29

The Second National Development Plan of 1970-74 focused on

reconstruction, rehabilitation and reconciliation of the civil-war battered economy.

There was the introduction of the intervention programme to redress food scarcity.

Worthy of note was the National Accelerated Food Projection Programme

(NAFPP) in 1977.

The Third Development Plan of 1975-80 emphasised indigenisation of the

economy with the objective of having Nigerians own and control majority shares

in industries and other investments. The period witnessed some agriculture

intervention programmes and projects such as:

i. Operation Feed the Nation launched in 1976 which sought to increase local

food production thereby reducing imports. Citizens were encouraged to

engage in farming.

ii. Establishment of 12 River Basin and Rural Development Authorities which

are saddled with management of water resources and provision of same to

farmers through irrigation. (River Basin Development Authorities Act 1979.

(Cap 123, 1979 No.87).

iii. Promulgation of Land Use Act of 1978 which vestsownership of land in the

State Governments. It provides uniformity in the laws governing land - use

and ownership, prevents fragmentation of land, prevents speculation of

urban land.
30

iv. Green Revolution Programme.Was also inaugurated in 1980. (alsoknown as

National Accelerated Food Production Project).

It is pertinent to note that while each of the intervention

programmes/projects sought to improve food production, the World Bank Funded

Agricultural Development Projects – represented the first major practical

demonstration of the integrated approach to agricultural development in Nigeria.

The experiment started with World Bank Funding of projects at Funtua (1974)

Gusau (1974) and Gombe (1974), Ayangba (1977) Lafia (1977), Bida (1979) Ilorin

(1980) etc.

The Fourth National Development Plan covers the period 1981-85. This plan

aimed at regulating urbanization, through vigorous pursuit of a policy of integrated

urban and rural development.

The Fifth National Development Plan 1988-1992 was the first of the Rolling

Plans initiated by the Babangida Administration.It was intended to correct

structural anomalies in the economy.

In 1992, the National Agricultural Development Authority (NALDA) was

established by the Ibrahim Babangida regime, after most of the earlier programmes

had failed to achieve the expected result.

31

Under NALDA, each of the participating states of the federation was to

provide residential/office accommodation for key personnel of the Authority and

payment of initial such of #2 million into NALDA account. Besides making

available 4acres of land to each participating farmer and enabling the formation of

co-operatives societies, farm inputs will equally be provided as well as loan which

will be recovered when due.

Other Rolling Plans are the 1990-1999 Rolling Plan, National Economic

Direction 1999-2003, National Economic Empowerment Development Strategy

(NEEDS 1) of 2003-2007 and NEEDS 2/vision 20:2020 Seven-Point

Agenda/Transformation Agenda.

3.3 Legal and Regulatory Framework of Oil and Gas Sectors

The most important petroleum legislation in Nigeria is the Petroleum Act,

1979 Laws of the Federation of Nigeria, Cap P10 of 1979 with several regulations

under it.Section 1 of the Act provides that:

i. The entire ownership and control of all petroleum in, under or upon any

lands to which this section applies shall be vested in the State.

ii. This section applies to all land (including land covered by water) which –

a. is in Nigeria; or

b. is under the territorial waters of Nigeria; or

32

c. forms part of the continental shelf; or

d. forms part of the Exclusive Economic Zone of Nigeria.

The Petroleum Act provides for the grant by the Minister of Petroleum

Resources of three types of interest – oil exploration license, oil prospecting

licensee and oil mining lease. These can only be given to companies incorporated

in Nigeria under the Companies and Allied Matters Act Cap C20 Laws of the

Federation of Nigeria, 2004.

The latest effort is the Petroleum Industry Bill which is presently under

review at the National Assembly. Various pieces of legislation that are at various

phases of processing in the National Assembly are intended to be consolidated into

the comprehensive draft Petroleum Industry Bill, and Among these are the

Downstream Gas Bill Petroleum Profit Tax Amendment Bill, the among others.

