Federal Allocation and Our Future

 Did you know? If oil money were to dry up today (maybe crude prices drop to uneconomic levels or we are unable to export), only one state in the entire federation would be able to settle its wage bill. You guessed right: Lagos. This statistic may shock you, but only Lagos generates enough internal revenue to pay its workers. To meet wage obligations, the rest of Nigeria depends on federal allocation—which is anything between 70-90 per cent from oil. Let me quickly make a point before I move on: Rivers State also generates significant IGR, but it is mainly from oil activities. And since my fundamental assumption here is that oil dries up, Rivers’ IGR would thus be massively depleted. Lagos is a secondary beneficiary of oil activities, of course, but because of its industrial base and unique position as the commercial and financial capital of Nigeria, the state will still generate sufficient IGR to take care of its wage bills.

Let’s put things in proper perspective. Speaking sometime last year, the chairperson of the Federal Inland Revenue Service (FIRS), Mrs. Ifueko Omoigui-Okaru, said most states hardly generate up to three per cent of their total income. She said beside Lagos and Sokoto which generated 60 per cent and 46 per cent IGR respectively in 2008 (obviously the latest statistics she had access to), others depended on federal allocation for the bulk of their income. I quote her: “Some states have IGR-to-total revenue percentage that is as low as three per cent. Only two states had an IGR ratio above 40 per cent. For most states, the federal allocation ratio is above 80 per cent. This went down slightly to 70 per cent in 2009. States whose IGR are about 20 per cent or a little more in 2008/2009 include Borno, Gombe, Rivers, Osun, Oyo, Ogun and Abia States. Most states did less than 20 per cent. A state managed only three per cent.”

I don’t like bombarding readers with excessive figures, but I have gone to this extent for just one reason: to emphasise that we are living a false life in Nigeria. Many commentators and analysts have been saying this for years, but it always falls on blocked ears and stone hearts. So every day, there is a fresh demand for state creation. Every local government wants to become a state. There is political agitation, but no economic viability plan. Everybody wants to eat from the national cake. Everybody wants a fiefdom with which they would go to FAAC meeting every month to collect their share of the oil-fuelled federation account. Nobody has said: Come, Ladies and Gentlemen, can we pay our bills without FAAC? The reason for this mentality is simple: it is because we run a “unitary federalism”, where the resources of parts of the country are pooled into a central pot and shared to the rest of the country.

Last week, I did argue that the clamour for “equitable” sharing of federal allocation is faulty. The argument, really, should be how states can begin to gain financial independence from the centre so that federal allocation can become “pocket money” or something to be saved for future generations. The story of Nigeria is like that of a father who has 36 children. He takes the income of his wealthy children to a central port and distributes it among his 36 children. A good father will encourage all his children to be creative and hardworking so that they can make the money to sustain themselves. A bad father will ignore the larger picture of every child being self-sustaining and insist on redistributing his children’s wealth. The ultimate danger is that you will have children who are extremely lazy and unwilling make good use of their talents and gifts. Every month, they will go to “papa” to give them their own share of the other children’s wealth. It will now reach a stage that they will start complaining that the money is not enough to buy the limousine of their dream.

I understand a bit of the logic of natural resources. The oil in the Niger Delta is a gift of nature, many will argue, since the people played no role in putting it under the ground. So let’s share it—it belongs to all. But so also can we say of human beings—we are not gifted the same way! Michael Jackson could sing better than his brothers and sisters. But it would be wrong to compel Michael to bring his income to the table so that his father could share it among all the Jacksons. If that were the case, Janet or Jermaine or LaToya would have no reason to do any work at all. They would all be waiting for the month to end to collect their own FAAC. But Janet honed her skills and became a success in her own right as an artiste. She may not be anywhere near the success of Michael, but she is certainly a success. The Jacksons can have a common purse where they can contribute resources for the common cause of the family. There is nothing wrong with that. But to make a policy of taking from one Jackson to sustain another Jackson is illogical.

There is no state in Nigeria that cannot sustain itself if the governors understand the art and science of development. If it is natural resources, every state has them. If it is value-added agriculture, every state can become an industrial host. These are the things that can generate employment, generate economic activities, generate tax revenue and shore up the incomes of the states. The real challenge for the governors is: how can they use what they’ve got to get what they need? How can they put the right policies in place to attract the needed investment? How do they spend wisely to make state economies viable? These are the questions they should be asking. But because of the ease of travelling to Abuja for federal allocation cheques every month, forward planning and critical thinking are no longer part of governance.
The eternal reliance on oil revenue has done a lot of damage to the federation. Every day now, we hear the Niger Delta people say “our oil, our oil”. During the petrol price hike crisis in January, some Niger Delta person, trying to suggest that the protests were unjustly aimed at President Goodluck Jonathan, said something like: “If our son is not good enough to be president of Nigeria, then our oil is not good enough for Nigeria.” This warped logic—which tends to paint oil as the solution to all human problems—defies the fact that the most advanced countries in the world do not rely on oil revenue. Even Norway, the poster boy of successful management of oil revenue, survives on tax. Their oil money is saved largely for the rainy day.

