LEGAL REGIME OF OWNERSHIP OF PETROLEUM AND LAND OWNERSHIP AND USE IN NIGERIA

CHAPTER THREE
 3.1       Introduction
In this chapter, we propose to discuss legislations dealing with ownership of petroleum in Nigeria and the relevant legislations are; the 1999 constitution of the Federal Republic of Nigeria, the Petroleum Act 1969 (now cap P10 LFN 2004), and the Oil Minerals Act 1959.  These enactments vested petroleum resources on the Federal Government.  We shall observe that these enactments are silent on the issue of ownership of land, yet oil is entrapped in the land and cannot be exploited without access to (or acquisition of) land.

Against this backdrop, on the second arm of this chapter, we shall be looking in the legal regime of ownership and use of land in Nigeria that is provided for under the Land Use Act of 1978. Under this Act, Land in each state of the Federation is vested in the government of that state, who holds same in trust for all Nigerians.  We shall x-ray the right of occupancy, certificate of occupancy and deemed right of occupancy, under the Land Use Act.

3.2     Legal Regime of Ownership of Petroleum
3.2.1    1999 Constitution of the Federal Republic of Nigeria
Section 44(3) of the 1999 Constitution of Nigeria provides
Notwithstanding the foregoing provision of this
section the entire property in and control of all
minerals, mineral oils, natural gas in, under or upon
any land in Nigeria or in, under or upon the territorial
waters and exclusive economic zone of Nigeria shall be
managed in such manner as may be prescribed by
the national assembly.

The impact of the above provision is that no state government or local government has a legal right of ownership of minerals or petroleum found within its territory.  Consequently, it cannot make laws governing the exploration, development and production of petroleum. All such matters are within the exclusive legislative list as provided by the constitution.[1]
            The federal Government is the only authority that can lawfully grant licenses or leases to prospective explorers and concessionaries to enter upon any land or water in Nigeria. It equally have full jurisdiction to enact and enforce laws governing the development of petroleum resources, the pricing of oil and gas (petroleum) products and natural gas, within the land territory of Nigeria and seabed and subsoil of her territorial waters.  As a coronary to this law, nobody not even a Nigerian can undertake activity for the exploration, exploitation of oil and gas without the express authority of the federal government[2]
            The constitution allowed derivation fund of “not less than 13 percent of the revenue accruing to the federal account directly from any natural resource to state from where it’s derived.[3] The FG based such revenues only on onshore natural resources.
            Following widespread protests, the FG instituted a case against the 36 state of the federation asking the Supreme Court to interpret what constituted the seaward boundary of a littoral state in Nigeria.[4]  

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            The FG maintains that natural resources located within the continental shelf of Nigeria are not derivable from any state of the federation.
            The eight littoral states[5] did not agree with the FG’s contentions.  Each state claimed that it’s territory extend beyond the low-water mark onto the territorial water and even onto the continental shelf and the exclusive economic zone.  They maintained that natural resources derived from both the onshore and offshore are derived from their respective territories and in respect thereof each is entitled to not less than 13 percent allocation as provided in the provision of subsection of section 162 of the 1999 constitution.
            Justice Wali, JSC stated that none of the littoral states is sovereign despite the historical narration by some of them.  He therefore, held that whatever revenue that accrues from drilling of shore belongs to the whole federation of Nigeria based on section 162(2) of the 1999 constitution, their claims that they are entitled to not less than 13 percent of the total revenue accruing from off shore drilling must fail and same is hereby refused and dismissed.
            Conclusively, no individual, organization or any component state of the federation has ownership right over mineral oil insitu or its proceeds whether from on-shore or off-shore mining.

