Collapse the states now!

The chicken has finally come home to roost. After years of denying the obvious; of prevaricating and expecting oil prices to pick up, we are gradually admitting the obvious – that Nigeria’s expensive but broke federal structure is buckling and things are gradually falling apart.

After about two bailouts advanced to states in 2015 and our estimation that such ad-hoc measures were not going to solve the problem but only postponing the ‘evil day’, the financial situations in the states of the federation are yet to improve. In fact, they are getting worse and many of the states are on the verge of collapsing. President Buhari confirmed this much last week when he expressed great concern that nearly two-thirds of states of the federation are still having difficulties with salary payments despite the bail-out funds provided to them by the federal government. To put the problem in perspective, it means the states cannot even pay workers – who constitute less than 1 percent population of their states – not to talk about the rest 99 percent of the population or even fulfilling any of the grandiose promises they made to their people during the elections.

However, instead of thinking of a more sustainable solution, the President has continued to think in an ad-hoc manner – offering palliatives while waiting for the price of oil to pick up. He was reported to have said the federal government will continue to ameliorate the hardship being faced by the states by making more funds available through expediting refunds due to them for the maintenance of federal roads and other expenses incurred on behalf of the federal government.

But the recalcitrant governors are pitching for something else – the review of the revenue sharing formulae – as the lasting solution to the bankruptcy of the states. They simply want a larger percentage of Nigeria’s oil money.

In a way, this is precisely the problem with the Nigerian federation. It was structured and designed – especially after the Civil War – to depend exclusively on revenues from the sale of crude oil for its survival not minding that crude oil prices, like those of most commodities, are volatile and fluctuate regularly. The country is bound to be badly exposed to the shocks and volatility that always comes with trade in commodities. It is a shame and a disservice to the people of the country that its leaders set it up to be officially a ‘rentier’ state that lacks a productive outlook and always preoccupied with ‘allocation’ and ‘distribution’ of rents rather than with wealth creation.

But it has not always been like this. In the First Republic, states or regions were productive centres and the principle of derivation held sway. Resources also flowed from the regions to the centre. However, with the military incursion into governance and the need to break the backbone of the then nascent state of Biafra by starving it of funds with the corresponding need to provide the federal government with funds to effectively prosecute the Civil War, collection of revenues from mineral resources were centralized. That ‘temporary’ arrangement became ‘permanent’ after the Civil War – a period that coincided with the oil boom. The arrangement was consequently cemented with its insertion into the 1979 constitution and since then, Nigeria was programmed to rely exclusively on rents, remain unproductive and thus vulnerable to the shocks that come with the rise and fall of commodity prices.

One consequence of the ‘distributive’ character of the Nigerian state is the proliferation of states and agitations for more states by groups in Nigeria since it appears the raison d’être for states creation is for them to be used as instruments of extraction of resources/rents from the Nigerian state by ethnic formations. Any wonder then that states in Nigeria have elaborate governance structures – over bloated executive councils, parliaments, judiciaries and civil services just like the federal government – whereas they, bar Lagos, produce very little or next to nothing and have no way of justifying their existence as semi-autonomous entities within the Nigerian federation? With the current arrangement, the major preoccupation of political authorities in Nigeria will continue to be ‘allocation’ and ‘distribution’ of rents rather than with ‘wealth creation’.

Like we have argued before, the issue of bankruptcies of state governments go beyond just transparency and judicious use of resources. It has everything to do with the dysfunctional and unproductive nature of our federal system, which ensures that despites states having constitutionally guaranteed avenues of raising revenues, virtually all of them, except one, still hopelessly depend on allocations from oil receipts to function.

A concrete solution will necessarily involve the collapsing of the current state structure into more manageable, productive and economically viable units that will be governments not only in name, but also in functions and capacities. Of course, this can only be achieved by way of a constitutional amendment. Until this is done, the country will sadly, continue to exist only to share rents and our fortunes will continue to raise and fall with the prices of crude oil in the international market.