But do you blame us? Why do we need to stretch our brain to dream of building our own Microsoft and Apple when we can look up to Abuja for the flow of petrodollars every month? Why should Bauchi bother to tap its tourism potential? Why should Bayelsa dream of feeding Africa with its FADAMA rice when there is a fat FAAC cheque to be collected in Abuja monthly? Why should we quicken Ajaokuta so that the fourth biggest steel company in the world can begin to operate fully and spice up the economy? Why should Aba be developed into our own Taiwan or Japan? There is no such incentive.  The only incentive I can see in Nigeria is federation account.

It wouldn’t even matter if we are utilising federal allocations to develop the most important resource at our disposal: the human capital. Oil is not the real deal, no matter how dominant it has become in our lives. It was human beings that designed cars and made petrol as important as it is today. Human beings are now designing cars that run on bio-fuels, electricity and solar energy. By the time the cars become popularly accepted, the demand for oil could drop. It may not happen in the next 50 years but it would happen someday. So the wise person does not keep emphasising on oil and ignoring human capital. The wise person thinks about a future where our lives will no longer depend on oil but on the quality of the brain. It was human beings that invented aeroplanes, computers and phones, etc. If we are wise now, our energies should be devoted to getting out of this oil trap.

I wish we could discuss these issues honestly without trading insult and threat. The quality of public debate is very poor in Nigeria. We have a real problem in our hands but instead of engaging in fruitful debates to chart the way forward, we specialise in name-calling and blackmail as if that would solve our problem. Those of us who have no interest in politics or politicking will continue to make our point.

And Four Other Things...

Nitel from Hell

 
Nitel and Mtel—the ultimate symbols of Nigeria’s public sector inefficiency—will finally be liquidated, according to the National Council on Privatisation (NCP). Anybody who wants to know everything that is wrong with this country should not look beyond Nitel. Once an absolute state monopoly, every attempt to sell it since 2001 when new players, such as MTN and Econet, entered the telecoms market, has either been frustrated or manipulated. Yet, by any means, this is a company that could have been bigger than all other telcos put together if not for the fundamental flaw with the Nigerian mentality. For a company saddled with a debt in the region of N350 billion, it is always going to be difficult to do an acceptable deal that will not hurt either the seller or the buyer. The “guided liquidation” option being adopted, I understand, would mean anybody who eventually buys it will not be able to engage in asset-stripping. That is some good news, judging by the Daily Times tragedy. But Nigerians must pay close attention to the entire process.

Ibori’s Plea

 
Former governor of Delta State, Chief James Ibori, has finally pleaded guilty to 10 charges of money-laundering and fraud before a London court. If we are to believe all the talk about plea bargain, he is expected to get a 30 per cent discount on imprisonment when he is sentenced next month. Ibori admitted to fraud totalling more than $79 million (N12.6 bllion), said to be part of total embezzlement that could exceed $250 million (N40 billion). Indications are that he would be jailed for seven years instead of 10. The bargain was intended to end the long prosecution, which had consumed millions of pounds as well as invaluable time. To me, Ibori was never going to escape guilt. His wife, associate, sister and lawyer have all been jailed with the same evidence and because of him. So on what ground would they free him? The lesson I have learnt from the Ibori saga is that the best-laid plans can go wrong. A few years ago when Alhaji Umaru Musa Yar’Adua was president, Ibori went around boasting: “We’re in charge now!” This life…

To Pastor Adeboye

 
I always tell anybody who cares to listen that although I don’t celebrate my birthday, the first I would mark is when I clock 70. Anytime anyone clocks 70, I’m always excited. I therefore send my hearty congratulations to the General Overseer of the Redeemed Christian Church of God, Pastor EA Adeboye, who clocked 70 last Friday. I’ve always admired him for something—how he has managed to build bridges across the divides in Christendom. The monthly Holy Service of the church is essentially nondenominational—you find Catholics, Anglicans, Baptists, and indeed Christians from several denominations trooping to Redemption Camp to worship. I wish him many more fruitful years ahead. In fact, what he has achieved in 70 years will be child’s play compared to what is ahead! That is my prayer for him.

Caverton Flies High

 
As an advocate of “Made in Nigeria, Enjoyed around the World”, I was more than pleased to learn that Caverton Helicopters has launched its international operations. Caverton is a leading provider of aviation services to the oil and gas sector in Nigeria. But from this month, its operations will expand to Cameroon following a five-year contract with the Cameroon Oil Transportation Company (COTCO). I hope this is the beginning of more to come, and a challenge to other Nigerian companies to rise and shine. It is not always bad news that is coming out of Nigeria, after all.