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FISCAL FEDERALISM AND RESOURCE CONTROL IN NIGERIA: THE WAY FORWARD

CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

Fiscal decentralization has become fashionable regardless of levels of development and civilization of societies. Nations are turning to devolution to improve the performance of their public sectors. Fiscal federalism is essentially about the allocation of government resources and spending to the various tiers of government. In general the intensification of clamour for greater decentralization is informed by a combination of people desiring to get more involved in government, and the inability of the central government to deliver quality services (Aigbokhan, 1999; Chete, 1998).

Decentralized systems of government give rise to a set of fiscal exigencies referred to as fiscal federalism also known as fiscal decentralization. It refers to the scope and structure of the tiers of governmental responsibilities and functions, and the allocation of resources among the tiers of government to cope with respective functions (Ewetan, 2012). Fiscal federalism or decentralization debate in the country has been the focus of public discourse for several years now. It is an issue that has for the first time in the history of Nigeria forced the Southern people (South-South, South-East and now South-West), to unite to ‘fight’ for a common cause (Arowolo, 2011). The practice of federalism and resource control formed the focal at the 1957 Constitutional Conference in London and the 1958 Conference that led to the enactment of the 1960 Independence and 1963 Republican Constitutions.

The 1960 Independence and the 1963 Republican Constitutions respectively enshrined some fundamental principles of fiscal federalism and resource control in view of the level of deprivation percentage accruable regions. In the course of the nation’s political evolution, these constitutions were either suspended or repealed by the ruling military regimes and the country titled towards what looks like a unitary system but a very strong Federal Government. With the return of democratic governance and the contending developmental problems that the Niger Delta region had successively experienced, there has been a spontaneous call for the institutionalization of resource control and true federalism (Nwogwugwu and Kupoluyi, 2015).

Defined as the control and management of resources by states and local governments from whose jurisdictions the resources are extracted, all federal states and local governments from whose jurisdictions the resources are extracted, all federal states, from the Australia, Brazil, Canada, Ethiopia, Germany, India, Malaysia, Switzerland and United States of America have it enshrined in their constitutions. For instance, under the Canadian constitution, the provinces and federal government legislate on natural resources in which the provinces have substantial control over their own natural resources. In the US, states have power over their resources and are subject only to federal taxes and laws on strategic resources.

Financial subordination makes mockery of federalism irrespective of how carefully the legal forms may be preserved. The states should not permanently remain dependent on the federal government for survival. The 1960 Independence and 1963 Republican constitutions not only granted greater fiscal autonomy to the regions, but also empowered them to compete with one another. This phenomenon has generally been misunderstood. The advocacy for resource control does not seek the exclusive control and ownership of mineral and other resources by the states. This advocacy is built upon the philosophy of justice that the federating states should have a deeper stake in the exploration and exploitation of mineral resources located within their territories (Nenyiaba, 2013).

Long years of military rule and the centralized nature of the military hierarchical structure created the financial hegemony enjoyed by the federal government over the thirty six states (36) and seven hundred and seventy four (774) local governments. This has created disaffection in the Nigerian federation. Thus the worry over the development of a national and functional fiscal federalism for Nigeria is well founded.

The 36 states together with the Federal Capital Territory which make up the federation of Nigeria have been reduced to beggars, because of their representative gathering every month at Abuja for monthly federal allocations. Only two states – Lagos and Rivers – can pay their workers without the federal intervention. Odje (2000) succinctly considers the twin concepts of true federalism and resource control. For him, the two concepts mutually complement each other. A true federal state practices resource control while resource control functions vibrantly in a true federal state. Hence, this research study seeks to examine fiscal federalism and resource control in Nigeria by suggesting the way forward.

1.2   Statement of the Problem

Nigeria’s federalism is crisis ridden and one of the perceived causes of the conflict is resource control or fiscal federalism. Fiscal federalism is the dynamic interaction between different tiers of government. It poses questions as to how the nature of financial relations in any federal system affects the distribution of the nation’s wealth. Nigeria is beset with structural imbalance, and true federalism implies that component units should freely pursue their own development. Most of the time the conflict is usually between rich and poor states in terms of resources availability and the need to have control over those resources. The reason for this conflict is based on the unaccepted method for revenue sharing.

Oil account for the nation’s 90% of all its foreign exchange earnings, but there are many issues involved in the exploration of this natural resource. They include environmental degradation, air and water pollution, oil spillage which pollute farm lands, river and creeks in the Niger Delta region of the country. Fiscal federalism is one of the problems that the nation is encountering alongside ethnic conflict which is mostly responsible for the centralization of the nation’s account. This problem has caused states to always be in antagonism regarding the exercise of power in terms of resource control. Therefore, this research study seeks to investigate fiscal federalism and resource control in Nigeria highlighting the way forward.

1.3   Objectives of the Study

The objectives of the study are:

i.  To explore the relationship between fiscal federalism and resource control in Nigeria.

ii.  To find out the relative effect of true-federalism on national development in Nigeria.

iii.  To find out the issues and challenges of Nigerian Fiscal Federalism.

1.4   Research Questions

In order to achieve the above objectives of study, the following research questions are formulated:

i.  What is the relationship between fiscal federalism and resource control in Nigeria?

ii.  What is the relative effect of true-federalism on national development in Nigeria?

iii.  Are there Issues and Challenges of Nigerian Fiscal Federalism?

1.5   Significance of the Study

The significance of this qualitative research project is notable since previous researchers have been very divergent in their views about the link between fiscal federalism and resource control in Nigeria. Thus, the study will be of great significance as it will add to the already existing literatures. It is anticipated that the analytical, conceptual and empirical studies will enhance the understanding of the relationship between fiscal federalism and resource control in Nigeria. The outcomes of this study would be a tool of intellectual pride to the University of Lagos' library, as well as to students and future researchers.

1.6   Scope of the Study

This study covers fiscal federalism and resource control in Nigeria. The undertaking of the research project is also poised to bring up plausible recommendations to suggest the way forward.

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