STEERING NIGERIA TOWARDS ECONOMIC GROWTH 2

Resource control and Federalism

One mistake the military made was the creation of more states. States were created without any consideration of the ability of the state to survive independently. This also led to a stronger central government and undermined Nigeria’s healthy federal system in the process.

Nigeria at independence was based on a federal structure. The states were independent and controlled the resources within their territories and remitted part of the proceeds from the resources to the federal government. The military changed that, they moved the responsibility of managing resources from the state to the central government. This meant that revenue accruing from the nation’s wealth are put into a common pool and then shared between the central, state and local governments using a formula determined by the central government.

The takeover of the management of resources and sharing of generated revenue by the central government created a lot of problems some of which we are still facing today. One problem was that the states discontinued investment in development of resources within their territories.

This was reasonable since they were no longer in control of the resources in their territories and revenue was shared with a formula that had no relationship with productivity. With the responsibility of developing all resources in Nigeria abandoned to the central government it was obvious that she could not cope.

In response to this daunting responsibility the central government focused on only resources that she considered to be viable while abandoning the rest. In no time oil became by far the most viable resource in Nigeria and the central government decided to concentrate on it. This is the story of how Nigeria became a one product economy.

A lot of Nigerians have wondered how Nigeria a country blessed with abundant human and natural resources have ended up a one product economy. Some Nigerians are looking for the groundnut pyramids, the palm and rubber plantation, the coal and tin mines and all the other legacy of our past.

The fact is that once the central government took over the management of resources it became unattractive for states to develop resources that they cannot control. In addition a socialist (with no link to productivity) revenue sharing formula went a long way in discouraging Nigerian state governments.

Today Nigeria is seen as an oil producing state. Nigeria generates between 20 and 50 billion dollars from oil and gas each year. For a country of over 150 million people this is a very small figure and explains why Nigeria remains poor.

To grow the Nigerian economy it is obvious that more resources need to be developed. Nigerian governments have identified this and have for so many years been talking about developing the non oil sector. This however is yet to be backed with effective action.

The problem is that the central government wants to maintain the status quo (ie control resources from the centre) and at the same time develop the non oil sector. It seems to me that this two cannot go together.

The Nigerian government should consider handing over the management of resources to state governments. Every state should also be given a reasonable share (at least 50%) of the revenue accruing to the state as a result of developing revenues within their territory. This will only serve as motivation for states to develop resources within their territory and restore Nigeria as a multi product economy.

Whenever resource control is suggested in Nigeria the federal government and some states (especially northern states) view it as a threat. To them resource control means less revenue for them, this is bad. To me their disposition is selfish and do not consider the interest of Nigeria.

The question is will resource control lead to more revenue for Nigeria? My answer is yes. Once a state knows that her survival is in her hands she will devise ways of improving her revenue base, necessity is the mother of invention they say. This will result ultimately to an increase in the revenue base of Nigeria. To me what is important is whether resource control can increase the revenue base of Nigeria not whether it can increase the revenue base of a state.

Today states and local governments in Nigeria fold their hands and wait for money coming from the federation accounts, most of which is derived from a region of the country (the Niger delta). There are some state and local governments in Nigeria that rely 99.9% on the proceeds from oil wealth. Some time ago a local council chairman in Abuja claimed that the internally generated revenue from his local council (equivalent to a local government) for the whole of 2007 was just 2,000 naira (about $16). What this means is that this local government depends entirely on oil wealth produced hundreds of kilometers away and this is typical.

In fact there are local governments in Nigeria were the chairman comes once in a month to his office to share revenue. Once this is done he or she (but he most of the time) goes back to his private business until the next month.

This practice is the reason why Nigeria is not growing at the rate that the ordinary Nigerian will feel the impact. If the economy of Nigeria must grow then we must stop rewarding laziness and mediocrity.

Nigeria must get rid of this socialist heritage from her military days and embrace the capitalist ideology were income is a reward for productivity. Reward for productivity will lead to even more productivity and at the end of the day Nigeria and Nigerians will be the better for it.

