Simon Kolawole: A federalism ruined by allocations

by Simon Kolawole

Simon-Kolawole-YNaija

Now, how can states become more economically stable and viable? There are two avenues I can think of straightaway. One, solid minerals. The laws are currently skewed in favour of the federal government and there is gross inactivity despite all the licences issued to mining companies over the years.

What is federalism? You are never going to get one definition. Not that it cannot be neatly defined but, in practice, there are hardly any two forms of federalism that are the same.

I have done extensive studies on federalism in the US, Canada, Mexico, Germany, Australia, UAE and Brazil, among others, and I find it interesting that every country seems to have evolved a system that suits its history and purposes.

While some political scientists will want federalism described simply as “weak centre, strong units” (compared to the unitary system of “strong centre, weak units”), the consistent feature is that power is shared between the centre and the federating units.

Federalism is mostly two-tiered, but countries such as Nigeria, India and Brazil have introduced a third tier called local governments or municipalities over the years.
In terms of ownership of natural resources, federal systems do not have a standard format. In the UAE and US, for instance, every federating unit controls its resources.

This is “resource control” at work. In Canada, however, there is a deliberate policy to achieve “balance” or “equalisation” through the sharing of a percentage of the petrodollars with non-oil-producing provinces.

In Nigeria, we apply principles such as “need”, “land mass” and “population” to achieve a similar objective. Meanwhile, in Mexico, the federal government is totally in charge of the oil, much like Nigeria.

All the states receive 20 per cent as transfers (federal allocations). Mexican municipalities (called councils in Nigeria) where oil production and shipping activities take place receive an extra 3.17% as “compensation” (13% “derivation” in Nigeria).
But I am not here today to propose what variant of federal system is best for Nigeria. I honestly cannot be bothered. I worry more about the leadership rather than the systems.

My concern, and many Nigerians have been expressing this worry for ages, is our variant of federalism which is based on federal allocations. This is stunting our development. We run an economic system where all the tiers of government shamelessly live on “federation salaries”.

If these “salaries” are delayed or short-paid in any month, there is immediate repercussion for the economy. Nigeria’s most important meeting every month is that of the Federation Account Allocation Committee (FAAC). Without FAAC, we are nothing. Take away the oil money and you have a country that is headless and going in no particular direction.

The conversation we ought to be having today is how we can run a federalism where the units are economically strong, with or without amendments to the constitution. How can the states become less dependent on FAAC? How can federal allocations become mere “pocket money”? How can a state like Rivers or Delta get N20 billion from FAAC but generate N100 billion internally? How can we change our mentality from allocation and consumption to production and development? For me, that is the real deal as we seek to make Nigeria a better country and reduce the political and economic tension in the land.

In Nigeria, every discussion starts and ends with “federal allocation”. People are demanding new states mainly because they have their eyes on FAAC. Shame!
Now, how can states become more economically stable and viable? There are two avenues I can think of straightaway. One, solid minerals. The laws are currently skewed in favour of the federal government and there is gross inactivity despite all the licences issued to mining companies over the years.

This needs a complete overhaul – in ownership, regulation and fiscal regimes. States should control the minerals. Governors should spend half of the energy they are wasting on 2015 to change the situation.

Two, industry and services. Most states have the potential to play host to big manufacturing companies by developing an industrialisation programme that will attract the needed private capital.

They can spur growth in tourism and hospitality. Economic activities will be generated, jobs will be created and the multiplier effects will be explosive.
How will states make money from these avenues? I am not suggesting that they should set up factories. Our experience with state-owned businesses in Nigeria is unpalatable.

In advanced economies, the biggest source of state revenue is taxation. Taxation works best where there are productive economic activities to be taxed. If state revenue depends on the prosperity of citizens (and not oil), the government inevitably has a responsibility of making the environment conducive for businesses to flourish.

Prosperity of the citizens is prosperity of the state. So government has to look out for the well-being of the citizens and their businesses.

But under our current system, government is more concerned with the security and prosperity of Shell and co. As long as the oil is drilled, pumped, lifted and paid for, Nigerians can go to hell as far as government is concerned.
To be economically virile and less FAAC-mad, states will have to focus their efforts on the areas of competitive advantage – agriculture, industry, tourism, etc. As these businesses flourish, tax revenue grows. Government will get more revenue from several tax handles: PAYE, VAT, corporate, withholding and so on. Imagine Taraba factories selling 10 million bottles of juice monthly.

Imagine Ondo chocolate factories selling 10 million bars monthly. Imagine a phone handset plant in Aba assembling 10 million units yearly. Imagine Kogi State developing the confluence into a tourist destination with millions of visitors yearly. Do the math. Please do the math.
However, the curse of FAAC means these avenues and opportunities are less attractive to government. It will take “too much” vision, “too much” effort and “too much” political will to change the economic structure of a state and ditch federal allocations. Instructively, even under the 1999 constitution, states can multiply their internal income simply by becoming more efficient in their revenue drive. There are enough tax handles to boost a state’s revenue base.

But the easy flow of oil money is ruining us. I mean, why expend so much effort on developing infrastructure, providing amenities, tax administration, rule of law, order and security to earn revenue when you can simply attend FAAC meeting in Abuja and go back home with a N5 billion cheque? What would you prefer?
I am one Nigerian who is convinced beyond reasonable and unreasonable doubt that every ingredient to make Nigeria great is here with us. With competent and patriotic leaders, we will be unstoppable. Believe me.

And Four
Other Things…
BOYCOTT BLUES
Jigawa Governor Sule Lamido has declared that his state will not participate in the national conference. Lamido, who is eyeing presidency in 2015 and is one of President Goodluck Jonathan’s fiercest rivals, does not believe the president is sincere. However, if we learnt anything under Gen. Sani Abacha, it was that boycott does not always work. Decisions reached may be implemented with or without your consent. In any case, delegates will certainly come from Jigawa. Those who think Jonathan has an agenda should go to the conference and counter it.

ASUU ISSUES
May I use this medium to plead with the Academic Staff Union of Universities (ASUU) to reach a compromise with the government and call off their strike? We are yet to truly gauge the impact of strikes but, surely, the effects are will be with us for generations. The ASUU strike of 1996, which saw students losing a whole academic year, is one damage we are yet to repair. That was possibly when the Nigerian elite started sending their children to foreign schools. Our education has suffered more neglect since then.

SHUTDOWN SHAME
I used to think Nigerian politicians rank first among those who care little about their actions on the masses, but the American Republican lawmakers are proving to be as heartless. The American government shutdown, caused by a Republican attempt to undermine the pro-poor Obamacare health policy through the back door, is threatening to send the global economy into spiral. Obamacare has been passed into law and the Supreme Court has approved it, but the buccaneering health insurance companies have engaged in intensive lobbying to kill it. What a shame.

GO AHEAD, EAGLES
The Super Eagles will take on Walia Antelopes of Ethiopia in Addis Ababa today in the first leg of the final qualifying round for the 2014 World Cup. Nigerians are very confident. I have heard analysts declare the Ethiopia fixture as a walk-over for us. Yes, we beat them 2-0 at the 2013 Africa Cup of Nations which we eventually won, but common sense should tell us that no match is won before you step into the pitch. Coach Stephen Keshi must proceed with caution as there is only a thin line between self-confidence and over-confidence.

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Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija

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