The draft Petroleum Industry Bill is a detailed document covering most of

the relevant issues pertaining to Oil and Gas exploration, production, transportation

and marketing in the country. Other issues covered include: matters of state

participation and control, fiscal issues, regulation, safety, health and environmental

concerns: and finally issues regarding community relations. The Draft Bill is

divided into numerous parts covering exploration, prospecting, production and gas:

33

3.3.1 Exploration

An Oil Exploration Licence (OEL) is necessary to conduct preliminary

exploration surveys. The licence is non-exclusive and is granted for a period of one

year. It is renewable annually.

3.3.2 Prospecting

An Oil Prospecting Licence (OPL) allows for more extensive exploration

surveys. It is an exclusive licence given for a period not exceeding 5 years. It

includes the right to take away and dispose of oil discovered while prospecting. An

OPL granted to a foreign company is now issued with a covenant by the foreign

company to assign the OPL to the NNPC upon making a commercial discovery.

3.3.3 Production

The grant of an Oil Mining Lease (OML) allows for full scale commercial

production once oil is discovered in commercial quantities (currently defined as a

flow rate of 10,000bpd). The Lease confers the exclusive right to carry

prospecting, exploration, production and marketing activities in and under the

specified acreage for a period of 20 years. The minister exercises general

supervision over all operations carried on under licenses and leases (Section 8) and

may make regulations prescribing anything required to be under the Act (Section

9).
34

There is also the Exclusive Economic Zone Act, Cap E17, Laws of the

Federation of Nigeria, 2004. The Act says that the exclusive economic zone shall

be an area extending from the external limits of the territorial waters of Nigeria up

to distance of 200 nautical miles from the baseline from which the breadth of the

territorial waters of Nigeria is measured.

3.3.4 Gas

The current gas legislation is the Associated Gas Re - injection Act, 1979. In

pursuance of government policy, generous fiscal incentives for gas utilization have

been granted. Gas incentives include royalties at zero per cent, gas development

under the companies Income Tax Act and duty/VAT exemptions for gas

development.

3.4 Solid Mineral Exploitation:
3.4.1 The 1960 and 1963 Constitutional Provisions

Item 22 of the Exclusive Legislative List of the Constitution gave the

Federal Government control over the Maritime Shipping and Navigation. In

addition item 25 of the same list gave the Federal Government exclusive control of

mines and minerals including oilfields, oil mining, geological surveys as well as

natural gas.

35

Section 134 of the Constitution provides that “there shall be paid by the

federation to each region a sum equal to fifty percent (50%) of the proceeds of any

royalties received by the federation in respect of any minerals extracted in that

region and any mining rents derived by the federation during that year from within

that region. That 30% of the royalties shall be credited to the Distributive Pool

Account from proceed of any mineral from any region.

It further stipulates that the continental shelf contiguous to a region shall be

deemed to be part of that region.

The provisions of the 1963 Constitution are the same with those of 1960

except for the arrangement of the Sections.

3.4.2 The 1979 Constitution

Section 40 (3) vests ownership of mineral bearing land in the Federal

Government and further states that such land.“This shall be managed by the

Federal government in accordance with any manner prescribed by the National

Assembly”.

The Exclusive Legislative List in addition reserves the under listed items for

the exclusive preserve of the Federal Government.

Item 27 - Fishing and Fisheries (Marine)

36

34 - Maritime Shipping and Navigation

36 - Mines and Minerals including oil fields, oil mining, Geological Surveys

and natural gas.

The Constitution did not give an indication of who owns the off-shore resources,

neither did it indicate any sharing formula.

3.4.3 The 1999 Constitution

The provisions of the 1979 and 1999 Constitutions regarding exploitation of

mineral resources are virtually the same except for variations in sections

Fishing and Fisheries (Marine), Maritime Shipping and Navigation and

Mining of minerals including oil fields, oil mining, geological survey and natural

gas are under the Exclusive List.

Section 44 (3).vests ownership of mineral bearing lands on the Federal

Government.

