Oil, the military and our warped fiscal federalism
As Nigeria basks in the glory of the recent peaceful presidential election, it is clear to the dispassionate observer of the Nigerian political scene that the many inequities of our fiscal federalism will demand attention in the new dispensation. The reason is not far-fetched: although federal in name, Nigeria has put in place an essentially unitary structure. Indeed, we wish to warn that the sooner we do away with our current and myopic policy of feeding-bottle federalism, the better for all of us.
We recall that this paradox is essentially derives from a combination of two inter-related factors: military rule and oil.
With regard to the former, the military with its rigid chain of command gave minimal thought to the other sub-national units with respect to features like autonomy and derivation in the area of Fiscal Federalism. However, the specifics of fiscal centralization derived from the dramatic face-off which occurred during the civil war. The oil giant, Shell-BP, was caught between the Federal Government and Biafra on the question of who should receive oil royalties. It was a tough call. Ultimately, after a protracted wrangling in which the famous Albion lived up to its classic billing, the revenues were paid to the Federal Military Government. However, and in order to subsequently remove any ambiguity concerning who is the ‘legitimate’ recipient of oil revenues, the Federal Government, inserted a specific section in the Memorandum of Understanding (MOU) with the oil companies. Predictably, the MOU stipulated that at all times; the Federal Government was designated as the sole recipient of all oil revenues from the oil companies. And in the bid to further consolidate this monopolistic situation, the Federal Government went further to put in place, Decree No 13 of 1970, with retrospective effect from April 1969.
Thus, an expedient measure that was put in place at the height of the civil war became a pillar of our fiscal federalism. Little wonder therefore that an observer, with a laconic disposition was moved to declare that the real losers of the internecine conflict were not just the Biafrans, but all the inhabitants of the oil-bearing regions of the Niger Delta. And the reason for this is obvious enough.
Hitherto, with derivation as a major criterion, the oil bearing region received 50 percent of the rents and royalties on oil. But since, 1969 and particularly since 1970, the figure had turned to zero. Meanwhile, matters have hardly been helped by the fact that in view of their respective demographic strengths, the major drivers of the Nigerian State, with the possible exception of the Jonathan Presidency have always come from one of the major ethnic groups. Little wonder therefore that in describing this anomalous situation, Ken Saro Wiwa came forth with the seductive phrase : internal colonialism.
Unfortunately, this is not the only negative dimension of our fiscal federalism. The near-monomaniacal focus on distributed oil revenues has virtually killed off our agricultural sector. Nigeria has since been transformed into a country that cannot feed itself. Moreover, and over time, a disjuncture has occurred between the government and the governed. This is because the former has relaxed its efforts in the area of tax collection.
The consequence of this is a lack of civic rigour in the polity. This has in turn fuelled corruption of monstrous proportions. Meanwhile, a situation in which the government just relies on rents coming from the oil companies has done a lot to encourage the phenomenon of drone capitalism. In turn, this type of laid-back, risk free capitalism has turned politics into warfare. This is because the victors simply come into vast oil wealth – a feature which encourages a lot of political malgovernance and irresponsibility.
Unfortunately, although managers of the Nigerian state have attempted to redress some of the loud complaints and agitations from the oil bearing areas, yet in addressing these demands, the ensuing outcomes have merely thrown up another set of drone capitalists in many of the states in the Niger Delta. In this instance, we can look no further than the fact of the monumental corruption which has been perpetrated by the political class in that part of Nigeria.
Meanwhile, given the principle of equality that is embedded in our fiscal federalism, agitations for state creation and proliferation of local government constitute a major feature of our political life.
This is because any state that is so created automatically becomes entitled to some largesse in the form of petro- revenues at the centre. Similarly, another form of iniquity can be observed in the fact that, in Bayelsa State only eight local governments are recognized by the Federal Government for the purpose of revenue sharing. On the other hand, Kano State has 44 councils. Thus, at every revenue sharing exercise, Kano State is entitled to 44 portions, while oil rich Bayelsa, gets only 8
In an immediate context, one sure way of contending these various aspects of our lopsided fiscal federalism is to restore the Principle of derivation. Luckily enough, the various parts of this vast country are so blessed that the principle, will favour not just the Niger Delta, but the entire country. This is because natural resources abound in virtually every part of our country.