By Ibrahim Sanyi-Sanyi
([email protected] <[email protected])
INTRODUCTION
The present structure of Nigeria’s federal system of government is dysfunctional, hardly sustainable and will continue to constrain the country from attainment of its political economic potentials and goals also its developmental aspirations. It is simply tailored to sustain a colossal federal government – with heavy wage bill and large overheads – from the proceeds of commodity exports that chiefly comes from oil and gas receipts and dole handouts to the thirty-six states, federal capital, Abuja and seven-hundred-and-seventy-four local councils.
This disturbing reality is reflected in Nigeria’s revenue sharing formula which allocates 52.68 percent to the Federal Government from revenues that accrues to the Federation Account, 26.70 percent to states and 20.60 percent to local government areas. It is open-secret that only Lagos State can stand on its feet without the monthly revenue allocation from the Federation Account.
The rest of thirty-five states of the federation and FCT, Abuja cannot generate sufficient internally generated revenue (IGR) to cover such basic costs as their expenditure of running government, a clear testimony of their fiscal unviability as vehicles for Nigeria’s political-economic development.
The grim reality of the economic crises currently rocking Nigeria due to plummeted oil prices in the past two years has been persistent which led to lost about 60 percent of earnings into the Federation Account and attendant recession taking its toll resulting in most of the states unable to pay workers’ salaries for months and had to ran to the federal government cap-in-hand to beg for bailout funds. This effectively rekindled one of the recurring debates on our political economy: restructuring and fiscal federalism. The revenue sharing and allocation between the federal and other tiers of government
The revenue sharing and allocation between the federal and other tiers of government has been one of the most contentious issue of our nationhood; but the biting economic hardship aggravated by cash crunch and rising inflation has brought up the question of restructuring and fiscal federalism to the front burner of our national discourse. Actually, revenue allocation has always being the primary issue that is fundamental to the political stability of the country which transcend the purview of economics; and in pluralistic societies such as ours, it assume political, religious and social dimensions. But then, addressing the challenges of Nigeria’s fiscal federalism and its underlying derivation principle is just massaging over the symptoms and cannot be the silver bullet that would deliver Nigeria out of the woods.
The crucial issue is the restructuring of Nigeria’s political systems and institutions which serve as the pedestal upon which the political economy was built: big government with expensive presidential system which shoulders gargantuan executive functionaries (ministries, departments and agencies), costly bi-cameral legislature that consumes one-half of the nation’s total revenues; 36 states plus FCT, Abuja (with 35 of the states not fiscally viable) and 774 local governments that are mostly cost centers, unproductive and a major drain on the national resources. Another crucial matter is that of land reforms, through constitutional and legal amendments, which is needed to reverse those obnoxious provisions of the Land Use Act 1978 (still part of the 1999 Constitution as amended) that prohibits Nigerians from having fee-hold interest in land or ownership but fixed term lease tenancy (at mandatory rent) placed at the mercy and control of the state Governors; and limits the leasehold interest to maximum of 99 year period. It is however surprising that land reforms being an important area of restructuring is largely overlooked by most public commentators and policymakers thereby depriving it of the needed transformation to unlock land ownership and use in Nigeria which is urgently required for the development of agriculture
Another crucial matter is that of land reforms, through constitutional and legal amendments, which is needed to reverse those obnoxious provisions of the Land Use Act 1978 (still part of the 1999 Constitution as amended) that prohibits Nigerians from having fee-hold interest in land or ownership but fixed term lease tenancy (at mandatory rent) placed at the mercy and control of the state Governors; and limits the leasehold interest to maximum of 99 year period. It is however surprising that land reforms being an important area of restructuring is largely overlooked by most public commentators and policymakers thereby depriving it of the needed transformation to unlock land ownership and use in Nigeria which is urgently required for the development of agriculture
The crucial issue is the restructuring of Nigeria’s political systems and institutions which serve as the pedestal upon which the political economy was built: big government with expensive presidential system which shoulders gargantuan executive functionaries (ministries, departments and agencies), costly bi-cameral legislature that consumes one-half of the nation’s total revenues; 36 states plus FCT, Abuja (with 35 of the states not fiscally viable) and 774 local governments that are mostly cost centers, unproductive and a major drain on the national resources. Another crucial matter is that of land reforms, through constitutional and legal amendments, which is needed to reverse those obnoxious provisions of the Land Use Act 1978 (still part of the 1999 Constitution as amended) that prohibits Nigerians from having fee-hold interest in land or ownership but fixed term lease tenancy (at mandatory rent) placed at the mercy and control of the state Governors; and limits the leasehold interest to maximum of 99 year period. It is however surprising that land reforms
Another crucial matter is that of land reforms, through constitutional and legal amendments, which is needed to reverse those obnoxious provisions of the Land Use Act 1978 (still part of the 1999 Constitution as amended) that prohibits Nigerians from having fee-hold interest in land or ownership but fixed term lease tenancy (at mandatory rent) placed at the mercy and control of the state Governors; and limits the leasehold interest to maximum of 99 year period. It is however surprising that land reforms being an important area of restructuring is largely overlooked by most public commentators and policymakers thereby depriving it of the needed transformation to unlock land ownership and use in Nigeria which is urgently required for the development of agriculture and property in the country.