3.2.2 The Petroleum Act 1969[6]
            Under the petroleum Act of 1969, the entire ownership of petroleum in, under, upon, any land is vested in the state as provided for in section 1, which provides thus:
(1)    The entire ownership and control of all petroleum in, upon any lands to which this section applies shall be vested in the state.
(2)    This section apples to all land (including land covered by water) which
(a)    Is in Nigeria, or
(b)  Is under the territorial waters of Nigeria or
(c)    Forms part of the continental shelf
Furthermore, the Act[7] states that only Nigeria citizens or companies duly incorporated in Nigeria may be granted:
1.      License to be known as oil exploration license
2.      License to be known as oil prospecting license
3.      A lease to be known as oil mining lease
Section 2(1)[8] empower the minister of petroleum to grant an oil-mining lease to search for, win, work, carry away and dispose off petroleum.
            The effect of this is that ownership of produced oil under a license is well settled and free from controversy.  By section 14(1)[9], petrol is said to mean mineral oil and /or any related hydrocarbon or natural gas, as it exist in its natural state in strata.
            Also s. 1(2) of the  Act made the provisions in s. 1 applicable to all lands including land covered by water that is in Nigeria or is under the territorial waters of Nigeria or form part of the continental shelf.  The petroleum (amendment) Act 1998 i.e. (former decree No. 22 of 1998) has widened this by deleting the full stop at the end of S.1(2) in the following words, “or forms part of the Exclusive Economic Zone of Nigeria” (EEZ).
            Petroleum is defined in S.15 (1) to include gas. Therefore gas was thereby brought under state ownership and control too.  At this point, it is worthy of note that the country’s EEZ under S.1 of the Exclusive Economic Zone Act and the 1999 constitution in that areas of the sea extending from the external limits of the territorial waters of Nigeria to 200 nautical miles from the baselines from which the breath of the territorial waters is measured.
            Under S.2 (2) of the petroleum Act, a concession can be granted to a citizen of Nigeria or a company duly incorporated in Nigeria under CAMA[10] or a corresponding law. By this therefore, it simply means that it is only a company not registered that cannot be granted a concession.  This is why most foreign oil industries register Nigeria subsidiaries through which they obtain licenses and carry on operations.  (This is legal and within the ambits of the law since the law does not require a company incorporated in Nigeria to be owned by Nigerians only).
            The Act equally provided that any person prospecting or mining shall pay to the “owner or occupier” of private land “such sums as may be fair and reasonable compensation for any disturbance of the surface rights of such owner or occupier and for any damage done to the surface of the Land upon which his prospecting or mining is being or has been carried on and shall in addition pay to the owner of any crops, economic trees, buildings or works damaged, removed or destroyed by him or by any agent or servant of his compensation for such damage, removal or destruction.
            Section 9 (1) (b)(11) of the Act, generally empowers the minister to make regulations for the prevention of pollution of watercourses and atmosphere which is a clear environmental protection provision.
            Conclusively, this Act vests ownership of petroleum resources in the Federal Government of Nigeria.

3.2.3. Oil Mineral Act 1959
            This is the first legislation made for the entire country in 1914 after the amalgamation of the Northern and Southern protectorates.  It is generally referred to as the Oil Minerals Act 1914 Act following an evolving English tort pattern, vested ownership of mineral oils in the British crown.  Subsequently, the petroleum Act 1918, the Mineral Act 1946 and Oil Minerals Acts 1948 were also enacted.
            The 1959 Act maintained state ownership of oil mineral by enacting at section 3(1) that the entire property and control of mineral oils on, under or upon any land in Nigeria and of all rivers, streams and watercourses throughout Nigeria was to be in the British crown.  Surface right such as to crops on the land were left subject to customary land tenure thereby leaving such rights in the previous owners, i.e owners of the lands in which oil was found.[11]
            Under section 77 of the Act, any person prospecting or mining shall pay to the “owner or occupier” of private land such sums as may be fair and reasonable competitions for any disturbance of the surface rights of such owner or occupier and for any damage done to the surface of the land upon which his prospecting or mining is being or has been carried on and shall in addition pay to the owner of any crops, economic trees, buildings or works damaged, removed or destroyed by him or by any agent or servant of his compensation for such removal or destruction.