3.5 Land Management

Land is a factor of production. It could be termed the most vital ingredient of

a nation‟s socio -economic development. On it depends every economic activity.

How a country utilizes land determines its level of economic development. Ease of

access to land is germane to its ease of doing business.
37

During the pre-colonial times the land tenure system had communal land

ownership, while the family head (in the south) was the administrator of land.

Allocation was effected to the members of the community by the family head in

agreement with other members of the family. Land was then never not for sale.

In the North, the Emir was the custodian of the land and allocates lands to

members of the community. Once allocated the land could be sold. However, it

could only be sold to strangers with the consent of the Emirs. The land tenure

system resulted into fragmentation of land and makes land allocation cumbersome

and highly contentious.

There were some laws enacted before the promulgation of the Land Use Act

that are worthy of note:

Communal Land Rights Vesting Law of Western Nigeria – 1959, enacted as a

consequence of repeated abuses by tribal chiefs, headmen or members of the

community. The law prevented the chiefs from administering the land and vested

such customary powers in the board f trustee appointed by government. Thus,

government was responsible for dealings in communal land matter.

Grazing Reserve Law (1965). This was enacted to give legal backing to the

acquisition of grazing reserves. It gave the regional government and Native

Authorities‟ powers to acquire native land and constitute it into grazing reserves.

38

National Agricultural Policy of 1968: Stipulated that a combination of 10%

of the national territory would be acquired and constituted into grazing reserve for

lease to herdsmen. This was a conscious effort to protect pastoralism. However,

about 313 grazing reserves covering a total of 2,82million hectares was acquired.

Only about 52 reserves were gazetted by 1978 (mainly in the northern states) most

of these have been encroached on by crop farmers.

3.5.1 Land Use Act of 1978

The Land Use Act was enacted in 1978. The main provisions were:

Section 1: Vests all land within the territory of a state in the Governor of that state.

To be held on trust and administered for the common good of all Nigeria. Rural

land is vested in the chairman of the Local Government.

Section 5: Empowers Governors to issue Certificate of Occupancy for urban land.

Section 6: Empowers Local Authorities to issue Customary Right Occupancy for

rural land.

The objectives of the Act are as follows:

a. To remove bitter clashes resulting in loss of life which land is known to

generate;

b. To streamline/simplify the management of ownership of land;
39

c. To assist the citizenry irrespective of social status to realize his ambition and

aspiration of owning a plot of land;

d. To enable the government control the use of land tenure by facilitating,

planning and zoning programmes for particular use.

3.6 Public-Private Partnership

Public Private Partnership is a sustainable effort between the public and

private sectors, in which each contributes to planning and resources needed to

accomplish a mutually shared objective.

The bane of national development is easily tied to the dearth of

infrastructure. Nigeria‟s infrastructural challenges are huge. Recent reports suggest

that the country requires between US$12 to 15 billion annually for the next six

years to meet the infrastructure requirement. It has become evident that the

government alone cannot muster the resources to meet this need. Therefore, the

involvement of the private sector is not just desirous but necessary.

Nigeria has not had consistent investment in infrastructure; however

infrastructural development is on the increase. Government has of late involved

itself with project development in partnership with the private sector. Over 25

projects have been rolled out through PPP. This is an indication that PPP is at its

infancy in Nigeria.However, the Federal Government has set up the Infrastructural

40

Concession Regulatory Commission (ICRC).It was established by the

Infrastructure Concession Regulatory Commission (Establishment, etc) Act, of

2005. It is an institution responsible for setting guidelines to promote, facilitate and

ensure the successful implementation of PPP projects.Its primary objectives are:

a. to accelerate investment in new infrastructure and ensure that existing

infrastructure is upgraded to satisfactory standard that meets the need and

aspirations of the public;

b. to ensure that all investment projects provide value for money and that the

costs of governance are affordable after allowing for economic growth;

c. to improve the availability, quality and efficiency of power, water, transport

and other public services in order to increase economic growth, productivity

and access to markets;

d. to increase the capacity and diversity of the private sector by providing

opportunities for Nigerian and international investors and contractors in the

provision of public infrastructure, encouraging efficiency, innovation and

flexibility;

e. to ensure that infrastructure projects are planned, prioritized and managed to

maximize economic returns and are delivered in a timely, efficient and cost

effective manner;

41

f. to manage the fiscal risks created under PPP contracts within the

government‟s overall financial and budgetary frameworks;

g. to utilize federal and state assets efficiently for the benefits of all users of

public services.

