[size=14pt]Nigeria and challenges of fiscal federalism[/size]
Written by Abiodun Awolaja Thursday, 19 May 2011

Fiscal federalism has remained one of the potent challenges to the Nigerian nationhood. Abiodun Awolaja looks at some of the issues surrounding the concept in the country and some of the solutions proffered to tackle them.

DR Goodluck Jonathan is, by nomenclature, the current President and Commander-in-Chief of the Federal Republic of Nigeria. But is Nigeria really a federation? This question may be a perplexing one because, among other factors, the federalism question remains one of the potent challenges to Nigerian nationhood, some of the others being the fear of ethnic the dominance and population census controversy. With respect to the question of fiscal federalism, conflicts over revenue sharing formula, centralisation of fiscal relations and the agitation for resource control are problems which have proved quite intractable in the last 40 years at least.

Like most federal republics, Nigeria boats a bi-cameral legislature at the centre, and a unicameral legislature at the regional or state level. It also boasts a third tier of government, the local government, which underwent massive reform under the Olusegun Obasanjo regime in 1976. In addition, Nigeria has a centre which is stronger than the component units, which are currently the 36 states in the country and the Federal Capital Territory (FCT), Abuja, the seat of federal power which is run by an administrator rather than an elected governor.

In Nigeria, as in most federations of the world, questions of equitable revenue sharing formula have been at the forefront not only of policy discourse but also physical agitation, including militancy movements. The state governments in the country, especially since the return to civil rule in 1999, have also been engaged in wrangling with the Federal Government on the issue of securing adequate financial resources to discharge their constitutional responsibilities.

In this regard, particularly with reference to the Obasanjo era (1999-2007), fiscal federalism issues were encapsulated in debates and litigation over the controversial on-shore/off-shore dichotomy in the oil sector, with the former Minister of Justice and Attorney-General of the Federation, the late Chief Bola Ige, advising the affected states ( the Niger Delta states) to pursue their case at the Supreme Court, which finally gave its verdict in April, 2002.

In tackling the fiscal question, the Federal Government had, at various times, even form the colonial days, set up committees/commissions to look into the question. In addition to Decrees 15 of 1967, 13 of 1970, 9 of 1971, 6 of 1975 and Decree 7 of 1975, some of the commissions set up were the Phillipson Commission (1946), Hicks-Phillipson Commission (1951), nChicks Commission (1953), Raisman Commission (1957), Binns Commission (1964), Dina Commission (1969), Aboyade Technical Committee (1977),. Okigbo Committee (1980), and the Danjuma Commission (1988). However, none of these commissions was able to evolve a viable fiscal allocation formula for the country.

With the return to civil rule in 1999, the Federal Government established the Revenue Mobilisation Allocation and Fiscal Commission and the Politics of Revenue Allocation (RMFAC) to, among others, monitor the accruals into and disbursement of revenue from the federation account; review from time to time, the revenue allocation formula and principles in operation to ensure conformity with changing realities; advise the federal, state and local governments on fiscal efficiency and methods by which their revenue is to be increased; determine the remuneration appropriate to political office holders.

In 2001, the commission evolved the following sharing formula: Federal Government ( 41.3%) state governments 31%, local governments (16%), Special Fund (11.7%.) This formula, however, proved unworkable arising from the Supreme Court judgement on resource control in April 2002. Thus, in 2008, the fiscal body drafted a new proposal, which seemed to reinforce the hegemony of the Federal Government. By this new arrangement, the Federal Government was to have as much as approximately 54 per cent of the total revenue.

In the opinion of Dare Arowolo, a lecturer in the Department of Political Science and Public Administration, Adekunle Ajasin University, Akungba, Ondo State, the revenue allocation formula in Nigeria inevitably encourages parasitic governance where states become relaxed and endlessly expectant of the monthly ritual of allocation from the federal government. According to him,the implication of this is that while the allocation formula limits the capacity of states to provide public goods needed to promote and sustain governance, it also predates on the Internally Generated Revenue (IGR) of each state, thus making the states perpetually dependent on the Federal Government.

