States viability in Nigeria

by | October 20, 2017 12:50 am



Nigeria claims to be a federation and even refers to itself as the federal republic of Nigeria. But in reality it is not because most of its federating units are not and cannot be self-sustaining or financially autonomous. To be sure, one of the requirements for a federation is the existence of a constitutionally guaranteed source(s) of revenue to concretise and justify its existence as an order of government. This requirement is so important in a federation because without fiscal autonomy, there cannot be real autonomy, which is the very idea of federalism. In fact, federalism can trace its origin to the desire of the various independent states in the America to form a supranatural body to coordinate the activities of the various states without the states losing their autonomy. What is more, revenues usually move from the states to the centre to enable the centre perform its constitutionally assigned functions.
However, in Nigeria, we have succeeded in turning the idea and practice of federalism on its head. Rather than being an order of government with coordinate powers and independent revenue source(s), we have contrived a system whereby the centre has become the pre-eminent government with the powers to create smaller, dependent and economically less viable or even unviable orders of governments.
This much was captured by the Economic Intelligence Magazine, which, months ago, released its Annual States Viability Index (ASVI) which shows that fourteen states are insolvent as their internally generated revenues (IGR) for 2016 were less than 10% of their federation account allocations in the same year. The report further explicated on what we already know – that the declared IGR of Lagos state of N302 billion for 2016 was higher than those of 30 states put together excluding Ogun, Rivers, Edo, Kwara and Delta states whose IGR are more than 30% of their FAA.
We recall that the problem started with the civil war and the oil boom. Nigeria’s productive and region-based federal system was restructured and redesigned to depend exclusively on revenues from the sale of crude oil for its survival not minding that crude oil prices, like those of most commodities, are volatile and fluctuate regularly. The country is bound to be badly exposed to the shocks and volatility that always comes with trade in commodities. It is a shame and a disservice to the people of the country that its leaders set it up to be officially a ‘rentier’ state that lacks a productive outlook and always preoccupied with ‘allocation’ and ‘distribution’ of rents rather than with wealth creation.
But that is not all. A much worse bastardisation of our federation is the use of creation of states as instrument of extraction of resources/rents from the Nigerian state by the elite ethnic formations. With the current arrangement, it appears raison d’être for the existence of states in Nigeria is to receive the states’ elite share of the national cake (oil money) and nothing more.
But that is all right in periods of boom. Now that the oil money does not flow as it used to, there is the need to rethink the nature of our inverted federation. Already, most of the states are bankrupt and after about five bailouts, most are still unable to meet recurrent expenditure not to talk about capital expenditure.
We must collectively realise that our political authorities can no longer be preoccupied mainly with matters of ‘allocation’ and ‘distribution’ of rents. They must now be concerned with how to generate wealth and ensure that the sub-national orders of government (states) are viable and fiscally independent.
This can only be done by undoing the damage done initially – creation of unviable units as states. That is why the political restructuring of the country is so essential and necessary to escape the coming doom. We only wish the government will take a realistic view of the restructuring of the country!