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)