19/09/2020
Suggestions for the operation of True/Fiscal Federalism in Nigeria.
Preamble (Definition viz a viz resource control/fiscal/true federalism)
For many in Nigeria, the country will continue to be regarded as a political enclave epitomising injustice and modern day slavery if true federalism is not practiced.
While the official name of the country remains "Federal Republic of Nigeria" the country is in all aspects, a unitary state!
Mineral resources for example, are controlled by the central government as part of an "exclusive" legislative list, which effectively prohibits the states where the resources are situated from having any say.
The revenue derived from such is shared among other States in the federation after an allocation of 13% to the State from which such is derived.
This is the situation regarding the Oil Producing Niger Delta area of Nigeria.
The Federal Ministry in charge of the Solid Mineral development appears incapable of regulating the activities of miners in the other parts of the Country. This has resulted in violence of monumental proportions.
Amidst international outrage the central government set up a body (Niger Delta Development Commission) and Oil Mineral Producing Areas Development Commission (OMPADEC) to develop the area on behalf of its Citizens who regard it as an affront on their collective intelligence.
The central government appoints a Minister in charge of the NDDC.
The present situation.
Some states of the Federation are considered disadvantaged and are allocated more money than they can generate internally and as such, rely on the central Government to redistribute a large portion of revenue collected, to be allocated to thems on the basis of their land masses and population .
Even when the revenue is from.corporate or value added tax, the central Government collects and re allocates such according to a "revenue allocation formula".
Most higher income producing states believe they are being cheated especially when the population figures are fiercely contested.
Under a true Federal arrangement, the states are expected manage their resources and to contribute to a less dominating center.
Case for true Federal Republic.
I. Current Revenue allocation formula which considers land mass/population figures is not regarded as equitable. This has generated such strong feelings from the states from which the greater percentage of the revenue is collected that they see themselves labouring relentlessly for those who are not productive.
The idea of the "Federal" government collecting revenue for distribution to other states run against the principles of the federalism which they complain is the reason for the large deficit in revenue required for infrastructural development required to maintain productivity by easing the hardships encountered by the residents in the course of their daily commercial and industrial activities!
II. There is no incentive to mobilise and encourage production in the so called disadvantaged states as regular revenue inflows from the central government is guaranteed based on land mass and the disputed population figures.
This is believed to be responsible for the over dependence on the centrally collected oil income.
III. The country is now paying dearly in from of insurgency and banditry as a result of extreme poverty in the northern states.
The true federalism advocated would enable the States exercise full discretion in ;
I. Fixing the rates of Payroll taxes and collection of such within its boundaries, as opposed to the current practice where the rates for all the states is centrally fixed.
II. Legislation and collection of value added and Corporation taxes in the area
III. Fixing the remuneration of its Governors and all elected officials (in line with the revenue they collect).
IV. Fixing and remuneration of the State's representatives in the Senate and House of representatives. This should no longer be the prerogative of the Federal Government.
V. The Organisation of a State run Police force in line with its security challenges.
VI. Exercising full power in granting mining licenses and exploration rights,
VIII. Establishment and legislation on its courts and penal codes
Restructuring.
Proponents would like a return to the situation immediately after independence, where the Regional authorities exercised fiscal autonomy.
They legislated their tax laws and granted mining rights within their Regions.
As many of the states created by military decrees may not be viable, it is therefore necessary for parts of (or) some states to be joined to form new states.
Similarly, Local Governments and wards should be formed/grouped by the States so formed.
As these objectives may be too cumbersome to attain at the inception of this new order, the existing States and Local government structure should be in force while necessary changes can be made over the years until the objectives stated earlier are met.
This should be a continuous exercise!
Political Structure.
It is hereby suggested that ward counsellors. and L.G. Chairmen should not be elected on party platforms but should all be based on independent candidature.
This should also encourage grassroot participation in Ward and L.G. levels while limiting the negative influences of political “godfatherism”.
Election on party basis should start from State Houses of Assembly level and upwards to the Presidency.
The states so formed will now contribute to the center.
It is thereby proposed that revenue generated on existing facilities shall be shared in this order:-
I. The ward from where the revenue is generated 5%
II. The Local Government where the ward is located 10%
III. The State in which the Local Government is located 45%
IV. The Federal Government 20%
V. The federal Government to share EQUALLY
among the remaining states (No allocation formula) 20%
Total 100
For verification of the revenue collected, the Federal Government should maintain its presence in every state the same way it collects excise duties from companies in the past and verifies company taxes.
Fortunately, the infrastructure for that is already in place in form of Federal Government secretariats.
The States should also do this through their offices in the Local Government Secretariats while the LGs can do theirs conveniently through their proximity to the wards.
In effect, there would be four levels of verification for the revenues accruing to every revenue center, which enables transparency in revenue collection.
This does not include the revenue center's right to appoint its own independent auditor to verify the revenue accruable to it.
