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Diversification Before Fiscal Federalism

By Nafata Bamaguje
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Nigeria’s current economic woes occasioned by the slump in global oil prices has heightened calls by Southern jingoists, particularly from Niger Delta for fiscal federalism as the cure-all panacea. They would have us believe that simply cutting off other parts of the country from the nation’s oil wealth – mostly from our offshore oil fields – will lead to a boom in the non-oil sector with economic diversification and prosperity.

Apparently, the resources to pay civil servant salaries in non-oil states and diversify their economies away from oil dependence would magically appear out of thin air.

If it is that easy, why hasn’t it happened? For almost 2 years now crude oil prices have been rock bottom, drastically slashing state allocations, such that most can’t pay salaries. Where is the much hyped spontaneous non-oil boom with prosperous diversified economy that is supposed to follow such deprivation of oil revenues?

It’s not simply a matter of tax hike to boost internally generated revenue in non-oil states. No tax hike in our depressed underdeveloped economy can make up the huge budgetary shortfall from declining oil revenues.

In fact such punitive confiscatory taxation is bound to be counterproductive, as many already struggling businesses will be forced to shut down, thereby further contract our depressed economy and diminish its revenue base. Most states are up to their neck in debt, so massive borrowing is not a realistic option either.

Thus the fiscal-federalism-to-diversification sophistry is sheer bunkum. Fiscal federalism by itself cannot lead to economic diversification. That’s putting the cart before the horse. A diversified economy makes fiscal federalism possible. That’s how the British colonialists did it to enable fiscal federalism in the first republic.

When Lord Lugard amalgamated northern and southern Nigeria in 1914, it was largely to offset the colonial running costs in the North, which was then not self-sustaining. It would have been impractical to talk about fiscal federalism then. The South was ahead economically by virtue of its sea ports and much earlier commercial trade with Europe, decades before formal colonialism.

But by independence the Northern economy was vibrant and abundantly productive. In fact Northern Nigeria was the world’s largest exporter of hides & skin, columbite and groundnuts. Cotton and tin were also major northern exports. That was the diversified economy that made fiscal federalism possible in the First republic.

With the exception of Lagos, no state today can subsist on the productivity of its people i.e. without oil revenues from our federation account. In that sense we are all parasites living off oil wealth we did not create. In fact without oil revenue allocation, even Lagos will do little more than pay salaries.

Southern calls for fiscal federalism are therefore disingenuous and totally unrealistic at this point in time. Over 80% of our crude oil revenues come from off-shore oil fields, which our Supreme Court declared in April 2002 is Federal territory, not belonging to any state.

Yet self-serving fiscal federalism/derivation jingoists in littoral southern states are banking not on increased productivity of their people, but on their continued unconstitutional parasitism of our off-shore commonwealth, which the Supreme court declared illegal in its April 2002 verdict.

They expect the rest of us to slave it out, while they feed fat on crude oil revenue that is not from their land. That’s their idea of fiscal federalism. And they have the temerity to insult the rest of us as lazy parasites. Derivation to Akwa Ibom and Ondo is entirely offshore.

Not even in U.S. - poster nation of Nigeria’s ‘true federalism’ loudmouths – do coastal states collect revenues from distal offshore oil fields. It goes to their Federal government. The U.S. federal government even owns that nation’s largest onshore oil fields – Alaska’s ANWR.

Unfortunately, our feckless northern legislators in the National Assembly allowed themselves to be intimidated and bullied by the Niger Delta insurgency as they treacherously acquiesced to the clearly unconstitutional offshore derivation, which shortchanges all non-littoral states, not just the North. Only 5 states benefit from the present lopsided arrangement, to the detriment of the remaining 31.

It is therefore dumb and self defeating for non-littoral southern states to continue blindly supporting off-shore derivation just to spite the North.

Their ultimate loyalty and responsibility should be to their own citizens, not the littoral states which do not share their huge off-shore derivation allocations with the deprived non-littoral southern states. But for unconstitutional off-shore derivation, financially hamstrung states like Oyo and Osun would easily pay salaries.

If the SS/SE fiscal federalism/derivation jingoists truly believe their self serving prescription that cutting off oil revenues to other parts of the country will lead to economic diversification and prosperity, they should take a dose of their own medicine – forget about oil revenues and their non-oil sector will bountifully boom Niger Delta into prosperity with full employment.

After all we all know crude oil won’t last forever. Nor will it always remain a high value commodity. That much is already abundantly evident from the current low oil prices, as well as the constant noise about green energy. The refusal of OPEC big wigs like Saudi Arabia and Iran to cut production has not helped matters.

Thus diversification is not just a northern imperative, but is also relevant for Niger Delta. Oil rich Bayelsa – the least populous state - can’t even pay salaries. Akwa Ibom, arguably the richest derivation state also struggles to pay salaries, even though it collects more allocation than the entire South east.

Diversification into the productive non-oil sector is the panacea for the mass unemployment with attendant high rate of violent crimes plaguing the Niger Delta and other parts of the South.

Building a diversified industrialized economy for fiscal federalism entails investing our resources to develop other potentials across the country, so that each federating unit can stand on its own feet without allocations from our federation account.

Rather than misapply our meager resources pandering to the misplaced sense of entitlement of some of our selfish compatriots, because their grandparents impregnated our Atlantic coast with crude oil exclusively for their benefit. Concentrating Nigeria’s limited resources in one small corner of the country (derivation, NDDC, Niger Delta ministry) is inimical to meaningful diversification for enduring prosperity.

That’s a failed strategy that has abysmally failed to address the challenges of Niger Delta states even after collecting humonguous derivation allocations over the past 17 years.

