Special Report
This is the third instalment of this presentation. The second part was published in yesterday’s edition of Vanguard
AT any rate, there are no two federal systems that are exactly the same. Rather, federal systems evolved and operate within the context of historical dynamics of the respective human societies operating them .
AT any rate, there are no two federal systems that are exactly the same. Rather, federal systems evolved and operate within the context of historical dynamics of the respective human societies operating them .
A number of the countries operating federal system are non-classical federations, which adopted the system as an appropriate mechanism to manage political and cultural plurality. It is now being estimated that there are more than 25 countries, with 40 per cent of the World’s population practicing federal systems of government. There are also countries, such as Iraq, that are now regarded as on transition to federalism.
There is no universal definition of federalism or essential principles but there are key features of federalism, which are the existence of a central government sharing power/functions with regional/provincial/sub-national/territoriai/local governments over the same citizens and each tier of government derives its own legitimacy from citizens under its jurisdiction.
Coordinate federalism
As a result, therefore, scholars categorize different modes of federalism, from co-operate federalism to co-ordinate federalism to organicfederalism as a means to distinguish the variety of systems being practiced by different nations. Thus, federalism in reality is a continuum running from alliances and associated states through to centralized government with federal system lying at some point in between.
Fiscal federalism in Nigeria: The Nigerian State was born in October 1914. Nigeria’s mode of fiscal federalism dates back to 1914 through colonial taxation policy and financial arrangement pioneered by the British Colonial Administration, which subsequently financed the development of all natjonal institutions and assets that the nation holds today.
After the splitting of Southern Nigeria into the Western Region and Eastern Region, the ensuring political developments necessitated new constitutional development that provided the Richard Constitution of 1946. Six months before this new Constitution took effect in January 1947 an elaborate study and planning for structure of fiscal arrangement for the Nigerian State was commissioned under Sir Sydney Phillipson with the following terms of reference:
•To study comprehensively and make appropriate recommendations regarding the problems of the administrative and financial procedure to be adopted under the new constitution; and,
•To examine, in the light of its historical antecedents, the problem offinancial relations between the Nigerian Government and the Native Administration with a view to making recommendations as to the policy and procedure which should determine those relations in the future.
•Obviously true fiscal federalism in Nigeria would give full support to the on-going clamour for the abrogation of the Constitutional provision for the existence of the state/local government joint account.
In undertaking his assignment, Phillipson made a detailed study of the revenue and expenditure profile of the Regions and their Native Administrations, which clearly show the contributions of the Regional Governments to the Central Fund as well as to the general government services that created and financed the developments of common national institutions and assets.
Government had the power to enact taxation law but the responsibility for collecting the proceeds of direct tax from individuals residing with the jurisdiction of Native Administrations had been assigned to the individual Native Administrations.
The Native Administrations were allowed retaining 50 per cent of what they had collected and passing on the remaining 50 per cent to Gove’rnment. While individual Native Administration expended the retained portion of the tax for various financial services including payment of salaries of their staff, the Government was responsible for executing some essentials services in the provinces.
The Table below gives the actual annual revenue contribution from th Native Administrations of Northern and Southern Provinces to the central fund as well as the expenditure incurred by the Central Government on the provincial service in the Northern and Southern Provinces:
In 1937/8, government stopped publishing the expenditures separately for Central Government and the Northern and Southern Provinces as the Southern Protectorate was split into the Eastern and Western Regions with headquarters at Enugu and Ibadan respectively. But the system of revenue collection by the central Government and Native administrations in the Provinces continued.
In 1932 the 70 per cent share of direct taxes being retained by the “fully organised” Native Administrations was reduced to 60 per cent. And in 1937 the policy “was rejected on the ground that it led to inequality of development and replaced by a policy of adjusting the apportionment according to the needs of particular Native Administration subject to the general conditions that
• the proposal objects of expenditure were such as were proper for Native Administration rather than the Government to undertake and finance;
• the previous year’s tax had been satisfactorily collected, and •the new expenditure was on purposes such as Nigeria as a whole could afford. The net effect of this policy was to allow Native Administrations of the Southern Provinces an increased share of tax amounting tyo 28,000 pounds annually.
Central revenue
Based on the new policy the derived revenue from the provinces into the central revenue fund extracted from Nigerian Estimates are shown in this paper.
Without a doubt, and right from the beginning, the commitment of the North to the Nigerian nation was clearly much more apparent than that of the South. For example, the North, economically more buoyant at that time due to its expansive agricultural production and solid minerals, and obviously with a larger heart than the South, contributed in many fold more than the other regions to the central government.
