A Federation without Federalism



If any questions remain as to why, despite huge oil revenues and massive borrowing by the government - poverty, unemployment and insecurity have worsened, our detailed analysis in this column of the 2011 and 2012 budgets of the Federal Government would have provided some answers. We raised posers on whether the vast sums of money earmarked for the expenditure heads – both capital and recurrent – have in any way added value to the lives of Nigerians, and offered alternative spending and expenditure priorities on how our resources may be better managed.


Ultimately, it is a sad commentary on the mind-set of government that massive infrastructure development projects to generate employment and reduce poverty were relegated in favour of misplaced and ineffective security spending and other recurrent expenditure that mostly benefits those in power but have near zero impact on Nigerians. The cost of governance - never mind it is of such a poor quality and totally dysfunctional - has never been higher. How can such high levels of insecurity, fewer hours of electricity than ever, and the hardly-educated products of our educational institutions cost us so much as a country?


While the focus of this column has been on the Federal Government, we cannot escape the fact that the dereliction and mismanagement of our resources are not confined to the centre but replicated in all the component units of the Nigerian Federation. If President Goodluck Jonathan leads in profligacy, most of our 36 state governors and 774 local government chairmen are proving to be very good followers. From 2001 to 2011, available records indicate that a total of N34 trillion accrued as revenue into the federation account, apart from what was paid into the excess crude account for a rainy day.


In the five years of late President Umaru Musa Yar’Adua and Jonathan at the helm, over $200 billion have been frittered away by the federal, state and local governments with pretty little to show. On monthly basis, these revenues have been distributed among the federating units using the revenue allocation formula: FGN – 52.68 per cent; states – 26.72 per cent and the LGAs – 20.6 per cent.  This is apart from the 13 per cent using the derivation formula, which accrues to each of the nine ‘oil-producing’ states, and transfers from ecological funds, natural resources funds and the like, all at the discretion of the president to favoured states and pet projects.


We must begin to ask: How have these huge allocations and financial transfers from the centre been expended?  Is it in the interest of the generality of the people at the federating units or that of a privileged few that mostly rigged their way into power?  And we must begin to seek answers. This is the task to which this column will devote itself to in the coming weeks as we look at specific cases of sub-national revenue and expenditure trends with data from all of the six geopolitical zones of the country.


In the meantime though, there is need to assess, in real terms, what is today referred to as the Nigerian federation.  Is it plausible to refer to Nigeria as truly a federation or a failing nation-state in which all the component units were designed to live off the federation account, and maintained by the Federal Government at the centre? Will our current ‘federal’ structure ever create a productive and competitive nation? Or are we doomed to be a nation of parasites on oil and mineral wealth that we neither produce ourselves nor really sweat for? But, has Nigeria always been structured this way?


From one perspective, there might be a nexus between our anomalous federal structure and the lack of accountability, particularly at the state and local government levels.  If we reflect on our distant past, the 1963 Republican Constitution was close to an ideal federal structure, with clear guidelines on how the Nigerian federation and the federating units were to be financed without undue reliance of one on the other.  Unlike the 1979 presidential constitution and its successors including the current 1999 version, the 1963 constitution set clear parameters for territorial and fiscal federalism and carefully avoided undue centralisation. 


For instance, section 140(1) (a) & (b) of the 1963 constitution foreclosed any agitations in the guise of ‘resource control’.  While all minerals – solid or liquid - remain unequivocally the property of the government of the federation, the constitution provided thus: “There shall be paid by the Federation to each region a sum equal to fifty percent of – the proceeds of any royalty received by the Federation in respect of any minerals extracted in that Region; and any mining rents derived by the Federation from within that Region”.


In reciprocal terms, the regions were contributing towards the costs of administration of the Federal Government at the centre in the proportion of what they received as their own share of proceeds of export, import and excise duties collected in each region by the region on behalf of the government at the centre. In the case of oil production, the same applied with the unforeseen exception that the federation will go into joint ventures and production sharing contracts that bring in revenues other than rents, royalties and taxes. This system was maintained until the circumstances of the civil war changed it radically in favour of retention of most of the revenues by the centre, in order to prosecute the war. Things have never been the same since then.


Accordingly, the fallout of military regimes that governed the country for the greater part of our post-independent era; was that virtually all those roles being performed by the regions were overtly taken over and centralised to the situation we now have. We now have a Federal Government at the centre that tends to be biting more that she could chew for instance by the ineffective policing of the streets, highways and borders across the length and breadth of the vast geographical space called Nigeria.