3.7 The Fiscal Responsibility Act 2009

The Act provides for prudent management of the Nation‟s Resources, long-

term macro economic stability of the nation‟s resources through accountability and

transparency in fiscal operations within the Medium Term Fiscal Policy

Framework and the establishment of the Fiscal Responsibility Commission.

This Act provides for accountability, transparency and value for money in

the public resource management of our country. The Fiscal Responsibility

Commission has the mandate to do the following:

a. Compel any person or government institution to disclose information

relating to public revenues and expenditure;

b. Cause an investigation into whether any person has violated any provisions

of this Act;

c. Recommend such a person, if so satisfied, to the Attorney-General of the

Federal for possible prosecution.

42

3.8 Tax Laws and Regulations

Tax is a financial charge imposed by governmental authority upon property,

individuals, groups or transactions to raise money for public purpose.

Government‟s power of imposition of tax is not dependent on enforcement of

benefits, but is essentially of sovereign power.

3.8.1 General Outline

a. Personal Income Tax Act (PITA);

b. Company Income Tax;

c. Education Tax – All incorporated Companies are required to pay 2% of their

assessable profit into an Education Tax Fund.

d. Industrial Development (income Tax Relief) Act – makes provision for the

grant of tax relief to pioneer companies.

Exemption from tax for companies which have incurred expenditure in its

qualifying building and plant equipment for use in an Export Processing Zone is

granted 100% capital allowance in any year of assessment.

Value Added Tax –All purchases of chargeable goods and services are expected to

pay 5% purchase price as tax. Proceeds are shared among the three tiers of

government.

43

Customs and Excise Management Act: Customs duties are payable by

importers of specified good. This is a very major source of revenue to the Federal

Government.

Stamp Duties Act: This is tax paid on a wide range of documents. Following

the coming into force of Land Use Act of 1978, income is generated through

tenement rates payable annually on buildings situated within a particular areas.

Also payment is made before a governor grants Certificate of Occupancy (C of O).

3.9 Revenue Mobilisation, Allocation and Fiscal Commission

Established by Decree 49 of 1989, it has on its board, a commissioner

representing each state of the federation including Abuja. In the 1999 Constitution,

it is listed as paragraph 32 of part 1 of the third schedule. Its powers includeto

monitor the accruals into and disbursement of revenue from Federation Account,

review from time to time the revenue allocation formulae; provided that any

revenue already accepted by the National Assembly shall remain in force for a

minimum of five years.

The Commission is an autonomous body and is not subject to the direction,

or control of any other authority or person in the exercise of disciplinary control

over persons.

44

3.10 The National Planning Commission (NPC)

The NPC was established by Decree No.12 of 1992 as amended by Act 71 of

1993. It has mandate to determine and advise the Government of the Federation on

matters relating to National Development and overall management of the national

economy. Their functions are indicted in Appendix „1‟.

This could be compared with the Malaysian Economic Planning Unit (EPU)

which is the secretariat of the NationalPlanning Development Committee and was

charged with the responsibility for the formulation, implementation, progress

evaluation and revision of development plans for both the central government and

the federating units.

Consequently,the NPC should be forceful in the implementation of its

functions. It should ensure strict adherence to Nigeria developmental plans and be

given powers of sanction over non-compliance.