On the average their per capita allocations has been 3 to 4 times that of non-derivation states. Not to mention other huge Federal expenditures in the region via NDDC and Niger Delta ministry. Yet they have little to show for it in terms of economic prosperity, improved standard of living and employment.

Despite the huge sums collected for nearly 2 decades, the derivation states have nothing saved, and virtually no productive non-oil investments to fall back on a rainy day such as these trying times. Their visionless kleptocratic leaders seem to think oil wealth will last forever.

With the much more abundant resources available to them, derivation states failed to accomplish what they disingenuously accuse the less financially endowed North of not doing – diversification. It is the height of idiocy to believe continuing this failed deeply flawed policy will somehow produce better results.

Too many of our indolent Niger Delta compatriots believe they are entitled to live large on the nation’s oil wealth without having to do anything. It is this inordinate oil greed and dependency that led to their self inflicted environmental degradation, with which they try to guilt trip the rest of the country for even more compensatory derivation.

Yes you heard me right. Most of the Niger Delta environmental degradation is self inflicted from vandalization of oil installations. So says UNEP (UN environmental program) and a Senate investigatory committee led by one of the Niger Delta sons – Senator Magnus Abe. For some inexplicable reason, the foreign oil companies that supposedly devastated our Niger Delta, drill for oil responsibly in other parts of the world.

Even at that, oil spill environmental degradation does not affect up to 4% of any Niger Delta state. In other words over 96% of the land is still available for agriculture and other non-oil productive ventures. But they disingenuously exaggerate the impact of environmental degradation in order to extort more than their fair share of our nation’s oil wealth.

Instead of obsessing about oil, our Niger Delta compatriots would do well to learn from Japan and South Korea. These first world Asian nations have virtually no valuable mineral resources, yet are rich technologically advanced nations. Thanks to the productivity of their people.

On the other hand, the oil rich Gulf Arab nations will never attain the impressive technological advancement and even economic security of Japan and South Korea, so long as large proportions of Gulf Arab citizens remain pampered unproductive welfare dependents of the state… which is what many of our slothful Niger Delta compatriots seem to aspire to.

Under the ludicrous amnesty program, thousands of Niger Delta extortionists glorified as “militants”, collect N60,000 monthly for doing virtually nothing. Not to mention the Tompolos and Asari Dokubos who have become billionaires, all because they held a gun to our head and we buckled.

Many of our Southern compatriots have ulterior motives in their insincere advocacy for fiscal federalism. Largely driven by selfishness and greed, some of them are closet separatists who don’t believe in Nigeria. They expect the nation to fall apart once the oil revenues that largely sustains Nigeria is cut off.

With regards to fiscal federalism in the First Republic, another useful lesson to learn is fewer federating units. Given our present level of underdevelopment, most states are too small to be economically viable. Excessive state creation has sapped valuable developmental resources to run bloated and corrupt civil services presided over by thieving politicians.

Where there was one small civil service in the North, we now have 19 money guzzling state bureaucracies. Consequently, even in the recent past when oil prices were better, most non-derivation states (north & south) spent 80-90% of their allocations on bloated civil service and thieving politicians who account for less than 2% of the nation’s workforce.

Clearly, our federation needs to be structured into fewer more viable federating units (no more than 10), to free up much needed developmental resources for economic diversification. Instead the gathering of numbskulls at Jonathan’s defunct Confab recommended creation of 19 additional states for a grand total of 55.

That is more than United States, which has twice our population and 10 times our land mass. India has about 8 times Nigeria’s population, more than thrice our land, and is more ethnically diverse (over 800 ethnic groups), yet only has 29 states.

Incredulously, many of the vociferous Southern fiscal federalism loudmouths insist that Buhari implements the nonsensical recommendations of Jonathan’s useless Confab, even as existing states can’t pay salaries. They don’t seem to appreciate the obvious contradiction between more states and fiscal federalism.

Even if the confab recommended 55 statelets (glorified LGAs) are created, the agitation for new states won’t stop. Give it another 5 or 6 years, and new groups crying marginalization will emerge demanding creation of even more states.

As they sonorously clamour for implementation, too many Nigerians put much stock in Jonathan’s confab or SNC as the cure-all panacea for the nation’s problems. It isn’t… so long as our polity is dominated by visionless corrupt misruling elites.

We’ve had numerous talk-shops before – 3 pre-independence constitutional conferences as well as several post-independence constitutional conferences/assemblies (Obasanjo’s military regime constitutional assembly, IBB’s political bureau, Abacha’s constitutional conference and OBJ’s 3rd term confab). There’s no reason to believe Jonathan’s confab would be any better at solving Nigeria’s intractable problems, which are not fundamentally constitutional.

Our 1999 constitution clearly limits Sharia to personal matters like marriage and inheritance. That did not stop our Northern Muslim compatriots from insisting on the limb-amputating stoning-to-death barbarism glorified as “total Sharia”, which eventuated in Boko Haram. Similarly our constitutional provisions against discrimination did not stop the divisive indigene/settler dichotomy that led to orgies of violence in Plateau.

On the other hand nations like UK and Israel have no written constitution, yet do quite well as democracies. Thus Fiscal federalism won’t be realized by merely decreeing it in our constitution in defiance of the reality of our monocultural economy.

What is most important to realize our full potential as a great nation is not any rulebook penned by constitutional egg-heads, but capable visionary leadership and a truly unifying Nigeria-first ethos among our people, rather than hateful divisive ethno-regional/sectarian bickering (SS/SE/North etc).

Unfortunately our inept leaders who should provide the required sense of direction and visionary policies, come up very short… including the present Buhari administration.

Nafata Bamaguje