Prisons have been taken over from states and local governments. Every major interstate road is a federal road – which then neither gets built nor maintained when it ever gets constructed. The Federal Government has secondary schools, attempted to build Primary Health Centres, and construct boreholes – activities best done by local governments! We can go on and on, but I believe the point is well made. The Federal Government should scale back on the breadth and depth of its interventions.


Many of these so-called federal functions that are backed by huge recurrent budgets and bureaucracies in Abuja are better handled, cheaper by state governments. But looking more closely at our states, are they capable of shouldering the burden? These are the questions we will seek to answer over the next few weeks. With the possible exception of Lagos, we currently have states, most of which cannot survive on their internally generated revenue without the monthly transfers from the federation accounts from Abuja. The states now resemble parastatals that wait for a monthly subvention! Compare this with what was obtainable under the First Republican constitution, there is no incentive for the states to impose and collect income and other taxes, scout for mineral resources in their domain and make efforts for the exploration of same, and develop their agricultural potentials.


These would have raised revenues, created employment opportunities and made the citizens of the states more prosperous – and more secure! In effect, rather than forging a reciprocal resourceful interaction with the government at the centre, the states wait monthly to be spoon-fed by the Federal Government – and with that we see the inevitable erosion of their independence and constitutional powers. In this fourth republic, only Bola Tinubu and Babatunde Fashola as governors of Lagos State had the fiscal independence – and therefore the guts - to not only stand up to any attempted oppression by Abuja, but tell the successive occupants of the Villa to take a walk! 


The resultant consequences of this distortion of our federation have now come home to roost? There are increased agitations and hatred among the federating units – manifest in open calls for some National Conference (NC), the senseless but continued demand for the creation of more states, and the review of the revenue allocation formula. It is clear to everyone that such agitations are not borne out of genuine developmental need but to satisfy the territorial ambitions of the political elite in such enclaves.


The dismal fiscal performance, poor governance and lack of financial accountability in the existing states are too self-evident for any rational person to insist on more of the same. The case of the oil-producing states that enjoy huge derivation windfalls from the federation accounts does not exempt them from this. Rather than spend the huge monthly allocations to build badly-needed infrastructure, create employment opportunities and improve the welfare of their people, the levels of poverty, unemployment and environmental degradation remain largely unchecked amidst high per capita incomes! It is similar to the case of Nigeria’s fast-growing economy but with over 112 million citizens living in poverty and tens of millions of qualified youths looking for jobs!


Without question, I believe the situation would have been different if true federalism in which every state generates the bulk of its recurrent needs, lives within its means and gets help from the centre on need basis; operated as in the 1963 Constitution. Rather than blame the government at the centre for the woes of the states, citizens would have learnt to hold state governors and local government chairmen responsible for their neglect, and the incessant scramble for political positions at the federal level would have been less desperate and divisive. As it is, the attitude is one of “it is our turn to rule and chop” - with dire consequences for national cohesion, transparency and accountability in governance.


A sound federal structure with balanced devolution of powers among the federating units would provide a respite for the security challenges currently facing the country. In our pieces on the armed forces, the police and the paramilitary agencies, this column advocated reforms which would encompass decentralisation of the police structure close to what was obtainable under the 1963 constitution as a panacea to the current heightened level of insecurity in the nation.


At the local government level, there is virtually no infrastructural or social development. Apart from paying salaries of teachers, political appointees and the overheads of running the council secretariats, the rest of the allocations from the federation account are usually not accounted for by the chairmen. 


The plight of the councils was further compounded by the constitutional provisions which make it obligatory for a state-LG Joint Account to be established, under the control of the state government.  This became a conduit of a sort where funds allocated to the councils for grassroots development simply grow wings – to land in governors’ offices. Rather than entertain the clamour for more non-sustainable states, this is one area that should attract the attention of the National Assembly while considering further amendments to the 1999 Constitution.  To play their rightful roles and engender true federalism, any constitutional amendment must clearly specify the tenure of local government chairmen and councillors and entrench direct transfer between the councils and the federation account.


Dream as we may for a better Nigeria; a country that works; a nation with egalitarian principles of equal opportunity for everyone and built on peace requires governments that are responsive and responsible. These ideals will remain mere dreams if we are unable to aggregate and articulate concerted efforts to first have elections that really reflect the wishes of the electorate, a decent judiciary, and then entrench a constitutional structure that enables true federalism. These need to be pursued not sequentially but simultaneously, and immediately. Until these are done, Nigeria will remain a federation in dire need of real federalism. And we will continue our accelerated decline towards state failure. That will be very sad indeed.