3.11 Appraisal

Many laws and regulatory frameworks have been rolled from 1960 till date,

with regards to the exploitation and management of resources in Nigeria. The law

books and statutes are replete with these. The problem therefore has never been

attributable to inadequacy of laws but the capacity of relevant institutions with

mandate to exercise oversight functions, including coordination and
45

implementation.For instance, the OFN attracted a sizeable investment into the

agricultural sector both for commercial and subsistence purposes. Unfortunately

successive governments after the Gen OlusegunObasanjo regime (1976 -1970) did

not build on the success achieved by that scheme. Otherwise by the turn of the

century, food security for all Nigerians ought to have been assured and even huge

income earned through export of food and food product to which value have been

added.

A pointer to the benefits accruable in this regard can be gleaned from the

Malaysian experience as per the Study Group Threereport on resource

diversification in that country. This is exemplified in the vertical and horizontal

diversification Malaysia achieved in the oil palm industry. On the contrary, in

Nigeria, diversification in the field of solid minerals has been seriously hampered

by the constitutional provisions that place it on the Exclusive List, thus shutting out

the state, the local government and private sector initiative.

On the whole, what is required therefore is the need to develop and integrate

all sectors of the economy through robust legislative and regulatory framework

aimed at achieving set objectives.

46

References

1960 Constitution of the Federal Republic of Nigeria



2007 Nigerian Minerals and Mining Act

Adedipe N.O. et al.

Akinbola, O.D and Oladele, (2004), Food, Agricultural and Environment Vol.
2(1): 249-254.2004
Jinaidu, A.M “Management of Common Property Resources for Sustainable
Livestock Production in Nigeria. Paper presented at the DFID
Workshop on Land Tenure in Sub-Sahara 16th - 19th Feb.1999, UK.

Federal Government of Nigeria, (2004), Laws of Federal Republic of Nigeria,
Interpretation Act (2004), Cap 123 Sec. 18(1), Abuja: Federal
Government Press.

Fiscal Responsibility Act, (2007), Cap 31, Abuja: Federal Government Press.

Infrastructure Concession Regulatory Commission (establishment, etc) Act 2005.

Land Use Act1978

Nigeria Mineral and Mining Act (1907), Section 1(1)

National Policy on Public Private Partnership (PPP), A document of: The
Infrastructure Concession Regulatory Commission (ICRC) July 2009.

Oil in Navigable waters, Cap 06 Laws of the Federation of Nigeria, 2004.

The Chartered Institute of Taxation: Nigeria Tax Guide and Statues Preface to
CITN Proceedings of (2010), Annual Conference.

The Land Use Act (1978), Part II Section S(Ia)

The Petroleum Act, Laws of the Federation of Nigeria, Cap p.10

47

The NNPC Act, Cap N123, Laws of the Federation of Nigeria 2004.

Uyo, J.N. (2011), “The Fiscal Responsibility Act”, Lectured delivered to officers
of the Nigeria Police, AkwaIbom State Command on 20/08/11

48

CHAPTER FOUR

LEGISLATIVE AND REGULATORY FRAMEWORKS: LESSONS FROM
COUNTRIES VISITED

4.1 Preamble

In the search for best practices, SEC 34, 2012visited Argentina, Canada,

Gabon, Guinea,Malaysia, Morocco, Niger, Poland,Tanzania, The Gambia and

Turkey.This chapterbrings out lessons learnt from these countrieswith special

focus on agriculture, petroleum, and solid mineral sectors, three sectors that are

critical to resource diversification in Nigeria.Nevertheless, cases such as Research

and Development, Energy and Power as well as Human Capacity Development are

also examined to highlight best practices in the countries visited.

4.2 Agriculture and Agro Allied Sector

In Malaysia, all land is vested in the government. The country has made

optimal utilization of its Federal Land Development Authority (FELDA) to

establish agricultural settlements and plantations for the unemployed and landless

peasants. The FELDA framework has helped the country in its resource

diversification drive. Due to the success of FELDA, Malaysia is the largest

producer of palm produce in the world. Over 15 major products are derived from

oil palm,thusboosting the earnings of the country from agriculture. The

49

productsinclude oleo products, palm kernel cake, biodiesel and cosmetics. This is

achieved through determined and integrated research and development activities

carried out by FELDA in collaboration with the private sector.

