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Fiscal federalism needed for Nigeria to move forward ….. Retreat participants

By Innocent Anaba

Are  we practicing federalism?  This was the question participants at a five-day retreat on ‘Foundation of Fiscal Federalism’, recently in Abuja tried to address. Though it was accepted that from the provisions of the 1999 constitution, there is no doubt that Nigeria is suppose to be a federal state, but in practice, are we?

The Nigerian constitution recognised the three tiers of government, the Federal, State and the Local Government and allows for power to be shared amongst these units, which is a feature a federal system,  but aside the creation of the three tiers of government, with the constitution spelling out their clear duties and functions, there are still agitation for the enthronement of true federalism. This is much so with the call by practically every zone of the country  for the amendment of the constitution to allow for true federalism.

The retreat organised by Forum of Federations (FOF) in collaboration with Nigeria Economic Society and funded by the UK Department for International Development, brought together stakeholders from the academia, government orgnisations, civil society groups and the  media. It provided participants the opportunity to debate on the issue and suggest the way forward.

The first presentation  by an Indian Economist and FOF Consultant, Dr Vishna Alok, which was a brief overview on Fiscal Federalism, generated much controversy, as participants could not agree on what Nigeria is practicing at the moment. Some of the participants argued that the country is practicing federalism, while others disagreed, contending that looking at the way the Federal Government dictates on many issues on one hand and the way the State Governors call the shot at the Local Government level, one cannot say it is a federalism.

Another issue raised to counter the argument that Nigeria is practicing true federalism is the issue of resource control. It was noted that the Federal Government cannot through legislation, take over the  land and resources  of the people without allowing them  the ownership of same, and turn round to claim that we have federalism.

Prof. Juam Zapata, an Argentinian, also a Consultant to FOF, who spoke on ‘Fiscal Federalism: An Overview of International Principles and Practices’, made it clear that  federalism is parctice in different forms. According to him, there are unique features in the federalism practiced in the US, UK, Canada, Brazil, Argentina and in other countries that practices federalism.

In another presentation on ‘Revenue Assignments in a Federalism: Principles and Practice’, Prof. Zapata, pointed out that usually, federal governments raises most of the revenues in a federation.

He noted that Argentina had to introduce the Fiscal Responsibility Law of 2004 to achieve fiscal discipline and transparency in public management through a series of guidelines that aim to establish a classification in the fiscal account of that country.

Dr Chinedum Nwoko, also a Consultant with FOF, in his presentation traced the history of Nigeria’s federal structure, referring to the 1963, 1979 and 1999 constitutions, pointing out that powers were shared between the different tiers of government.

According to him, while the 1963 constitution provided for better resource control, because the said constitution was well negotiated by the different sections of the country before it was passed. It was argued that the 1979 and 1999 constitutions, were created and handed over to the civilians, was not so liberal in the same area.

In another presentation entitled “Vertical and Horizontal Distributions in Nigeria”, Dr Nwoko with the aid of illustrations explained horizontal and vertical federal revenue distributions.

Prof Godwin Akpan of the University of Uyo, in his presentation entitled “Fiscal Responsibility and Accountability in Nigeria”, noted that sound institutions are necessary for fiscal responsibility and accountability to take place as honesty of government agents and transparency of fiscal processes are required for enforcement of fiscal responsibility and accountability.

According to him, “accountability in government activities reduces incidence of agency problem, while sound and fiscal system reduces fear, distrust and discontinuity and increases peace and social harmony which is prerequisite for development.

He also noted that corruption is a major challenge to fiscal federalism.

Mr Onyukwu Onyukwu, who spoke on “Fiscal Federalism, Sub-national Governance and MDGs in Nigeria”, said that the ability of state and local governments to significantly contribute to accelerated achievements of the MDGs in Nigeria depends on the quality of economic governance at this sub-national levels.

Executive Chairman, Federal Inland Revenue Service ((FIRS), Mrs Ifueko Omoigui-Okauru, who spoke on “Tax Administration Issues in Nigeria”, noted that the controversy trailing the imposition of  sales tax by some states would not have arisen, if other aspects of tax were properly harnessed.

She said, “the constitution clearly determined our rule of engagement and unfortunately, we fail to look at the constitution and rather do things the way we want. Until the constitution is amended, we must continue to abide by it, otherwise, we will have chaos. Again, we are in a hurry to change the constitution without even appreciating what we want to change.”

On the contentious issue of resource control,  she said “for the fact that an item is listed on the exclusive legislative list does not mean that the National Assembly cannot make a law to cede 100% of tax collected from a state to that state. Personal income tax is completely collected by the state and it is held by the state”.

The participants agreed that fiscal federalism was necessary for the country to move forward. It was also agreed that capable hands must be allowed to hold public and political offices, so that the nation’s resources are used for the maximum benefit of the masses.

Participants also agreed on the setting up of a network to support original policy-oriented research in the field of fiscal federalism by Nigerian scholars and experts working in the government sector.

The network, according to the participants, will also organise and promote non-partisan and independent dialogue on fiscal federalism issues in Nigeria; organise short-term professional training for policy makers and technocrats and to improve the quality of policy deliberation.

It will also convene periodic gatherings of researchers and practitioners to discuss research findings and recommendations (i.e., conferences). It will also compile an electronically accessible knowledge bank of research and other relevant documentation concerning fiscal federalism, with particular reference to Nigeria, develop  and support graduate courses and develop courses and support to training centres.

On the rationale for the retreat, Mr Jude Ilo, Forum of Federations Nigeria’s Manager said, “in Nigeria, issues of fiscal federalism are ubiquitous and at the forefront of many political and socio-economic development challenges, including matters of service delivery, accountability, macroeconomic stability, balanced growth, national political coherence and the deepening of democratic federalism in general.

“At the same time, it is generally accepted that Nigeria’s institutional capacity in the field of fiscal federalism  at all levels of government and sectors of society is very weak.”

On the network, he said a network  on fiscal federalism would play a small but strategic role to enhance capacity and improve policy in this critical field. Thus, the general rationale for establishing the network is strategic enhancement of capacities that we lead to better informed deliberations of public policies and programs bearing on the practice of fiscal federalism in Nigeria”.


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