3.3       Legal Regime of Land Ownership and Use in Nigeria
3.3.1   Land Use Act 1978
Before the Land Use Act 1978,[12] land was vested in families clans, villages and communities in southern Nigeria.  Under the traditional or customary agrarian and tenure system, individuals did not have complete control over the land and the sale of land was hardly possible.  Individual occupants of land were identified by the right they hold rather than by actual possession of land.  In northern Nigeria, the ownership and control of land was vested in the state government under the land tenure law of 1962.  According to Omotola J.A in his Essays on the Land Use Act 1978[13] four objectives have been claimed for the enactment of the Land Use Act and they are:
a.      To remove the bitter controversies, resulting at regime in loss of lives, limbs that a land is known to be generating.
b.      To streamline and simplify the management and ownership of land in the country.
c.      To assist the citizenry, irrespective of social status, to realize his ambition and aspiration of owing the place where he and his family will live a secured and peaceful life.
d.      To enable the government to bring under control the use to which land can be put in all parts of the country and facilitate planning and zoning programmes for particular uses; and to make land available to the government for developmental purposes.
The aforementioned goes to say that the major aim of the LUA is to unify the nature of right to land in Nigeria.  The Act ended up divesting the natives of ownership of their land and has vested the management and control of all lands in a state in the “military governor” of that state that holds such land in trust for all Nigerians in the state.[14] After Oct. 1 1979, when civilian governors succeeded military governors, questions as to whether the civilian governors succeeded the rights and powers given to the military governors under the LUA. 
The Supreme Court in the case of Nkwocha v. Governor of Anambra State[15] finally decided that the civilian were successors to powers and rights given to the military governors. 
      Another issue that should be noted about the LUA is that the Act was incorporated into the 1979 constitution by section 274 (5) of the constitution.[16] Following this incorporation, questions arose as to whether it was possible to amend any provision of the Land Use Act.  It was held in the same case of Nkwocha v. Government of Anambra[17] that the incorporation of the LUA into the constitution did not make the Act part of the constitution but only made it an existing law subject to ordinary methods of amendments.
      Because of the scope of this work, we shall be in right of occupancy, certificate of occupancy and deemed right under LUA.

3.3.1.1 An Appraisal of Right of Occupancy
The LUA recognized two main titles in Nigeria they are:
 The absolute or maximal title: the combined effects of the provision of section 1 and section 49(1) of LUA absolute or maximal title to all land in Nigeria now vests in three categories of owners. Namely (1) the federal government in respect of all lands where ever located vested in it at the commencement of the Land Use Act.  The 1999 constitution[18] amplified this provision of LUA by providing expressly that “The ownership of all land comprised in the federal capital territory shall rest in the government of the Federal Republic of Nigeria”.
            Secondly, any Federal Government agency existing at the commencement of the Act, such agency would hold the absolute or maximal title to any land wherever located vested in the agency at the commencement of the LUA.[19] Federal Government agency for this purpose is defined in section 49(2) LUA.           
1.        The two depends on grant, which may be express[20] or assumed[21]
2.      The statutory right of occupancy is granted only by the governor or the head of the federal government[22] while customary right of occupancy is granted only by the local government.[23]
3.      The statutory right of occupancy can be granted to a person or an organization whether corporation or incorporate.  Furthermore, a traditional community e.g.  A family, a village or a town may have a statutory right of occupancy presumed granted under section 34, while customary right of occupancy can be granted organization whether corporate or incorporate. It can also be granted to a traditional community e.g. a family, a village or a town either expressly or by assumption under section 36 of LUA.
4.      While the statutory right may be granted in an urban or a non-urban area. The customary right can only be granted in a non-urban area.
5.      Statutory right could be subject to customary law e.g. where is held by traditional community such as a family, a village or a town, while the customary right will always be subject to customary law. 
6.      Under the two, where it is expressly granted its maximum duration is 99 years subject to renewal. However, where it arises by reason of assumed grant, its duration would seem to be indefinite