FELDA operates strictly on commercial basis whereby effective loan

recovery mechanism is put in place and every necessary farm input is supplied to

the farm settlers. Today FELDA that began with settling poor and landless peasant

is now a giant conglomerate in Malaysia operating its oil palm refineries and

investing in countries outside Malaysia (Study Group 3, SEC 34, 2012: 28).

The Nigeria Land Use Act of 1978 vests all urban and rural lands on

governors and local government chairmen respectively.Yet vast hectares of fertile

land still lie fallow without meaningful agricultural activities.Nigeria has National

Agricultural Land Development Authority (NALDA) established in 1992 which is

tailored to the same purpose as FELDA. However, NALDA was not as successful

as FELDA because it lacked commercial orientation. Unlike FELDA where settlers

were given portions of land on owner - occupier basis and necessary inputs

gingered the settlers in loan repayment, the same framework was not adopted by

NALDA.

50

4.3 Solid Mineral Sector

In Canada, mining contributed $36 billion to the country‟s GDP in 2010. It

also contributed 21% of the value of exports and earned $8.4billion in taxes and

royalties to government. In addition Canada has over 5,000 mining companies that

have created jobs and economic growth for over 115 communities and employed

308,000 Canadians in 2010. (Study Group 5, SEC 34, 2012:32). Unlike Nigeria

Canada is able to reap from its mining sector because regulations of mining

activities are vested in the Provincial Government that is equivalent to the State

Government in Nigeria.

Nigeria is also blessed with over 54 minerals deposits that are in commercial

quantities yet to be fully exploited. According to Yishau O. (2012),

“Not a few are looking forward to the day when the country will
start drawing fortunes from its over 27 billion oil equivalent of the
bitumen, 2.7 trillion tons of iron - ore and 1.4 billion tons of
coal”.

Due to over dependence on crude oil Nigeria is not reaping from its rich and

abundant mineral deposits. This could be attributed to limitative constitutional

provisions. The Exclusive Legislative List Part 1, Second Schedule item 39 of the

1999 Constitution vests all mines and minerals including oil fields, oil minning,

geological surveys on the Federal Government. This constitutional provision and

the Minerals and Mining Act Cap, M12 2004 are the major legal frameworks

51

regulating mining activities in Nigeria. Huge illegal and unregulated mining

activities are going on because of non-active participation of the Federal

Government that has the exclusive right to mining exploration and exploitation in

Nigeria (Study Group 3, SEC 34, 2012: 10). The mining sector presently

contributes a meager 0.4% to the GDP in 2011. This is in spite of the huge and

highly demanded mineral deposits spread all over Nigeria.

4.4 Petroleum Sector

The Canadian experience may be useful to Nigeria. Canada has 16 refineries

that produce a full range of refined petroleum products. These include gasoline,

diesel fuel, light fuel oil, aviation Jet A fuel, motor oil and grease, waxes,

petrochemical among others thereby exhausting diversification within the sector.

Canada has been able to record much achievement in the sector because of

her practice of fiscal federalism. Just like the solid mineral sector, Provinces have

the right of exploitation of petroleum resources within their domain. In Canada and

Malaysia there is a strict control and monitoring of activities within the sector so

that illegal activities like bunkering and vandalisation of installations are not

rampant.

By contrast, in Nigeria there is not much resource diversification even

within the petroleum sector in Nigeria. There are over 200 by - products possible in

52

this sector. However, Nigeria continues to produce and export crude oil and import

refined petroleum products. Nigeria could increase revenue in this sector through

active participation in the two streams of production within the sector - up stream

and downstream sectors.