The North that contributed up to 87.41 per cent of the total revenue of the amalgamated Nigeria after 1914 (1914-1954) ended up receiving only 9.48 per cent of its contribution in terms of expenditure to it by the central government.
This was a pattern that continued for a long time. In an analysis by Mallam Adamu Fika for a period of forty years (1914-1954), he indicated that the Northern provinces contributed a total of £18,000,000 to the central fund compared with £8,000,000 contributed by the Southern provinces.
This contrasts with the expenditure of about £13,000,000 by the central government in the Southern provinces for the same period on provincial services as against only £6,000,000 in the Northern provinces. In fact, the North subsidised the rest of the country, especially the Eastern provinces almost throughout these forty years, as their (the East’s) contribution to the centre was in deficit to what it actually received.
Nigeria did not start reaping any significant contribution of the oil sector to its national income until after 1973 when the surge in the oil prices internationally as a result of the Middle East crisis produced the first oil boom. Prior to that, the North generously gave the needed fund for the development and educational need of both the eastern, western regions and the Lagos colony and funded the oil exploration in the Niger Delta of Nigeria.
Oil exploration inthe Niger Delta
The North sacrificed its own development honestly and altruistically in the spirit of building a nation. The North has hence, remained: Left short of funds for its education developed; its well crafted catching up plans have, ever since the collapse of the first republic in 1966, been thwarted by underfunding from the centre and ill defined blanket national educational policies.
Agriculturally stagnated, the complete shift in focus to the development of the petroleum sector deprived the agricultural sector of all forms of support and modernisation. For example, the marketing boards and extension services were jettisoned and nothing was instituted in their place to develop the sector, thus throwing 65 per cent of the population that depended on the sector into wilderness.
Despite that, the sector contributed immensely to the national economy and making huge savings to the national income which could otherwise have gone into the importation of food to feed the nation and raw materials for its industries. The table below shows the contribution of the North in some agricultural produce:
Daily Statistics of livestock and produce taken from the North to the South (2012) Produce Lagos P!H Aba Calabar Enugu Onitsha Ibadan: The agricultural sector which actually produced the resources for the exploration of oil, thereby, remained at subsistence level undermining the capacity of the North to improve the viability of its economy. In fact, the Obasanjo administration made policies that effectively destroyed any prospects for the development and growth of the agricultural sector. For example the following programmes that could have made the difference in the agricultural sector were scrapped. These include:
•Gum Arabic development project, •National Accelerated Tree Crops,• Programme Presidential Initiative on Tree Crops, •Commerce, •Green Wall Aforestation National Project. The concentration of all major developmental projects in the South led to the demise of all of the North’s industries. Projects such as electric power supply, communication, access to water ways (ports, without equal attention to development of inland waterways and hinterland ports), and the abandonment of the railway system, all adversely affected the North economically.
Unsureventures
Indeed, the North sacrificed its future with no strings attached to reaping any benefits other than building a strong and prosperous Nigeria when even the colonial administration neither could risk resources from the United Kingdom or those available to it at the centre for some of the unsure ventures (especially oil exploration at that time). It is very important to note the other supreme sacrifices the North made to the making ofthe Nigerian Federation:
The acceptance by the North in creating 12 States at the first instance, later 19 states, 21 states, 30 states and eventually 36 states in Nigeria plus the FCT even though the population and land mass of the North by far exceeded that of the South.
The North had to abandon its well coordinated strategy of unity in diversity under (constantly seen as a threat by those outside of the North), undermining the tremendous achievements made in that direction for an economically strong North with well educated labour force for nation building.
The consequence of that sacrifice is what we see today in insecurity and communal upheavals undermining every aspect of the life in the North. This sacrifice was done purely to please the South who felt threatened by a unified North. The funding of the civil war was entirely done by the North at great sacrifice to its wellbeing, at the expense of investment in human and economic development of the entire region. The North sold forward all its groundnut and cotton for a number of years, risking forward delivery contract of three years for all its agricultural produce to prosecute the civil war.
The North supplied more than 80 to 90 per cent of the arms and men that executed the civil war. The North funded the exploration for oil in the Niger Delta, using Northern resources etc., These sacrifices are seen by the South only through the prism of a desire by the North to be in Nigeria to reap some phantom benefits that the North is imagined to be affixed on achieving. Unfortunately, the North is only now coming to grip with the disappointment on the lack of will and commitment of the political leadership of southern extraction at the centre to uphold the principles of fairness and equity as demanded by a federal system.
Democraticdispensations
Infact, since the current democratic dispensation set in 1999, this expectation for fairness had completely disappeared. Rather, there has been systematic dismantling of the North and jettisoning of justice and fairness and commitment to achieving a balanced federation.