As he puts it, “This arrangement of allocation sharing in Nigeria threatens initiatives, innovation and modern ideas of generating resources, especially money, for sustainable development. The Federal Government, on the other hand, cannot also be divested of this revenue allocation ‘pathology’ since it appropriates and concentrates too much money at the centre leading to waste and corruption. The Federal Government lacks a basic plan for the transformation of resources into concrete developments. This also explains the reasons for the characterisation of politics in Nigeria as a ‘do or die’ phenomenon.’’

Thus, in order to redress the imbalance, Arowolo advocated the following options: readjustment of the tax revenue sharing power of the federation in an equitable manner among the component units which currently skew in the favour of the federal government; embarking on radical diversification of the Nigerian economy to other viable and productive sectors of the economy, such as agriculture, mining, industry and human development; reviewing the constitution, especially as it relates to federalism, and, finally, the adoption of the principle of derivation, which, in his view, is capable of spurring the states to work harder to contribute maximally to Federation Account.

Although the current administration led by Dr Goodluck Jonathan is yet to make any pronouncement on the revenue allocation formula, there appears to be grounds for believing that there might be a change in the coming months. For instance, on Monday, the president advocated a review of the country’s foreign policy to reflect current realities after 50 years of independence.

In the same vein, will the president make a commitment to the federalism question, particularly in the face of the resolve by legislators-elect on the platform of the opposition Action Congress of Nigeria (ACN) to fight for a more equitable fiscal federalism?

While the question still remains in the realm of conjecture, critical observers of the Nigerian may be left wondering why, since the murder of Major-General Aguiyi Ironsi, Nigeria’s first military Head of State, on charges of abolishing the federal structure of the country through the now infamous Decree 63 of 1966, the country has found it difficult to navigate its way out of the unitary structure foisted on it by the military.

http://tribune.com.ng/index.php/politics/22172-nigeria-and-challenges-of-fiscal-federalism

Fiscal federalism is not about more money going to the states. That is the same monkey de work baboon de chop mentality that see's the various regions producing zilch, while the ND bears the unfair burden.

Lets adopt the "if you don't work, you can't eat approach." It is immoral for the regions to continue recieving free money, instead of paying taxes to the centre as happens in all normal economies. It is understandable that target is not immediately acheivable, but we must lay solid plans to hit it sooner than later; also, we must begin taking immediate transitional steps.

Let those that can't swim sink. Such an attitude will go a long way to ensuring the country develops and fixing worsening issues like the almajiri problem (without free money, there will be no almajiri).

Beaf:

Fiscal federalism is not about more money going to the states. That is the same monkey de work baboon de chop mentality that see's the various regions producing zilch, while the ND bears the unfair burden.

You are very right, I agree but I have a little reservation. See below:

Lets adopt the "if you don't work, you can't eat approach." It is immoral for the regions to continue recieving free money, instead of paying taxes to the centre as happens in all normal economies. It is understandable that target is not immediately acheivable, but we must lay solid plans to hit it sooner than later; also, we must begin taking immediate transitional steps.

True again, but that plan should include some kind of "Marshall Plan" for those states and regions with little to no income from mineral resources at least in the near term, or we require them to merge with other states.

Actually I prefer we de-emphasise statehood and carve our administrative governments out of cities, towns and local government with close cultural ties. We cannot afford to reduce the power of the FG then replace it with these 36 tin gods we call state governors.

I prefer we give more responsibilities to cities, towns and or local govts, give them the responsibilities for making local laws(with teeth) that are sensitive to local cultural and social values, local law enforcement, utilities, attracting businesses and managing local infrastructure.

We can have the regions as administrative hubs for budgetary and uniform law making purposes. The FG should simply manage Defence, foreign relations, Monetary policies, Federal law enforcement, Universal Federal Laws (which should be limited) e.t.c

Let those that can't swim sink. Such an attitude will go a long way to ensuring the country develops and fixing worsening issues like the almajiri problem (without free money, there will be no almajiri).

