In an era blighted by economic recessions and general malaise, the recent declaration by Akinwumi Adesina, the President of the African Development Bank Group, on the imperative of economic restructuring enlivens the debate about the fundamental weaknesses hobbling the Nigerian state. Calling for transformation, the erstwhile Minister of Agriculture traced the current seismic downturn in the country to the upside-down political structure in which the states depend primarily on the sharing from the centre for their income. “The union would be stronger when restructured,” he said. This is sound, logical and rational because Nigeria is a natural federation, but is unscientifically practising an economically centralised, unworkable and politically unsustainable federal structure.
Indisputably, the current fiscal system has delivered only economic misery, poverty and joblessness. Insecurity is extensive. Just like many other persuasive voices keep pointing out, Adesina’s concept is to restructure the fiscal system along the federal principles suitable for an extremely plural country like Nigeria.
Under the 1999 Constitution, the Federal Government controls most revenue, takes 52.68 per cent and shares the rest among the 36 states and 774 local government areas. As a result, only “three states are viable,” Adesina noted at the second-term inauguration lecture of Rotimi Akeredolu, the governor of Ondo State. In his speech, succinctly entitled, ‘Towards A New Nigeria: From Federal Fatherism To A Common Wealth,’ he reiterated, “Our kind of federalism is fiscally unhealthy for the states and the Federal Government and it does not grow its constituent entities. It simply makes them perpetually dependent.” The core issue is about implementing fiscal federalism, where “the resources found in each state or state groupings should belong to them and the constituent entities should pay federal taxes or royalties for the resources.”
The President, Major General Muhammadu Buhari (retd.), should stop his imperviousness to this tenet and save Nigeria from the affliction the military bequeathed to it in 1999. Research results indicate that greater economic complexity results in lower poverty headcount rates. This is particularly the case for countries that enjoy higher economic growth rates, lower levels of income inequality and lower degrees of economic growth volatility, including due to lower sizes of export demand and financial flows shocks. These findings have important policy implications for Nigeria where the constituent units are neither competitive nor productive, leading to a very low economic complexity. In the First Republic, the regions controlled their resources, paid taxes, royalties and agreed percentages to the centre. It worked marvellously as the regions developed industrially.
Today, Nigeria is an extremely poor country. At 105 million or 51 per cent of the population, it harbours the largest number of extremely poor people in the world. The states are not producing anything nor have the impetus to drive economic activities. The cause is the absurd dependence on the monthly federal allocation. By imposing itself on the states, the Federal Government is hurting every segment of the society.
Amidst huge potential, Nigerians are suffering. All the 36 states have resources that can be developed for economic growth. Oddly, they do not. Apart from iron ore, Kogi State is said to have sizeable solid mineral types; there are gold deposits in Zamfara Edo, Ebonyi, Kaduna, Osun, Oyo states and lead and zinc – Ebonyi, Benue, Cross River and Kano states. Although Nigeria’s roads are dilapidated, Ondo and a few states sit on bitumen deposits worth $1.5 trillion. Adesina says Ondo alone can generate $657 billion from the bitumen deposits over time, but the state’s GDP is a paltry $8.4bn because bitumen is untapped. Ironically, Nigeria imports bitumen annually at the cost of N300 billion, Adesina lamented. The logical solution is to devolve more fiscal powers to the states and Buhari should prioritise this swiftly.
In the United States, Canada, India, Brazil and Australia, fiscal devolution underpins their federalism. In 2019, California’s economy was reckoned as the fifth largest in the world behind Germany and above India with a GDP of $3.2 trillion based on ICT, agriculture and entertainment. Its $79,436 GDP per capita was higher than the US average of $65,000. There, federalism begets competition.
Unfortunately, Nigeria is not measuring up against its peers because of its unbalanced economic structure. Besides, the leadership is backward and deficient, one that is adamant about progressive ideas. At $477 billion in GDP, Nigeria ranks as Africa’s largest economy. That is where the good news ends. With a population of 206 million, its GDP per capita of $2,250 in 2020 made it 10th on the continent, whereas Seychelles has per capita of $14,962, says the World Bank. With a population of nearly 59 million, South Africa’s PCI in 2020 was $7,346. Algeria, war-torn Libya and Republic of Congo all outperform Nigeria in PCI. Brazil dwarfs Nigeria with a GDP of $1.84 trillion. Moreover, despite its oil wealth, Nigeria’s annual budgets are a shadow of South Africa’s, a manufacturing hub. South Africa’s $78.38 billion budget in 2018 more than doubled Nigeria’s $29.8 billion. In 2019, South Africa budgeted $74.84 billion and Nigeria $29 billion.
Apart from Adesina, other individuals and groups have all at different times strongly advocated restructuring. In Nasir el-Rufai’s case, the Kaduna State governor headed the All Progressives Congress 23-man Committee on True Federalism that made extensive recommendations in 2018. Two of the 12 major points in that report centred on fiscal federalism and the need to regularly review the derivation principle in favour of the states.
Thus, it is time to stop the political rigmarole dragging back the economy from reaching its true potential. The minimum irreducibility is for the political class to end the shallow and parochial interests standing selfishly against restructuring.
The people are paying heavily for the distorted constitution. Large swathes of the country are crumbling under the siege of insecurity; the economy is wobbly; poverty and unemployment are worsening, and ethnic tensions are pulling the country apart. A proper federal set-up will save the country from these centrifugal forces and place it firmly on the path of sustainable national development. Economic productivity that could enable millions of Nigerians, especially in the North, to escape poverty in the shortest possible time can be exponentially boasted if the Buhari regime embarks on bold reforms now.