This opinion piece is to be delivered in two parts: i) the need to structure Nigeria’s political system and incorporate fiscal federalism and ii) the imperative of land reforms which is at the center of restructuring of our political economy.
NEED TO STRUCTURE NIGERIA’S POLITICAL SYSTEM AND INCORPORATE FISCAL FEDERALISM
The term restructuring simply means to organize the political systems and power relationships between various levels and arms of government differently from the status quo ante. It entails tweaking the existing structure to accommodate political reforms that would cater for the aspirations of people and ultimately ensure stable union, effective governance/service and efficient resource utilization that promotes healthy competition and development of the constituent units of the political economy. In a federal system such as our, it encompasses adjustment to the
In a federal system such as our, it encompasses adjustment to the extant political architecture depicted by the federal government, 36 states and FCT, Abuja and 774 LGAs; power sharing and relationships between the tiers and arms of government; fiscal federalism on the basis of equitable revenue sharing that ensures application of derivation principle and resource control, etc.
Why Restructure?
The engineering design concept of pipeline system deliberately created valve points for effective management of pressure within the line-pack that is used to transport liquids and gas. This ensures regulation of excess pressure which is vital in maintaining the integrity of the pipeline system. Nigeria, therefore, needs to restructure to provide the kinds of safety valves to be used to vent off excessive pressure from the diverse constituent political entities and interests that can potentially threaten its corporate existence.
Thus, restructuring is needed to remedy the military legacy (1966 – 1979 and 1981 – 1999) of centralized political system which promotes rent culture on oil revenues which bred corruption and inefficiency with fragmented and financially weak second and third tiers of government. This will enable the establishment of equitable, fit-for-purpose and fiscally sustainable regions/states with powers devolved to the regional governments to address agitations for true federalism and secession.
The federal government as presently constituted is a colossal and obese cost center that consumes 52.68% of the national revenues every year but yet borrows to finance budget deficit. It spent 84% of the 2015 budget on recurrent expenditure (including 22% on debt servicing), 14% on capital investment and ran budget deficit of 17%. The recurrent expenditure was 68% in 2016 (including debt service of 24.3%), capital expenditure was 30% and deficit was 36%. The recurrent expenditure in 2017 budget was estimated at 64% (including debt service of 22.7%), capital investment was 31% and deficit was 32%. Meanwhile, the existing 36 states (with the exception of Lagos) and absolute majority of 774 LGAs are not fiscally viable and relied on FAAC handouts and bail-out funds to function and pay workers’ salaries.
The current proven oil reserves of 37.2 billion barrels at the prevailing exploitation rate of 2.2 million barrels of oil per day (bopd) would last 46 years unless new oil discoveries are made to increase the reserves. However, the dominance of oil as international commodity is being challenged by renewable energy race, specifically the electric car revolution and proposed ban petrol-powered cars by Norway in 2015, UK and France embargo on diesel and petrol cars by 2040. China – a market where 23.6 million cars were sold in 2016, translating into one-third of global car production for 2016 put at 72 million – announced its plan to bar fossil-powered cars.
There is need to restructure to carry out urgent land reforms to enable ownership of lands by individuals, groups, local governments, regions/states and federal government in order to address agitation for resource control. This entails removal of the Land Use Act 1978 from the 1999 Constitution (as amended) and repealing of those obnoxious provisions in the Act that prohibits Nigerians from having fee-hold interest in land or ownership but fixed term lease tenancy (at mandatory rent) of 99 years or less placed at the mercy and control of the state Governors.
The 18 year old revenue sharing formula which allocated the federal government about 53% at the expense of states and LGAs needs review. This will enhance equitable application of the *derivation principle *in revenue allocation to regions/states; ensure fairness to residents of the revenue generation areas who suffered opportunity costs, pollution, disruption of both social and economic life arising from economic activities such as oil exploitation, mining etc.
Lastly, it is better to jaw-jaw than war-war.