3.3.1.2            Regime of Certificate or Occupancy
The land Use Act makes provisions in respect of certificate of occupancy in section 9 and 10.  A certificate of occupancy is a document issued to a person entitled to a right of occupancy in evidence of such a right.
Under the terms of the Land Use Act, only the Governor and the Head of the Federal Government can issues a certificate of occupancy.  The Act requires them to issue such a certificate in the circumstance namely;
1.      When the governor or the Head of the Federal Government is granting a statutory right of occupancy to any person or
2.      When any person is in occupation of Land Under a customary right of occupancy in the prescribed manner of
3.      When any person is entitled to a statutory right of occupancy.[24]
The certificate of occupancy is a contact embodying the express terms and conditions of the grant of the right of occupancy.  For example, the amount of rant payable, the conditions of revocation, the amount of premium payable, the period of revision of rent etc.[25]
Where a statutory right of occupancy is granted in respect of any piece of land, all existing rights to the use and occupation of that piece of land is extinguished.[26] Furthermore, the holder of a statutory right of occupancy has exclusive rights to the land as against all other person except the Governor or the Head of the Federal Government as the case may be.
Finally, during the term of statutory right of occupancy, the holder has the sole right and absolute possession of all improvements on the land.[27] It needs to be noted that since, the holder sole and exclusive right is protected only “during the term of the statutory right of occupancy” it follows that such protection ceases on the expiration of the right of occupancy.

3.3.1.3            Revocation of Right of Occupancy
            The power of revocation of both customary and statutory right of occupancy resides in the governor,[28] while section 50 LUA vest the same power in the Head of the Federal Government in respect to land within the federal capital territory.
Furthermore, under section 6(3), a local government may enter upon, use and occupy any land within its jurisdiction.  The Act does not use the work revoke in connection with the power of the Local Government under section 6 (3) but it seems clear that the substance of the power given to the local government under that section is the same as the power of revocation given to the governor under section 28.
3.3.1.4            Grounds for Revocation of Right of Occupancy
            The ground for which the Governor or Head of the Federal Government may revoke a right of occupancy is as stated in section 28(2).
            The Omnibus ground for revocation is “overriding public interest”. In other words; under this section the Governor or Head of Federal Government may revoke any right of occupancy on ground of overriding public interest.  In connection with a statutory right of occupancy, overriding public interest means:
a.      The alienation of the Land by the occupier contrary to the provision of the Act or any regulations made there under.
b.      The requirement of the land by the Governor or Local Government or Federal Government for public purpose.
c.      The requirement of the Land for mining purposes or oil pipelines.
In the case of a customary right of occupancy, overriding public interest means:
a. The alienation of the Land by occupier without the required
Consent or approval.
b. The requirement of the Land for mining purposes or oil pipelines
c. The requirement of the Land by the Local Government or State 
     Government or Federal Government for public purpose.
d. The requirement of the Land for the extraction of building materials.
“Public purpose” as used in the forgoing provision is defined in section 51 of the Act that stipulates nine items.
It should be noted that the definition of overriding public interest is exhaustive and cannot be expanded.  This is because the Act uses the word “means”.  On the contrary, the definition of “public purpose” in section 51(1) is not exhaustive and can therefore be expanded. This is because that section uses the word “includes.”[29]
The Governor in particular may also revoke a statutory right of occupancy or the head of the government on the following additional grounds stipulated in section 28(5) namely:
1.      Reach of any of the provisions implied in a certificate of occupancy under section 10
2.      Breach of any express term contained in a statutory certificate of occupancy or any special contract made under section 8.
3.      A refusal or neglect to accept and pay for a certificate of occupancy issued in evidence of the statutory right of occupancy. Any revocation made for reasons. Other than those above is null and void.