Sounds kinda harsh, but Yes, they should merge if they can't cope. If you don't have mineral resources, you have creativity and human resources. A few Nigerian states are as big as some European countries.

Liberalise Land, property and mineral right laws, remove state of origin gradually and kill that Federal character nonsense, let everybody pay pre-determined taxes to the center and keep the rest for themselves, their city, state or region as it applies.

If we can't do this then let us have a confederacy where we are only joined together by common Defence and Foreign policy + maybe currency. Or everybody just go their separate ways.

We just cannot continue to manage this system as it currently stands.

Wonderful thread and i really would like to add more to the discussion because you guys have said it all and let me just join at this påoint.

Kilode?!:

True again, but that plan should include some kind of "Marshall Plan" for those states and regions with little to no income from mineral resources at least in the near term, or we require them to merge with other states.

This is a very good suggestion but in practice i am not sure if it will be acceptable to the people of the niger-delta. I want to see the present allocation as support for states to develop their mineral resource industry and other sources of income. Establishing a marshall plan that will make the states to be independent later in the future has to factor the benefits that will get back to the niger-delta states.

The government just only needs to liberalize the economy and do away with those land use acts and other laws impeding development. Creating a marshall plan calls for the need to turn the support from the niger-delta states as loan that should be paid back or they whould have some kind of percentage control in any venture that springs up from these supports. They cannot subsidize the development of other states just for nothing when they have already been receiving allocation for the past number of years.

Kilode?!:


If we can't do this then let us have a confederacy where we are only joined together by common Defence and Foreign policy + maybe currency. Or everybody just go their separate ways.

We just cannot continue to manage this system as it currently stands.

That is the conclusion of the matter because we are too deep than the road for us to be able to work together as citizens of one united country. I see the bashing that goes on here and there on nairaland and just conclude that we have totally lost it. The best bet is for us to separate into different countries and just corporate in terms of immigration, business, education and policies.

Lastly i also support the notion that we can't just continue this way but if we have more fasholas, okorocha, amaechi and chime in the governing affairs of the country then we will make some progress.

Beaf:

Let those that can't swim sink. Such an attitude will go a long way to ensuring the country develops and fixing worsening issues like the almajiri problem (without free money, there will be no almajiri).

We are so deep down the drain that no entity will just agree to sink without a fight so it must be done through a nationwide effort else we will be doing it the hard way. But i really support all your points above because this oil money and sharing of it is the cause of our collective laziness and death of other industries.

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@POST

This article is the same circling of the wagon known about Nigeria. Nothing seemed to be plainly genuine about it. There is no need to talk about fiscal federalism without the structural federalism on the ground. If federal government should reproach the issue of federalism in Nigeria, the structural federalism on the ground before the following commissions such as Hicks-Phillipson Commission (1951), nChicks Commission (1953), Raisman Commission (1957) and Binns Commission (1964) should be constructively reviewed.

It will be an attempt in futility to embark on genuine fiscal federalism when there is vindictive and draconian boundary adjustment aimed at ceding crude oil producing territories of Igbo land to neighboring non-Igbo communities. If the essence of the fiscal federalism should be solely based on GP (gross product) of state or region as the article tend to suggest, all the necessary composite factors, including the land, must be addressed. If it was not for punitive measures, I wonder why Nigerian government suddenly embarked on redrawing of boundaries in former eastern region where there were no problematic boundary issues among the neighboring communities.

Resource control is the answer. States should put their money where their mouths are, the Niger delta has spoon fed the lazy arses of most nigerian states for too long to their own detriment.  Local governments are a waste and should be scrapped. Nigeria has too many senators and house of reps members, considering our land mass, they are also wasting our resources. Too many useless and unproductive MDAs should be scrapped too.

Guys whilst I do agree with suggestions above, how do you hold non-perfoming governors from the ND to account. What are they doing with the current allocation, is that not as much problem as unfair allocation?

Beaf:

Fiscal federalism is not about more money going to the states. That is the same monkey de work baboon de chop mentality that see's the various regions producing zilch, while the ND bears the unfair burden.

