This opinion piece discusses how Nigeria’s fiscal federalism debates persist 50 years after their inception, with military rule and geopolitical symmetries shaping the discussions. The search for a workable revenue allocation formula continues even today. Read on.
A mere four years after emerging from a civil war, in 1974, Nigeria was at the beginning of an oil boom. Then, as today, the country was in the middle of a debate about fiscal federalism and revenue allocation. Unlike today, however, there were significant differences: the country was under military rule, and the men leading the debate were all soldiers. In the fifty years since then, the structure of this debate and the geo-political symmetries that define it have evolved only a little.
The immediate spark for the debate fifty years ago was the publication of the statutory allocations to the twelve states of the federation then for the fiscal year 1974-75. With a population of 2.5 million, Mid-West State received ₦139.9 million or 23.7% of the allocation. Rivers State, whose population was 1.5 million, received ₦101.1 million.
Isawa Elaigwu, semi-official biographer of Yakubu Gowon, the army general who was Nigeria’s military head of state at the time, observed that “while both Rivers and Midwestern States, comprising 7.3% (4 million) of the country’s total population, shared between themselves 40.83% (₦241.00 million) of the total allocation to the states, the ten other states which accounted for 92.7% (51.6 million) of the country’s population, shared among themselves 59.17% (₦349.2 million) of the statutory allocation.”
Usman Faruk, the Commissioner of Police who governed the North-Western State, was unhappy with the dissension over the allocation sharing because, he said, all of them in the Supreme Military Council then agreed on it. Joseph Gomwalk, another Commissioner of Police and then military governor of Gowon’s own Benue-Plateau State, and Jacob Esuene, who governed the South-Eastern State, called for a more objective revenue allocation system. If they knew what such a system looked like, they didn’t say. Kwara’s military governor, David Bamigboye, and General Abba Kyari of the North-East went on record to call for a review of the allocation formula. For their part, Oluwole Rotimi and Mobolaji Johnson, military governors of the Western and Lagos states, respectively, advocated for “a revenue allocation formula that would guarantee responsible and stable government for Nigeria.”
“Fiscal governance and reform are not as complex as the administration and its mouthpieces would like to suggest.”
Nigeria’s search for workable federalism can be reduced to the search for precisely such a formula. It has proved elusive. If anything, it may have become even more so. In the 36 years between 1946 and 1980, spanning the colonial and post-colonial periods and including military as well as elected civilian regimes, the country burned through the reports of at least eight blue-ribbon panels on the question of fiscal federalism.
On the eve of independence in 1958, the Raisman Commission report recommended the creation of a Distributable Pool Account (DPA), into which 30% of revenue from mineral rents, royalties, and import duties was to be paid. The regions retained 50% of the revenue from mineral rents and royalties from their area, while the central government took 20%. Seventy per cent of the revenue from import duties went to the central government.
Six years later and four years after independence, the Binns Fiscal Commission increased the DPA share of the income from import duties from 30 to 35% at the expense of the share of the central government. Notably, the report set its face against the principle of derivation, replacing it with what it called the principle of “financial comparability.” On this basis, it is recommended that the DPA receipts be shared as follows: Northern Region 42%; Eastern Region 30%; Western Region 20%; and Mid-Western Region 8%. Lagos was then the federal capital. Up to this point, the fiscal balance largely favoured the regions that contributed resources to the central government.
In 1968, Nigeria’s post-colonial crisis of state legitimacy had already exploded into a year-old civil war. Under pressure from both the economic costs of the war and its structural antecedents, Yakubu Gowon, the war-time Supreme Commander (as he was then known), called upon Chief I.O. Dina, a former history lecturer at the University College Ibadan, to lead what the regime called an Interim Revenue Allocation Review Committee.
The legacy of the Dina Committee recommendations was very far-reaching and suited the regimental mood of the military. The Committee addressed frontally the issue of taxation and public goods. It recommended centralising taxation and harmonising the produce marketing boards, which were mostly regional until then. The Dina Committee also recommended a centralisation of higher education funding and replacing the DPA with what it called a State Joint Account. Additionally, the committee recommended that states retain 100% of the rent from onshore extractive operations based on derivation and also receive another 10% of royalties revenue as derivation.
Even in the midst of an existential conflict at the time, the fuss that followed in the wake of the Dina Committee report was deafening. Officially, the Federal Military Government rejected the Dina Committee Report. In reality, Isawa Elaigwu recalls, “….Gowon did not raise dust over the issue but quietly implemented most aspects of this report through the back door at the appropriate time.” The result is that the Dina Committee Report has influenced Nigeria’s version of federalism.
Gowon enjoyed three advantages at the time in his handling of the unitarising tendencies that underpinned the recommendations of the Dina Committee. First, the civil war was an extenuating circumstance. Second, the regimental traditions of military government limited the degree of elite dissension. Third, as a military ruler, he did not have to suffer any institutional constraints similar to those imposed by a parliament or its equivalent under elected civil rule.
“Taxation is more than mechanical computation. It is the centrepiece of the social compact between a state and its citizens.”
For the current incumbent fifty years later, a civilian seeking to accomplish what would be the most far-reaching restructuring of Nigeria’s fiscal fundamentals in 110 years, none of these advantages exist, and he suffers many more debilitations.
By some coincidence, in the year that Gowon constituted the Dina Committee, the celebrated Kenyan political scientist Ali Mazrui explained the challenges of structural stability in post-colonial African states in terms of two underlying crises of state legitimacy and regime legitimacy.
Fiscal reform on the ambition evinced by the proposals now under consideration in Nigeria assumes the existence of a capable state which enjoys affinity among citizens, an overwhelming percentage of whom should be documented. None of these can be taken for granted in Nigeria. The evidence from across the fields of financial inclusion, electoral participation, and taxation suggests that the proportion of documented Nigerians does not exceed 40%. It will take more than a few convenient ebullitions to address this.
Any government will be challenged to address it. An administration that suffers from manifest issues of legitimacy lacks the currency to trade with in this situation. The crisis that afflicts the current proposals is that of a government unwilling to put in the work required to redress state and governmental legitimacy deficits around the country. To address what is evidently a political problem, the government has chosen instead to escape into self-inflicted technocratic gobbledygook.
Fiscal governance and reform are not as complex as the administration and its mouthpieces would like to suggest. Taxation is more than mechanical computation. It is the centrepiece of the social compact between a state and its citizens. With considered inadvertence, the administration of Bola Ahmed Tinubu has done itself a world of good by inspiring these increasingly raucous debates about the state of that compact in Nigeria or the lack of it. It will be best served by listening to the debate in humility while it learns.
ABOUT THE AUTHOR: Chidi Anselm Odinkalu is a Nigerian human rights activist, lawyer, professor, and writer. He was the former chairman of Nigeria's National Human Rights Commission and the senior legal officer for Africa's Open Society Justice Initiative. Odinkalu has worked as an advisor for various organizations and has co-authored a book titled "Too Good to Die" with Ayisha Osori. He is also a visiting professor at The Fletcher School of Law and Diplomacy, USA.
The opinions expressed in this article are strictly those of the author and do not necessarily align with the views of JolibaLive News! or any of its staff members. The author is in no way associated with this online news blog.
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