3.3.1.5 Compensation for Revocation of Right of Occupancy
            Where a right of occupancy is revoked on the grounds that the land is required for;
a.      Public purpose
b.      Extraction of building material
c.      Mining purpose
d.      Oil pipeline
The basis of compensation in the case of grounds A and B above is the value at the date of the revocation of the unexhausted improvements on the Land.[30]
      If any dispute arises as to the amount of compensation payable for such unexhausted improvements, the matter is referred to the Land Use and Allocation Committee for determination.[31] No court has any jurisdiction to inquire into any question concerning or pertaining to the amount or adequacy of compensation.[32]
      In the case of revocation on grounds C and D above, compensation is paid in accordance with the provision of the Mineral’s Act or the Mineral oil’s Act now called petroleum Act.[33]  Upon the revocation having been done, the Government or the Local Government has discretions to re-settle persons displaced if the revocation affected developed land. [34]

3.3.1.6      Effect of Revocation
      Revocation when validly carried out operates to extinguish the title of the holder to the right of occupancy revoked.[35]
      However, revocation will not extinguish any debt which the holder or occupier owes to the government in respect of the right of occupancy revoked
2.3.1.7            Deemed Right
The Act makes provisions to take control of title to land and interests therein existing before the Act came in force.
Their principal provisions in this regard are contained in section 34 and 36.  Section 34 makes provision in respect of Land in Urban area. The provision is to the effect that any developed land in an urban area which was rested in a person, before the commencement of the Act, shall continue to hold as if the holder is a holder of statutory right of occupancy issued by the government or Head of the federal Government as the case may be.
In respect of the Land that is undeveloped immediately before the commencement of the Act, a plot or portion of the Land not exceeding half of one hectare, shall continue to be vested in holder as if a statutory right of occupancy have been issued to the person.[36]
No underdeveloped land over which a person retains a right of occupancy shall further sub-divide or lay out in plots, or be sold or be transferred in any other except with the prior consent in writing of the Governor or president.[37]
In respect to land in a non-urban area section 36 provides that any occupier or holder of such Land whether under customary right or otherwise howsoever is permitted if he was using the Land for agricultural purposes to continue to be entitled to possession of the Land for use for agricultural purposes if customary right of occupancy has been granted to him by the appropriate Local Government.  In Abioye v. Yabuku[38] the Supreme Court held that section 36 is not intended to deprive the lessor of his reversionary interest in a parcel of Land nor is it intended to transfer possession of the Land from the owner to the tenant.  Accordingly, as between the customary tenant and his overland (customary owner), it is the later who is entitled to retain the land under section 36. 


[1] Second schedule of 199 CFRN

2a T do otherwise, amounts to challenging the supremacy of the constitution under s. 1
[3] Sec. 162(2) CFRN 1999 provides for the principle of derivation 
[4] AG federation v. AG Abia state & 35ors (2002) 6 NWLR (Pt 764) 543-903
[5] Akwa Ibom, Bayelsa, Cross river, Delta, Lagos, Ogun, Ondo and Rivers states
[6] Cap P10 Law of the Federation of Nigeria 2004
[7] S.2 of the Petroleum Act
[8] Ibid
[9] Ibid
[10] Companies and Allied Matters Act cap C20 LFN 2004
[11] A.K. Mgbolu: Historical Development of oil and gas sector in Nigeria (unpublished)p.8
[12] (now cap. L5 LFN 2004) Thereafter referred to as LUA
[13] (Lagos, Lagos University published 1980)pp. 1 & 6
[14] Section 1 Land, Use Act 1978
[15] (1984) 1 SCNLR 634
[16] Now section 315 (5) of 1999 CFRN
[17] (supra)
[18] Part ii, first schedule to CFRN
[19] Section 49(1) LUA
[20] Statutory right of occupancy section 50 (1&2), customary right of occupancy section 50(1) LUA
[21] Statutory right S. 34; customary right S. 36
[22] Section 50 (1&2)LUA
[23] Section 50 (1) LUA
[24] Section 9 (1)
[25] Combined effect of section 9(4), 10, 16LUA
[26] Section (5) 2
[27] Section 15 (9)
[28] Section 28
[29] Abioye V. Yakubu (1991) 5 NWLR pt. 130 p. 234
[30] Section 29(1)
[31] Section 30
[32] Section 47 (2)
[33] Section 29
[34] Section 33 (1&3)
[35] Section 28 (7)
[36] Section 34 (5&6)
[37] Section 34 (7)
[38] (supra)
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