WITH  the controversy over a more acceptable revenue  sharing formula causing a ‘war’ of words, CHARLES KUMOLU asks if adoption of fiscal federalism for the federating states, among other measures, can address this unfolding conflict.

THE derivation principle or formula from natural resources was accordingly rejected in several parts of the federation in preference for a return to fiscal federalism principle under which federating states (or regions under the 1963 constitution) owned, controlled and developed the natural resources which were located on their land.

*Mittee: Some states are not viable

The twin issues of Derivation formula and resource control stand out and constitute the greatest test of the political will of the constitution review process to effect the desired restructuring of the Nigerian Federation so that justice is done to all stakeholders in the Nigerian Nation,”this verdict was passed by report of  the Presidential Committee on the Review of the 1999 constitution, inaugurated on October 19, 1999.

Thirteen years since that observation was made, the issue of having a more acceptable revenue generation and distribution  formula has remained contentious.

Even though there had been uneasy silence about how the nation’s wealth is being shared among all tiers of government before now, the latest outcry, appears to have polarised Nigeria along regional lines.
In fact, to say that the polity is not being overheated by the war of words over this matter  that has pitched various geo-political zones against one another, is an under statement.

Sanusi’s poverty alarm: Instructively, the latest controversy was reportedly provoked by the Central Bank of Nigeria,CBN, governor, Lamido Sanusai, who  in a recent interview with Financial Times of London, kicked off the argument that Boko Haram, poverty and the general unrest in the Northern part of the country is a result of the lower sums they receive from the federation account compared with the oil producing states.

Rising level of violence

“There is clearly a direct link between the very uneven nature of distribution of resources and the rising level of violence,” Sanusi said.

Coming in the heels of this outbust, was the position of Chairmain of Northern States’ Governors’ Forum (NSGF) Alhaji Babangida Aliyu, who fired  the salvo about the perceived inequality in the country’s allocation of derivation funds.

Aliyu, consequently called for a review of the federal revenue formula to reflect “current realities in the country” and enable the Northern governors meet their financial responsibilities in their respective states.

“We need to examine our revenue sharing arrangement to balance derivation with need requirement to guarantee the continued economic and political health of the country,” he stated.

The Nigerian golden egg: In furtherance to this, the National Publicity Secretary of Arewa Consultative Forum (ACF), also pointed out that a situation whereby an oil-producing state collects N24billion monthly, while another non-oil producing state collects about N4billion monthly cannot be said to be just.

Since this position of northern political leaders was made public, there has been a lot of counter reactions, especially from the oil producing states of the South-South region.

This antagonism Vanguard Features,VF, gathered is not unconnected with the consensus  that the northern states should not expect more of oil revenue, given that it does not contribute to Nigeria’s oil wealth.
For instance, Rivers State in its rejection of this clamour by northern states, noted that  every state has resources such as agriculture which proceeds are not shared among states.

Similarly, Abia hinged its argument on the fact that it is the oil producing states that bear the brunt of oil production through environmental degradation, while Ondo State says 13 per cent derivation is the oil producing states’ statutory right.

Akwa Ibom also corroborated the position of  Rivers that oil producing states are the goose that lays the Nigerian golden egg, hence there is no basis for equal sharing of oil revenue with non-oil producing states, because the producing region does not share degradation of its environment with them.

Every state has resources

Following this outright rejection of the position of the northern leaders, and its attending controversies among the various stakeholders in the polity, VF investigations gathered that not a few want the federal government to evolve a more acceptable revenue generation and distribution formula among the federating states.

Those, who hold this view, were quick to demand for fiscal federalism among the 36 states of the federation, noting that it would tackle all contentious questions about revenue sharing formular in Nigeria.

Particularly, the proponents of this call for financial federalism suggested that it would allow for derivation principle and state ownership and control of resources if allowed.

Speaking on the matter, pioneer National Publicity Secretary of the Peoples Democratic Party,PDP, Sen. Anite Okon queried thus: “ The Central Bank Governor has also forgotten the history of fiscal federalism in Nigeria.

Emergence of military rule

He could not have remembered that between independence and the emergence of military rule, the revenue allocation formula was a whooping 50 per cent (against the 13 percent that he alleges is now causing so much poverty in the North). Was there no poverty in the North at the time the region was getting 50 per cent of all revenues derived from the resources found there at that time ?”

He further said: “Whichever way you slice it, establishment figures and organisations of Northern Nigerian extraction, make poor advocate of true fiscal federalism, if that is what the Northern Governors Forum meant by their recent call for the share of the Federal Government in centrally-collected revenues to be reduced in favour of states.

“For years under the military, the Northern establishment watched the wholesale conversion of the country from a federation to a unitary state but said nothing. In fact, they were complicit in that unholy process and benefited substantially from it. Thus, a unitarist central government which they dominated and controlled, took over the most basic government functions and distributed the perquisites deriving therefrom by ‘allocation’.”

Continuing, he added: “The cardinal principle of fiscal federalism that what each federating unit could get out of the central pool should have some relationship to what it contributed to that pool, was cheerfully thrown overboard.

Access to state power and suspect population figures, which clearly favoured the North, became the criteria for the distribution of our collective patrimony. The question we must ask, as many have done before, is whether this situation improved the development performance of the North? Few, not even Sanusi himself, would answer in the affirmative.”

The elderstates man’s position was also amplified by  a 2011 report by Prof. Kalu Idika Kalu on fiscal federalism.

The report which was titled Fiscal Federalism in Nigeria: Issues and Practices observed that:  “Considering that every region and state in the Nigerian federation is well endowed with abundant resources- oil, solid minerals, forest resources, arable land, etc., the centralisation of oil wealth and the resultant over-dependence of all states on the revenues therefrom accelerated the national degeneration into the resource curse and Dutch disease conundrum.

