Punch Editorial Board
As the 2017 financial year gets under way, attention has been rightly riveted on the capacity or lack of it of the federal budget to halt the recession. While the economic policies of the centre are indeed decisive, Nigerians would do well to pay closer attention to the states where at least N2.6 trillion is to be spent on salaries and other overheads and over N3.53 trillion on capital ventures. More than ever before, Nigeria should strive for the ideal where the component states become drivers of economic growth rather than mere bureaucratic cost centres.
That basic function of federating states has been lost to decades of ruinous centralising arrangements that have reduced the 36 states to mere cost units of a mighty central government. This is reinforced in the budgets released by 33 states that, according to a report by the BusinessDay Research Intelligence Unit, are to spend a combined N6.22 trillion in 2017. The fatal flaws in their spending plans are twofold: apart from Lagos State which targets generating 78.5 per cent of its N813 billion budget internally, the others rely substantially on allocations from the Consolidated Revenue Fund of the Federation from which revenues are shared monthly among the federal, state and 774 local governments; second, the cost of maintaining their wasteful bureaucracies makes no economic sense. Many of the states, even by their own admission, exist only to pay salaries and support the luxurious lifestyle of public officials.
In addition, the state governments have, without exception, seized control of the local governments and their 20.6 per cent share of the monthly allocations from the Federation Account.
Nigeria violates the established principles of federalism, which rests on the free association of federating sovereign units to forge a common destiny. The underlying characteristic of a federal polity should be fiscal federalism and this is lacking in Nigeria.
Unlike the 1963 Constitution where the four regions kept 50 per cent of revenues generated in their territories, remitted 20 per cent to the centre and 30 per cent was shared among all the regions, now the three tiers of government take 52.68 per cent; 26.72 and 20.6 per cent respectively with a mere 13 per cent of mineral revenues based on the derivation principle. The anomalous situation is becoming more unsustainable by the day. We must run Nigeria as a true federation or face ruin. The mindset that “the current federal arrangement is a direct legacy of military rule, with the attendant risk that states and LGAs were created to behave more as agents of the centre, and perhaps for the primary purpose of political distribution of national resources, and not for effective delivery of public services” must change.
In other federal societies, healthy competition helps drive growth even in laggard states. Every state should henceforth be run like an autonomous economic unit. States must use technology to drive their internally generated revenues. So far, only Lagos has been consistently striving towards these ideals with its IGR climbing to N25 billion monthly in December 2016. The National Bureau of Statistics reported that Yobe, Zamfara and Ekiti states generated N2.25 billion, N2.74 billion and N3.29 billion respectively as Internally Generated Revenue in 2015, with budgets of N80.6 billion, N92.8 billion and N80.9 billion.
Recurrent expenditure will gulp N56 billion of Ekiti’s N94 billion vote this year; Plateau will spend N69 billion of N133 billion budget, while Osun will service its bureaucracy with N76 billion from its total budget of N138 billion this year.
Yet, the country’s dire infrastructure deficit, jobless figure of 27 million and poverty rate of over 61 per cent cannot be reversed by policies driven by the centre alone. The 35 other states need to pursue the Lagos model of working for financial independence. The state has also set itself the goal of becoming Africa’s third largest economy soon. This is the standard practice in federations.
The American state of California has the world’s sixth largest economy, according to Bloomberg. Hitherto poor, with most of its land area desert or semi-arid, Nevada State opted for mining and the gambling industry to catapult itself to the 19th richest US state. Colorado did not depend on federal alms before leveraging its solid minerals and arable land to invest in mining and agriculture while making the state the third most business-friendly in the country to attract investments.
The state of Uttar Pradesh contributes 19 per cent of India’s total food grain output, 70 per cent of its sugar cane production and hosts 12 per cent of the SMEs. West Bengal relies on agriculture, industry and services and has an aggressive programme of attracting foreign direct investment. As chief minister of Gujarat, Narendra Modi (now India’s Prime Minister) was extremely aggressive in selling his state to the outside world, and reached out to a number of countries in Asia such as Japan, China and Singapore. In addition, Modi also started the Vibrant Gujarat Summit in 2003, which was attended by foreign investors and diplomats. Similar economic policies drive the diverse states/provinces of Australia, Canada, Switzerland, Belgium, Malaysia and Brazil.
Every Nigerian state has an advantage in agriculture and mining. Others like Cross River need to invest even more in tourism. Sokoto, Kano, Niger and Kogi among others also have a great but untapped advantage in tourism. The South-East states of Abia, Anambra, Ebonyi, Enugu and Imo cannot justify why the wealth that hitherto came from palm oil was abandoned. The states of the North-West and North-East should invest in ranching, re-desertification and farming.
Nasarawa and Kogi states have more solid minerals than many African countries, while the South-West states should urgently revive the sterling legacies of robust agriculture, industrialisation and human capital development that set the region apart in the 1950s and 1960s. They should revive cocoa, rubber, cassava and maize farming to drive a domestic export-oriented industrial take-off. Kano, Oyo, Plateau, Kaduna and Rivers should also revive their once-thriving industrial estates. States should adopt investment-friendly policies, competing for local and foreign capital.
Now is the time to concretise regional and cross-state economic collaboration and do away with empty rhetoric. Contiguous states should forge mutually beneficial economic ties that transcend party affiliation and regimes. Instead of perennially sharing oil revenues produced in only 10 states, state governors should work for the intensive investment in mining and agriculture while pursuing constitutional amendments to overturn federal monopoly on mining, railways and waterways. The Federal Government should not be the sole motivator of job creation. States should, like Lagos, have job-creation schemes. The first priority is to cut waste, reduce the cost of the bureaucracy and organise every state for production, job-creation and poverty reduction.
Governors must be proactive in attracting foreign investment. They should contain recurrent expenditure, which would create room for infrastructure investment and social spending. Governors that are still wasting scarce resources on religious activities should stop the primitive practice. Civil society groups should demand accountability from governors who run their states as their personal fiefdoms.
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