4.5 Research and Development (R&D)

In Malaysia, both the government and the private sector collaborate in R&D

and share results from this activity. Also, a huge per centage of the national budget

is consecrated to R&D. This explains why for instance, Malaysia took oil palm

seedling from West Africa in 1965 and has researched into it to improve yield per

tree as well as quality of produce. In 2012 Malaysia has gone from palm seedling

(PS) 1 to PS12. R&D efforts in Malaysia have also resulted in the zero waste of the

oil palm; all parts of the oil palm are useful. In addition, oil palm now has over 15

by-products from this one product. The same is true in other produce areas.

Nigeria could learn from Malaysia to increase allocation to R&D.

Governments research institutes and Private Sector enterprises should also unite to

share the results of Research and Development. This should result in internal

diversification of products as well as in vertical diversification.

53

4.6 Energy and Power Sector

In Malaysia, there are many sources of energy available for development

purposes. These include hydro, nuclear, windmills and coal. Malaysia produces

84% of electricity from fossil fuels and 16% by hydro power plants. In 2010,

installed capacity was 24,187mw, 16,332mw was consumed, leaving an excess of

7,855mw. The same high level of energy mix is practised in Canada where there is

no over reliance on one energy source. In Poland, there is also a level of energy

mix; hydro, geothermal, coal, oil, natural gas, wind and biomass. However, energy

supply is dominated by hard coal. Nigeria has a large deposit of low sulphur

content coal which could be exploited and integrated in the energy supply mix in

the country.

4.7 Human Resource/Capacity Development

Education is free in Malaysia up to the university level while in Canada it is

free up to high school level. In the two countries, scholarship programmes abound.

In The Gambia there is emphasis on girl child education to address the problem of

gender inequality in national development programme. The literacy level in these

three countries are very high due to the free education policy. Malaysia allocates

26% of her budget to education. Nigeria could borrow from these practices because

a highly educated work force goes hand in hand with Research and Development

54

4.8 Coordination of Government Policies

In Malaysia, the Performance Management and Delivery Unit

(PEMANDU), is charged with coordinating the activities of the various MDAs to

ensure that governments goals and objectives are being achieved within the

proposed timeframe.

In Nigeria, the National Planning Commission (NPC) like the

PEMANDU,plays a coordinating role of monitoring other MDAs. The NPC will

need to keep a closer tab on MDAs to ensure that the objectives of the Present

Transformation Agenda of government are being pursued individually and

collectively by the various MDA‟s.

4.9 Water Resource Management

In recent times, the issue of inadequate water management has been a

contending national issue. The 12 River Basin Development Authorities have been

adjudged not to be performing at the expected level. Nigeria needs to address the

inadequacies in management of its water resources for effective utilisation for

agricultural activities. This is to control excess that could unleash flooding during

raining season and provide for irrigation for dry season farming.

55

4.10 Anti-Corruption

Corruption is one of the factors that could prevent effective

operationalization of legal and regulatory frameworks in a country. Thus many

countries establish special frameworks for tackling corruption in addition to the

constitutional provision for criminal justice. In Malaysia for instance, institutions

such as the Performance Management and Delivery Unit (PEMANDU), and

policies like “whistle blower” and “name and shame” are all special anti-corruption

frameworks.

Nigeria also has special anti-corruption institutions like ICPC, EFCC and

Code of Conduct Bureau. Policies like the Fiscal Responsibility Act and Nigerian

Extractive Industry Transparency Initiative represent special frameworks against

corruption. Despite these legal and regulatory frameworks, corruption remains a

hindrance to effective resource diversification in Nigeria. This is mainly because of

slow and inefficient criminal justice procedure in regular courts especially with

regard to corruption cases. Nigeria could thus have special corruption courts in

addition to adopting other policies as used in Malaysia.

56

References

Petroleum Industry Bill (Nigeria 2004).
Study Group Five, (2012), Foreign Study Tour Report of Canada, Resource
Yishau, O.(2012), “52 Years on, the gold mines remain dormant”, The Nation,
October 1, 2012 P.6.