Nigerian states are shielded from a hard budget constraint, thus encouraging them to merely raid the common pool. Incentives for developing own tax bases and resources are thus stultified to the detriment of overall growth and development.”

It further stated: “In broad terms, fiscal federalism is the division of power, functions and resources among the tiers  in a federating system. There are principles that guide fiscal federalism and sustain the overriding factors of administrative efficiency and fiscal independence.

Every state should have the authority to develop their sources of revenue within their own ambit. It is in furtherance of these principles that the adoption of exclusive and concurrent legislative lists in a federal system becomes relevant.”

1963 Constitution strictly based on derivation

By implication, further

checks disclosed  that this model might amount to going back to the post-independence revenue  sharing formula, when the  three federating regions had financial autonomy to generate revenue and contribute to the centre.

Specifically, the Revenue Allocation system  in that era, especially the 1963 constitution was strictly based on derivation.

Another critical feature of that constitution was the extensive powers granted the regions, making them effectively autonomous entities and the revenue arrangements which ensured that the regions had the resources to carry out the immense responsibilities.

Elaborating further on this, another report titled NIGERIA: Federalism, the Constitution and Resource Control by Prof. Itse Sagay stated thus:  “It will be observed that Mines, Minerals, including oil fields, oil mining, geological surveys and gas were put in the Exclusive Legislative List in the 1960 and 1963 Constitutions.

This was a carry over from the provisions of the 1946 Minerals Act, under which the Colonial Government gave itself the  exclusive ownership and control of all minerals in Nigeria. This was understandable under  a Colonial Regime whose objective was the exploitation of the colonised peoples, but certainly not acceptable in an independent country constituted by autonomous (Federal) Regions.

It is, therefore, not surprising that what was lost by placing mines, minerals, oil fields, etc., in the Exclusive Legislative List, was regained by the very strict adherence to the principle of derivation in the revenue allocation formula, particularly the allocation of the proceeds from mineral exploitation.”

Beyond this, it was gathered that an adoption of a truly fiscal federal system, may not augur well for some states that are believed to be unviable especially in the northern part of the country.

“We created many states and local governments that are not viable, because some people want to have their hands on the national cake. By the time you give money to states every month without them contributing anything to the central purse, even those who are viable do not bother to even make money for themselves.

We should realise that viability is an important aspect of state creation, then all these questions as to which region gets higher allocation will be insignificant,” an Environmentalist, Mr. Ledum Mittee told VF.

The renowned activist, queried why states should be created without considering how they would survive economically. Hence, he  argued that the unviable nature of some states is responsible for this continuous  controversy over derivation fund.

“It is not just only because you want a state or because you have the political power to create a state, then you can just create a state for your kinsmen. When the issues of viability are put to test, instead of people asking for state, they will be asking to merge in order to have  a viable platform.

I think that it goes to show the grey areas on the type of federation we are running. And that is why some states are clamouring for more money because some just exist to collect money from Abuja. And they have nothing to do, even those, who have the potential to generate revenue have abandoned that,” Mitte added.

Still regretting, that some states only exist to benefit from the federal purse, he said: “when you look at the 1963, you will find that we had homogeneous people forming a region, except like in the Middle Belt and in the south with different groups.

Federalism is a response to agitations of the minority, especially by wanting diverse people to have a stake in a country.  Where is the diversity between Ogun and Osun, Katsina and Kano or Abia and Imo? These are the same people.

It was not only the money that necessitated for the derivation in 1963 constitution, it also responded to our diversity. I think that when you look at homogeneity and viability, you know that there are questions surrounding some of the states we have today.”

The issue is beyond fiscal federalism

But the Executive Director of The Policy and Legal Advocacy Centre (PLAC) and the Civil Society Legislative Advocacy Centre (CISLAC) Mr. Auwal Musa Rafsanjani, would not hear nothing of such, noting that the current agitations have gone beyond the question of fiscal federalism.

As far as he is concerned, the twin issues of corruption and absence of good governance, are responsible for the recurring derivation controversy.

“As you can see, the problem is not about the kind of federalism we practice. There is institutionalise corruption at the local, state and federal governments, so they have not been able to justify the money they received in the past, no amount of money will be given to a particular local government or state that would put an end to the recurring demands for revenue increment, except there is an end to corruption,” he stated Adding that: “We have a situation in the country, whereby the more revenue you get, the more corrupt you are, so we must develop a mechanism that would ensure accountability.

The absent of accountability is the reason  people are asking for more money. Look at the  recent pension probe. That is a perfect example of how people feed fat on available funds. The revelations coming out from the probe shows how money goes into private pockets.”

For the President of Arewa Youth Consultative Forum,AYCF, the various parties in the revenue debate, should avoid apportioning blames, noting that what is needed is a compromise among the warring parties.

“ I have always said it in different fora that our people are responsible for what is happening in the north today. They should stop finding how to give a dog a bad name by saying that they have not had much revenue allocation.

Please call any of the northern governors and ask them what they do with the resources they get. My advice is that they find a lasting solution with their southern counterparts, because the resources is primarily from the south before it is regarded as a national asset.”

National asset

However, given that the nation is yet to have a consensus on the issue, the question in most quarters is what is the way forward?

And Rafsanjani suggested thus; “Even the National Assembly haven’t shown that it is capable of fighting corruption. I think this country requires serious rethinking, rebranding and reorganisation. The structure is always encouraging the corrupt people, that is why we have to do something about political corruption, judicial corruption and value system, so that when the resources are given, they can be properly  utilised for the benefit of Nigerians.

The issues at stake have gone beyond having fiscal federalism or not, we need to change our value system, address the issue of corruption and good governance. When that is done, any increment of derivation will be useful to Nigerians.”