Such audit report should form an integral part of every Ward's report to be presented periodically to the assembly of neighborhood members!
Where Revenue Generating Venture or initiative Is at the Instance of :-
1. State
a. 10% of Surplus or 2.5% of total revenue (which ever is higher) goes to the ward,
b. 10% of Surplus or 2.5% of total revenue (which ever is higher) goes to the
Local Government
c. 20% of Surplus or 5% of total revenue (which ever is higher) goes to the Federal Government.
2. Local Government
a. 10% of Surplus or 2.5% of total revenue (which ever is higher) goes to the ward,
b. 10% of Surplus or 2.5% of total revenue (which ever is higher) goes to the
State
c. 20% of Surplus or 5% of total revenue (which ever is higher) goes to the Federal Government.
3. Wards
a. 10% of Surplus or 2.5% of total revenue (which ever is higher) goes to the State.
b. 10% of Surplus or 2.5% of total revenue (which ever is higher) goes to the
Local Government
c. 20% of Surplus or 5% of total revenue (which ever is higher) goes to the Federal Government.
4. Revenue Generating Ventures described above include (but not limited to )
a. Factories, processing plants and Farms
b. Markets, Parking spaces, Commercial buildings and housing estates
c. Resuscitated Federal, State, or Local Government projects abandoned for more than Five (5) years.
d. And all other revenue generating initiatives which the relevant arm of Government may establish.
All the projects listed above must conform to the guidelines of existing Town / Metropolitan Planning Authorities.
To avoid unnecessary administrative overheads, it is desirable that revenue accruable to the wards should only be recorded in the ward ledger in the Local Government Headquarters, and not be physically transferred to the Ward's account in a bank.
Money accrued in the ledgers can be expended only by signed approval of the Ward counsellor, presumably because the counsellor agrees that the expenditure will be of benefit to the Ward.
This must be cleared with the executives (Chairman & Secretary) of the constituent registered Neighbourhood Associations/Vigilante groups of the ward.
Only proceeds of projects exclusively initiated by the wards can be paid into an account maintamed by the ward. Revenue accruing to the other tiers of Government should similarly be kept in Iedgers maintained by the Wards, to be reconciled and the net differences paid out every quarter after a meeting with the executives of the Neighborhood Associations which make up the ward.
For the purposes of this section, tenement rates/pol tax fixing or collection should be under the Jurisdiction of the Local Governments while tax rates (income, Corporation, mining and VAT) should be under the jurisdiction of the State.
State Police Force!
The Police force should be independent just as the judiciary.
Cases referred to the Police should be treated with dispatch just as the Judiciary is expected to do.
The Commissioner of Police should be appointed by the state Governor from a list of candidates following recommendation by the State Police Service Commission just as is done with the Judiciary.
The State Police Service Commission should comprise of police officers who retired after having attained the minimum level of ACP and are indegenes of the state.
The Federal Government should have the Police Training Commission, (as opposed to the Police Service Commission) that would set the standards for Police training.
Should any state desire to set up its own Police college, the Police Training Commission should be responsible for accreditation/approval.
Furthermore, misuse of the Police should form a basis for the impeachment of a State Governor.
All these should not preclude the establishment of a Federal Police Force who must work IN COLLABORATION with the state police, whose jurisdiction must be respected.
As political and economic activities will now be closer to the grassroots, the option to recall elected representatives, from Ward Chairmen to State House of Assembly members who do not act in the interest of their constituencies should be more potent.
Federal Government’s roles:
The Army, Navy Air force, immigration and Customs should be under the control of the Federal Government.
Revenue from custom duties however, should be shared in the ratio earlier mentioned:-
The ward(s) accommodating the facility (seaports, airports and border posts) 5%, the Local governments 10%, the state, 45%, Federal Government 40% (with 20% to be shared equally among the remaining states).
The states, LGs and wards are to share staff salaries of the port workers in the proportion to which the revenues are collected. In practical terms, the FG would have collected the revenues and deducted the relevant expenses before handing over the balance to the affected bodies.
This will ensure their participation and oversight of the happenings in their ports/borders with the added advantage of checking misconduct in the operation of the ports.
The FG should be free to negotiate for more money from any federating unit (State, LG and Wards) in any period where collections exceed expectations as a result of a change in tariffs or any other federal sponsored measure that enhances or improves revenues and/or collection.
Long term Restructuring.
The measures stated above are based on the 36 states created by Military fiat.
Such states should be free to collaborate on any economic cause which may require usage of joint facilities to reduce administrative overhead in an ad hock or permanent basis. A constitutional provision should be required in the latter instance.
Collaborations should not be limited to neighbouring states.
There are other strategic collaborations, which states may jointly undertake, such as the production of “Lake” rice, a joint collaboration between Lagos and Kebbi states.
Direct economic collaboration between state governments could substantially increase revenues for the states.