Thus for example: •The abolishing of the onshore/offshore dichotomy on revenue derived from petroleum resources, •The abandoning of the dredging of the Niger river, •The abandoning of the northern gas pipeline project, •The complete disregard to federal character in appointment of senior personnel of federal agencies and establishments, •Establishment of all major electric power projects in the South while the hydro electric projects mainly remained on the drawing board, •Empowerment of youth of the Niger Delta at extreme cost while no similar project being even contemplated for the North which is now being seriously challenged by poverty, unemployment and insecurity, among others, •Engagement of the ex-militants as an armed security outfits at huge contract amounts and great danger to the rest of the country as they have made no pretence of the destruction they would unleash on the country if their aspirations are not met.
Their engagement is also to the detriment of the development of the Nigerian Navy to perform its constitutional role of protecting the integrity of the country.
This lack of commitment com pletely negates the principles upon which the federation is laid. It has, therefore, become the imperative of the North ‘to demand the practice of federalism in at least it’s essential form, which requires the system to be built on the achievement of national strategic objectives of human and economic growth and development, efficiency in resource allocation (towards a balanced development of all of the regions), national integration and political stability, all promoted in a just and equitable manner.
Fiscal federalism and structure of government in Nigeria: While there may be a need to examine the current structure of the federation for its suitability for the achievement of the aspirations of the people (the federating units), we are assuming that the existing structure is ideal for now.
Our focus here is, therefore, only to suggest, in the light of basic tenets of a successful federation what the structure of responsibilities and the requisite fiscal instruments should be to guarantee the North’s position as an equal partner in Nigeria, emphasising that the issue of revenue allocation should not be seen as mere sharing the national pie, but a purposeful and efficient deployment of resources to achieve the strategic national objectives.
Notes: •Average total allocation to each of the six states of the South-South = N2,956,165,677,283 = 300 per cent of National average,•Average total allocation to each of the19 states of the North = N554,065,542,595, = 50 per cent of National average, •Average total allocation to each of the 11 states of the South-East and South-West = N799,315,065,208 = 80 per cent of National average, •National supposed average for 36 states = N1, 029,352,919,175.
Coast guard contract with the ex-militants (Tompolo and others); in 2012 alone, the NNPC is reported to have made payments to companies owned by ex-militants to the tune of N6.2 billion (US$43.7m) ostensively for the protection of petroleum pipeline networks in the creeks and swamps of the Niger Delta. Yet oil theft had been unprecedented forcing a huge drop in revenue accrued to the Federal Government; Shell had to declare a “force majeure” on crude oil export from Nigeria on March 26, 2014.
The details above clearly shows that the revenue allocation formula in place since 1999 has failed to live by the principles of fairness, justice, equitable development and distribution of resource between federating units as required in the practice of federal system of government. The current status neither does ensure political stability nor creating a strong nation worthy of the pride of its citizens. This trend should not continue if we must avoid a country with disparate regions in terms of development; in fact a situation where the North can easily be subsumed by the South as an appendage of dependent people, with no future of its own.
This must be avoided. We, therefore, seek the modification of the revenue sharing formula reflecting the Supreme Court Decision of 2002, abrogating the existence of special funds accruing to the Federal Government and on onshore/offshore dichotomy, and taking into account some critical indices included in the RAF laws but hitherto not given the prominence they deserved. Our proposed revenue sharing formula is as presented below:
Proposed Revenue Allocation Formula (RAF). Vertical Revenue Allocation Formula (sharing formula between the three tiers of government). FGN – 26 per cent (Federal Government Exclusive 20 per cent. (Six per cent to be distributed to following arms, to draw at first line charge) as follows: Judiciary -1.5 per cent, Legislature -1.5 per cent, INEC/Political Parties -2.0 per cent, Police Force -1.0 per cent. This is to ensure the independence of these key organs to discharge their constitutional responsibilities unhindered.
To correspond to the reduced revenue due to the Federal Government, there should be reduction in its responsibility in primary health care, primary schools, rural roads, secondary health care, secondary school education, inter states roads. At the same time, Federal Government should erase any responsibility for the funding of the NDDC and scrap the Ministry for Niger Delta, the component C of the SURE-P and all other miscellaneous programmes it has introduced.
States – 39 per cent, (36 per cent exclusive to the states), while the remaining three per cent to be distributed as follows: States Judiciary- 2.0 per cent; and States Legislature -1.0 per cent, both to draw at first line charge from States Allocation. With reduction of responsibility in SIEC (to be merged with INEC), States should take the full responsibility for the funding of secondary education, secondary healthcare, inter-states roads maintenance and linkages to LGAs. .
