THE REASON WHY SYCOPHANTS SHOULD ALLOW OBIANO TO CONCENTRATE....................... A permanent solution to the revenue shortages lies in restructuring the country along the path of fiscal federalism Indications are rife that the Federal Government (FG) and the other federating units – states and local governments- are facing a grim financial crises arising from steadily dwindling national income derived predominantly from the sale of crude oil. Since last year there have been rumblings at the monthly Federal Revenue Accounts Allocation Committee (FRAAC) where the commissioners of finance from the 36 states of Nigeria and their Federal counterpart meet monthly to review national earning chiefly from crude oil and share the proceeds to the federating units according to the statutory revenue allocation formula which gives the bulk of the revenue to the monolithic FG leaving the states and local governments (LG) with less. Recently, states have complained that revenue accruing to the federation account has been drastically dwindling and fluctuating with the consequence that the states and LG’s got much less. This shortfall in revenue has made it increasingly difficult for the states and LGs to pay salaries to their civil servants as well as service their contractual obligations. When the going was good, the FRAAC for instance in July, 2013, shared N1.014 trillion among Nigeria’s federating units. But by October the same year, the income accruing had plummeted to N568.413 billion, the lowest for many months. Last November, the FG, states and LGs received an uncomfortable N675.650 billion between them which again nosedived by a miserable 581.14 billion in December, 2013. In January, 2014, only N629.12 was available for sharing to the three tiers of government. Obviously, the chicken have come home to roost as the FG and its federating counterparts in what some have aptly described as a “quasi federalism” or “unitary federalism” have woken up too late to the reality which economists have warned for many years since the ‘oil boom’ era of the seventies that Nigeria’s dependence on oil for over 90 percent of her income was not sustainable due to the volatility of crude oil pricing. The wise counsel for the country to diversify its economy from crude oil and reinvest oil earnings to grow the agriculture and real sector fell on deaf ears. This news paper is deeply pained that even at the moment many of the nation’s leaders who are used to accessing and squandering cheap oil income are yet to see the devastating time bomb of an unplanned future without oil. Statistics from the Federal Inland Revenue Service (FIRS) indicate that “some states have IGR-to-total revenue percentage that is as low as 3 percent. For most states the federal allocation ratio is above 80 percent. This went down slightly to 70 percent in 2009. In fact only Lagos generates enough internal revenue to settle its workers’ wage bill. The rest of the states depend on federal allocation to pay their workers. This is unacceptable. The oil related financial crises the Nigerian state and her federating units are currently going through is not a hurricane or tsunami not foretold neither is it an unpredictable earthquake. It is therefore most worrisome that rather than confront the challenge by putting in place a visionary plan to redeem the nation and the future permanently from the curse of oil dependence, the leaders are busy trading blames toying with banal solutions. Some state governors have blamed the drop in revenue on flawed fiscal policies of the FG besides the known factors of oil theft and pipeline vandalism. Some governors like Babangida Aliyu of niger State still cannot see a solution outside crude oil when some oil producing nations like Norway have wisely invested their oil earning to alternative sources of wealth. Governor Aliyu wants the northern states to mount pressure on president Jonathan to invest more funds for oil exploration in the northern states so that with some luck there will be more oil money to share. Recently the commissioners of Finance from the 36 states of the federation adopted a resolution urging the FG to abolish subsidy on petrol so that the states would have more to share and spend without considering the spiraling inflation this would unleash on the people. What an appalling consumptive mentality! We cannot agree more with one analyst who said “the reason for this mentality is simple: It is because we run a “unitary federalism” where the resources of the country are pulled into a central pot and shared to the rest of the country.” As far as this Newspaper is concerned, a permanent solution to the revenue shortages lies in restructuring the country along the path of fiscal federalism as was the case in the first republic this paper with each federating unit or region (now state) exploiting the revenue within its domain and contributing a fraction (statutorily) for the running of the central government which takes care of a few areas of common interest. This is one challenge the ongoing national dialogue should be able to resolve for the nation. In the interim, we implore the FG, states and LGs to drastically scale down the cost of governance by eliminating unnecessary political offices and institutions and slashing the salaries of political office holders by not less than 50 percent. The states and LGs must go back to the drawing board to evolve and implement functional plans to grow their economies, especially the agricultural and industrial sectors as well as increase internally generated revenue by at least 50 percent. Certainly, there is an economically viable future for Nigeria and her federating units without oil as a few states like Lagos, Delta, Gombe, Osun, and Abia have started demonstrating.
Posted on: Sat, 01 Nov 2014 11:13:58 +0000
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