Lets adopt the "if you don't work, you can't eat approach." It is immoral for the regions to continue recieving free money, instead of paying taxes to the centre as happens in all normal economies. It is understandable that target is not immediately acheivable, but we must lay solid plans to hit it sooner than later; also, we must begin taking immediate transitional steps.Let those that can't swim sink. Such an attitude will go a long way to ensuring the country develops and fixing worsening issues like the almajiri problem (without free money, there will be no almajiri).

1 bolded.we got to be fast or else we cont to be a failed state .
2 bolded.no one is gonna sink cause the poorer one can borrow from the richer ones.

I WILL GIVE THE WRITER 100% FOR THAT ARTICLE

The solution is simple; we don’t have to re-invent the wheel since Nigeria’s Federal Republic is modeled after the United States’. Just copy them all the way since their version seems to be working.

Every State and Local Government should be autonomous and the 3 levels of government should impose taxes on income, property, imports, exports, payroll, estates etc. The more work you put in or the location in which you find yourself will determine how much you “eat.” If you're not so lucky to have oil under your feet, like in the Beverly Hillbillies movie, you better find "something" to do! Why is that so hard?

Wallie:

The solution is simple; we don’t have to re-invent the wheel since Nigeria’s Federal Republic is modeled after the United States’. Just copy them all the way since their version seems to be working.

Every State and Local Government should be autonomous and the 3 levels of government should impose taxes on income, property, imports, exports, payroll, estates etc.The more work you put in or the location in which you find yourself will determine how much you “eat.” If you're not so lucky to have oil under your feet, like in the Beverly Hillbillies movie, you better find "something" to do! Why is that so hard?

i wonder why nigeria cant adopt the whole thing atleast it works for them! why wont for us! it seems there are things in the aso villa that we dont know.

Nice thread guys, Pls I would really like to know the federal allocations going to these states: Lagos, Borno, Sokoto, Enugu, Bayelsa and Niger states of nigeria. I would also like to to get data on poverty index in these states.

Nice thread guys, Pls I would really like to know the federal allocations going to these states: Lagos, Borno, Sokoto, Enugu, Bayelsa and Niger states of nigeria. I would also like to to get data on poverty index in these states.

Nice thread guys, Pls I would really like to know the federal allocations going to these states: Lagos, Borno, Sokoto, Enugu, Bayelsa and Niger states of nigeria. I would also like to to get data on poverty index in these states.

Nice thread guys, Pls I would really like to know the federal allocations going to these states: Lagos, Borno, Sokoto, Enugu, Bayelsa and Niger states of nigeria. I would also like to to get data on poverty index in these states.

Wallie:

The solution is simple; we don’t have to re-invent the wheel since Nigeria’s Federal Republic is modeled after the United States’. Just copy them all the way since their version seems to be working.

Every State and Local Government should be autonomous and the 3 levels of government should impose taxes on income, property, imports, exports, payroll, estates etc. The more work you put in or the location in which you find yourself will determine how much you “eat.” If you're not so lucky to have oil under your feet, like in the Beverly Hillbillies movie, you better find "something" to do! Why is that so hard?

If we have to copy them all the way, I do not see more than 20 states surviving anyway. This has to be a gradual process or at best merge states and local government so they can stand on their own. Our diversity will pose a lot of problem in achieving these as everyone is suspect of the other.

At the national constitionl conafb organised by Obj few years ago, this was the main demand of the SS and SE delegates, when the delegates from the north supported by the Sw refused to give in, SS & SE delegates staged a walkout that ended the confab unceremoniously, the demand of the SS and SE was a derivation system where the states would pay 50% taxes to the center, but this was to be implemented after a weaning period of 5 years, to allow othe states find their footing,   while everyone on this post seams to like the proposal, the results of that confab few years ago had lead me to believe that the north and SW are not ready for derivation or resourse control that is where I see a major challange for fiscal federalism, how do we go about conviencing the rest or nigeria to get of their arses and be productive I wish I had the answers, its a major puszle for gej to solve.