Local governments are the closest to the people and should be adequately empowered to reach the citizens. This can be done by making the local governments a multi tier system with ward council, districts council and local government council. Section 162 of the Constitution on Joint Accounts should be abolished. The supervisory powers of states over local government should also be abolished.
Supervisory powers of states
The Local Governments legislature/Area Council Legislature to be fully funded from their 35 per cent allocation above, and also the LGAs/ACs to be fully responsible for primary health care, primary schools and rural roads for development as much of the peoples expectation lies at the lower levels of government being much c1oser to the people.
Above will surely guarantee even and speedy development as much as possible, aid effective and efficient utilization of our resources to the target populations with cost effectiveness and proper supervision by the respective level of governments who are really the closest to the people and which is all that government is all about.
The Horizontal Revenue Allocation Formula: Sharing by the states and local governments/Area councils among themselves. This involved the sharing of the revenue due to the states and the LGAs/ACs from the Federation Account using some agreed, approved indices of Revenue Allocation in the Constitution of the Federal Republic of Nigeria as follows:
Our support for this revenue sharing formula is based on the real advantage the North has in terms of population and land mass. We based our support on the commitment to the imperatives of good governance by the Northern Governors for the progress and continued relevance of the North in the Nigerian federation.
In recommending this, we are very much aware of the erosion of the revenue accruable to the centre by the incursion of certain policies like the 13 percent derivation allocation to the oil producing states from all the oil collections, in addition to the creation of the NDDC and the Federal Ministry for Niger Delta, which collectively take a big chunk of what is accruable to the national account for subsequent sharing to all parts of the country (including the Niger Delta States) and the centre (see the table below).
Revenueallocation
If this is not corrected, it is a sure road to destruction of the federalism that is being practiced, as there is no justice or equity in play, and it is rife with the threats of political, social and economic instability and imbalance in the system that, in the long run will be a burden to the people. Not too removed from the issues of revenue allocation are the problem of environmental degradation and other ecological challenges. States in the oil producing areas have been receiving allocations supposedly for the amelioration of the plight of communities from the degradations and hazards caused to their environment by the oil exploration and exploitation.
On the other hand, there are quite a number of environmental challenges facing the North today for which nothing is being received. For example: Extensive animal rearing principally for food have famished most grazing lands in the North forcing large scale migration of herdsmen elsewhere with its inherent challenges metamorphosing now into national security issue. Meat production is for the benefit of all Nigerians.
The North has remained the major supplier of this essential food item to the whole country, conserving foreign exchange for the nation (as indicated earlier in table) apart from the earnings from export of hides and skin) bones and horns and other taxes on the animal head counts contributed to the economy. This “industry” has the capacity for development into diary production which importation is currently gulping billions of naira annually. Special allocation for development of grazing lands and development of modern animal rearing system, therefore, is necessary, and a special allocation in the revenue formula is therefore required.
Deforestation, soil erosion and degradation in the North as a result of clearing of lands for farming to meet the large food demands of the country. This has become a huge environmental challenge for the North that needs special and urgent attention.
The North has remained an open space and the preferred region for settlements for all citizens, exerting pressure on the land gradually diminishing a valuable resource of the North in terms of alternative more productive activities (e.g. modern farming). Therefore, there should be equity in show of concern, and commitment to the operation of sound federal system in the country. To achieve this, the North needs to demand for:
Ministry for the Niger Delta development and the NDDC should be scrapped as clearly it negates the principles of justice as it serves only the interest of one region.
Exploration anddevelopment of oil
There should be an agency for the exploration and development of oil and gas in the North. The provision in the proposed Petroleum Industry Bill that relegates the responsibility for management of the oil exploration function in areas other than the Niger Delta to a department in the Ministry of Petroleum Resources, directly under the authority of the Minister must not be allowed.
The dredging of the Niger and Benue rivers should be priority projects. The North should demand for the completion in minimum time of the project to enhance the capacity of the North and indeed all Nigerians to partake in business, commercial and agricultural activities. Such infrastructural development will add to the prospects of Nigeria as an investment haven to the much needed foreign direct investors.
The North should demand the implementation of the Hydro Power projects across it. The various plans for the construction of about six other hydro power projects on the Benue and other rivers that have the potential for an estimated 40,000 mega watts of electricity production (now in our archives) should be dusted for immediate implementation. In particular, the Mambila/Benue hydro project should be given immediate attention. These are resources that must be developed in the North to achieve the regional economic balance and stability that can contribute to the nation with a potential for much wider economic impact than oil.
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