To me resource control is the most fundamental reform needed in this country today, even more important than electoral reform. The question is why is their so much fight for leadership position in Nigeria? The answer is that being a leader in Nigeria gives easy access to revenue coming from resources that you no nothing of how it was developed.

Today all an average state or local government leader does is to wait for revenue accruing from the federation account and spending same in inflated contracts. To me this is not a hard job at all. What could be simpler than spending money? Anyone can do it.

Adopting resource control will create a challenge for Nigerian leaders and make the job of being a state or local government executive more challenging. The challenge will no doubt improve the quality of people who seek public office and reduce the fight for leadership position. With time the electorates will learn that only by voting for capable leaders will their territory grow. Vote rigging will die a natural death.

It is a fact that some states will not be able to survive on their own (at least for the interim). The central government will share part of the proceeds accruing from the rich states to states identified as poor. However states that are found to be unsustainable in the long term should be merged with other states. The revenue sharing formula used must be different from what is in use today.

In the next issue of this series titled “Steering Nigeria towards economic growth” I will suggest a revenue sharing formula that will propel those states to economic prosperity.

The formula can also be used even without resource control. The only difference in the formula and the present formula is that it uses variables that link revenue sharing with productivity. However, resource control is the ultimate solution.

STEERING NIGERIA TOWARDS ECONOMIC GROWTH

Introduction

Nigeria a country blessed with abundant human and natural resources has since her independence in 1960 been suffering from chronic impoverishment and underdevelopment. The country at independence had leaders who where selfless and patriotic. Then Nigeria was healthy and functioning properly and the structure was right for economic growth and the country then was described as the shining star of Africa.

All that is history now, since the military made their first incursion in 1966 Nigeria have lost her way. Nigeria, the shining star of Africa which should show the way to the rest of the continent, is now in search of direction. Nigeria is now an embarrassment to the African continent.

The military dismantled the rule of law and the constitution making Nigeria a lawless society in the process. They also dismantled the structure of Nigeria creating states that were not economically viable and by so doing created a stronger central government. Nigeria as a result moved from a federal system of government to a unitary system even though she had retained the “Federal” adjective in her name.

Once the Federation was dismantled the military had all the control to finally destroy Nigeria. They introduced politics in the education system. This they did by starving states that were considered then to be better-off education wise of funding in the education sector while investing heavily in states that were said to be “educationally disadvantaged”.

The aim of this was to centralize education and to put every part of Nigeria at par education wise. However the military forgot that the world is not static. As expected in no time the rest of the world left us behind education wise. Universities like UI and UNN at their prime were comparable to any university in the world, today they glorified high schools.

However, despite the heavy investment in the “Educationally disadvantaged states” project all the states have remained disadvantaged. In fact today all Nigerian states are educationally disadvantaged by any objective standard. Later in this series I will link most of the problems in Nigeria to our poor education.

The centralization of Nigeria created insecurity and mistrust among the tribes as every tribe wanted to control the almighty centre. Soon there was a brutal civil war and many lost their lives. The war may have ended but the battle for the centre is still on. Since the end of the war thousands of Nigerians have died in religious, ethnic and tribal related violence and many more may still die.

The military institutionalized corruption in the country. Corruption is today identified as the most daunting challenge facing Nigeria. Today corruption is on the driver’s seat.

The military however is not entirely to blame the civilians that took over from them did not do better either. These civilians made corruption official in government. Today some Nigerians do not see anything wrong in giving or accepting bribe. Corruption makes Nigeria go round. It seems to me that this country will ground to a halt without corruption.

This is the story of Nigeria a country in search of direction. One thing is certain, Nigeria is not sustainable as it is presently constituted. There is need for a drastic change in the state of affairs in this country.

In this series titled “Steering Nigeria towards economic growth” I will share my own views on how to salvage this country. In the next two issues on this series I will show that revenue sharing is at the core of our problems in Nigeria. I will start by showing that resource control is the most fundamental reform needed in Nigeria today, even more important than electoral reform.

Then I will also show how retaining the present structure but drastically amending the revenue sharing formula can turn Nigeria towards economic growth.

In addition I will also discuss how the poor quality of education in Nigeria is contributing to our woes corruption inclusive.