57

CHAPTER FIVE

CONCLUSION, RECOMMENDATION AND IMPLEMENTATION
STRATEGIES
5.1 Conclusion

This study established that legal and regulatory frameworks play important

roles in successful diversification of a nation‟s economy. Thus, ineffective legal

and regulatory frameworkshamper successful diversification of resources and

economic growth. Nigeria has a good number of regulations and institutions, which

have been put in place to govern economic activities in the various sectors. The

problem, however, has been in the implementation of such regulation by the

relevant institutions.

Over the years, legal and regulatory frameworks have been used to

encourage or inhibit investments in certain economic sectors as desired. While the

legal and regulatory frameworks with respect to the agricultural sector have

generally aimed at encouraging maximum participation at all levels, the contrary is

the case with solid minerals sector. Similarly, the laws, regulations and institutions

that guide oil and gas exploitation have failed to achieve diversification. Hence

Nigeria has been unable to actively participate in the downstream oil sector.

It has also been established that inadequate legal and regulatory frameworks

regarding other aspects of the economy research and development, human capacity
58

development among others are responsible for the poor performances in those

areas. In order to improve her capacity for resource diversification, Nigeria could

draw useful lessons from some of the countries visited by SEC 34, 2012

Participants. The best practices could help to strengthen institutional efficiency,

limit corruption and engender effective operationalization of the existing legal and

regulatory frameworks in Nigeria.

5.2 Recommendations and Implementation Strategies

In light of the foregoing, analysis and lessons learnt, the following

recommendations and implementation strategies are proffered;

Recommendation One

The National Planning Commission should exercise stricter coordinating and

supervisory role over MDAs.

Implementation Strategies

i. The Presidency to ensure that the National Planning Commission

coordinates and supervises MDAsin line with budgetary allocations for

sectoral developments.

ii. Ministry of Finance to ensure timely release of funds for execution of

approved projects.

59

Recommendation Two

State Governments should participate in the exploitation of resources in their

domain.


i. Federal Ministry of Solid Minerals Development to present a

Memorandum to the Constitution Review Committee to allow for

participation of States and individuals in mineral exploitation.

ii. The National Assembly to enact a law to legalise artisanal mining.

Recommendation Three

The Federal Government should operationalize the Land Use Act of 1978.


i. The National Agricultural Land Development Authority (NALDA) to be

commercial oriented.

ii. NALDA to understudy Federal Land Development Authority (FELDA) of

Malaysia.

Recommendation Four

The National Judicial Commission should expedite system of justice

dispensation.
60


i. The law courts to dispense with cases within a given period of time not

exceeding six months;

ii. Special Tribunals to try corruption and anti-graft cases to be set up.

Recommendation Five

The Federal Government should diversify its energy sources.

Implementation Strategy

Federal Ministry of Power and Energy to make use of abundant coal

reserves.

Recommendation Six

River Basin Development Authorities should work out modalities to ensure

effective prevention of flooding in the River Basins.


i. River Basin Development Authorities to do hydrological survey of flood

prone areas;

ii. River Basin Development Authorities to ensure none

cultivation/habitation of flood prone areas.

iii. The proposed dam on Upper Benue to be constructed.

61

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65

APENDIX 1

FUNCTIONS OF THE NATIONAL PLANNING COMMISION

To provide policy advice to the President in particular and Nigeria in general

on all spheres of national life;

To set national priorities and goals and engender consensus among

Government agencies, as may be contained in guidelines issued by the

Commission from time to time;

To undertake periodic review and appraisal of the human and material

resources capabilities of Nigeria with a view to advancing their

development, efficiency and effective utilization;

To formulate and prepare long-term, medium-term and short-term national

development plans and to co-ordinate such plans at the Federal, State and

Local government levels;

To monitor projects and progress relating to plan implementation;

To advise on changes and adjustments in institutions and management

techniques as well as attitudes necessary for the alignment of actions with

plan targets and goals;

66

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