The early years of Nigeria’s Second Republic (1979–1983) were marked by the challenge of balancing central authority with state autonomy. Central to this struggle was the control and distribution of oil revenue, the lifeblood of the Nigerian economy after the 1970s oil boom.
At the heart of these debates stood two contrasting philosophies: President Shehu Usman Aliyu Shagari’s federalist equalisation policy under the National Party of Nigeria (NPN) and Governor Ambrose Folorunsho Alli’s reform-driven state administration under the Unity Party of Nigeria (UPN) in Bendel State. The ideological divide between these leaders encapsulated Nigeria’s enduring fiscal tensions.
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Oil, Federal Power, and the Derivation Principle
By 1979, oil contributed more than 80 percent of Nigeria’s total federal revenue. Historically, the derivation principle, allocating a significant share of mineral revenues to the state of origin, had guided revenue distribution during the First Republic. However, by the mid-1970s, following the civil war and the rise of centralised military rule, derivation gave way to formulas based on population, equality of states, and need.
The 1979 Constitution reinforced this trend by vesting ownership of all natural resources in the federal government. This effectively subordinated state governments to federal discretion in accessing oil-derived funds. The result was a centralised fiscal system where states, including oil producers, became increasingly dependent on allocations from the Federation Account.
Governor Ambrose Alli and Bendel’s Development Vision
When Professor Ambrose Alli assumed office on 1 October 1979, he brought the zeal of an academic reformer into politics. A medical doctor and former university lecturer, Alli’s administration pursued a bold social agenda centred on free education, free healthcare, and rural development. His government established the Bendel State University (later Ambrose Alli University, Ekpoma), expanded primary and secondary schools, and upgraded rural infrastructure.
These programmes, though transformative, demanded substantial expenditure. Bendel’s ability to fund them depended largely on revenue transfers from the federal government. As allocations declined following changes in the national revenue formula, Governor Alli began to question both the transparency and fairness of federal distribution policies.
In several public addresses, he criticised the opaque management of the Federation Account, calling for greater accountability and a return to derivation-based justice for oil-producing regions, especially since parts of present-day Delta State, then within Bendel, contributed significantly to national oil output.
Federal Revenue-Sharing Reform: The Okigbo Commission
In 1980, President Shagari inaugurated the Pius Okigbo Revenue Allocation Commission to recommend a more equitable sharing formula. The Commission’s 1980 report proposed approximately 53 percent of federally collected revenue to the federal government, 30 percent to the states, 10 percent to local governments, and 7 percent for special funds.
This recommendation was later reflected, with slight modifications, in the Allocation of Revenue (Federation Account, etc.) Act of 1982. The Act prioritised equality of states and population, while the derivation factor was drastically reduced to about 1.5 percent.
For oil-producing states, this was a severe blow. The reduction meant that despite being the economic engine of the federation, their fiscal advantage disappeared. Governor Alli’s Bendel joined Rivers and Cross River in formally expressing dissatisfaction with the formula.
Legal Challenges and Intergovernmental Tensions
The frustration of the oil-producing states soon took a legal turn. In Attorney-General of Bendel State v. Attorney-General of the Federation (1981), the Bendel State government challenged aspects of the Allocation of Revenue (Federation Account, etc.) Bill before the Supreme Court. Although the court ultimately upheld federal discretion in revenue distribution, the case illustrated the constitutional limits of state autonomy within Nigeria’s federal structure.
This judicial outcome solidified the power of the federal government over mineral wealth and set a precedent that continued into later resource-control controversies of the 1990s and 2000s.
The Myth of the “1980 Benin Dialogue”
Several later sources and online accounts have suggested that a “Benin meeting” or “Benin dialogue” took place in 1980 between President Shagari, Governor Alli, and Bendel NPN chairman Chief Collins Obih, allegedly to resolve disputes over oil revenue. However, no verifiable official record, newspaper report, or archival document confirms that such a formal meeting occurred.
While Shagari did visit various states on official and political tours, there is no evidence of a specific Benin conference addressing oil revenue allocation. Therefore, historians treat the so-called “Benin Dialogue” as symbolic shorthand for the larger fiscal tensions of the period rather than a documented negotiation.
Bendel’s Fiscal Crisis and Alli’s Resilience
As federal transfers tightened and oil prices fluctuated, Bendel State struggled to sustain its expansive social programmes. Teachers’ salaries were delayed, and development projects slowed. Yet Alli refused to abandon his free education policy, seeing it as a moral obligation to future generations.
Archival studies and state reports from the early 1980s record repeated appeals by Alli for federal transparency and an increase in derivation-based allocations. His stance won him both popular admiration and political hostility, particularly from NPN-aligned federal officials who viewed his criticisms as partisan.
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Political Aftermath and Alli’s Legacy
The 1983 general elections were marred by widespread irregularities and economic discontent. The NPN regained Bendel State through Dr Samuel Ogbemudia’s controversial victory. Only months later, the 31 December 1983 military coup ended the Second Republic, bringing General Muhammadu Buhari to power.
Governor Alli was arrested, tried by a military tribunal, and convicted on corruption-related charges widely believed to be politically motivated. He was released after serving part of his sentence and lived quietly until his death in 1989.
Today, Alli is remembered as one of Nigeria’s most education-focused governors, whose efforts to democratise learning outlived the fiscal crises that constrained his tenure. The Bendel State University he founded remains a cornerstone of his legacy.
The fiscal battles of the Second Republic, epitomised by the Shagari–Alli confrontation, reveal how centralisation of oil revenue reshaped Nigeria’s federal dynamics. While the derivation principle was nearly extinguished, state-level leaders like Alli exposed the democratic tensions within Nigeria’s fiscal order, between equity, efficiency, and autonomy.
The unresolved questions from that era still resonate today in the ongoing debates about resource control, true federalism, and fiscal decentralisation in the Nigerian federation.
Author’s Note
The revenue allocation crisis of 1980 symbolised a defining tension in Nigeria’s post-independence federalism, the struggle to reconcile national unity with regional equity. President Shehu Shagari’s push for fiscal equalisation and Governor Ambrose Alli’s demand for derivation-based justice exposed the fragile balance between federal control and state autonomy. While the outcome favoured central authority, it also planted the seeds of enduring debates on resource ownership and fiscal fairness. The conflict between Bendel and the federal government was more than a policy disagreement; it was a contest over Nigeria’s soul, between a unitary vision of nationhood and a federated ideal rooted in justice for resource-bearing communities..
References:
Federal Republic of Nigeria (1982). Allocation of Revenue (Federation Account, etc.) Act, Official Gazette No. 6, Vol. 69.
Okigbo, Pius (1980). Report of the Revenue Allocation Commission. Federal Government of Nigeria.
Attorney-General of Bendel State v. Attorney-General of the Federation (1981), Supreme Court of Nigeria, SC.148/1981.
Lawal, O. (2018). Historicising Development Policies in Nigeria up to 2010. West Bohemian Historical Review, Vol. VIII(1), pp. 78–98.
The Guardian (Nigeria) (2013). “Alli’s Conviction and Pardon: Revisiting the Second Republic.”
Ambrose Alli University (AAU) Publications. “History of the University and Founding Vision.”
