Fiscal Federalism And Resource Control In Nigeria: The Way Forward

Project and Seminar Material for Political Science

Abstract

This study is on fiscal federalism and resource control in Nigeria. The total population for the study is 200 residents of selected communities in Delta state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made civil servants, youths, elderly men and elderly women were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies

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:

To explore the relationship between fiscal federalism and resource control in Nigeria.
To find out the relative effect of true-federalism on national development in Nigeria.
To find out the issues and challenges of Nigerian Fiscal Federalism.

1.4 Research Hypotheses

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H0: there is no relationship between fiscal federalism and resource control in Nigeria
H1: there is relationship between fiscal federalism and resource control in Nigeria
H02: there are no issues and challenges of Nigerian Fiscal Federalism
H2: there are 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 and Limitation 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. The researcher encounters some constrain which limited the scope of the study;

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational Privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities

1.7 Definition of Terms

Fiscal Federalism:

Fiscal federalism is part of broader public finance discipline. The term was introduced by the German-born American economist Richard Musgrave in 1959.Fiscal federalism deals with the division of governmental functions and financial relations among levels of government.

Resource Control:

Resource control is the process of allocating a system’s resources in a controlled fashion. The Solaris OS resource control features enable bandwidth to be shared among the VNICs on a system’s virtual network.

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
Chapter three deals on the research design and methodology adopted in the study.
Chapter four concentrate on the data collection and analysis and presentation of finding.
Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain fiscal federalism and resource control in Nigeria. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of the fiscal federalism and resource control in Nigeria

5.2 Summary

This study was on fiscal federalism and resource control in Nigeria. Three objectives were raised which included: To explore the relationship between fiscal federalism and resource control in Nigeria, to find out the relative effect of true-federalism on national development in Nigeria, to find out the issues and challenges of Nigerian Fiscal Federalism. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 residents of selected communities in Delta state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made civil servants, youths, elderly men and elderly women were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies

5.3 Conclusion

The essence of true federalism is to allow component units of the federation achieve some significant measure of autonomy to manage their affairs. The federalist debate in Nigeria centres essentially on the need to understand the basis of the contract of true federalism and resource control. Despite the contrived arrangement as articulated by the ruling class, the systematic dysfunction has resulted in a series of violent, dramatic and traumatic inter-ethno regional confrontation, ventilating the essence of the debate (Ihejiamaizu, 2001). Political observers have argued that the agitation for resource control is a test case for the enthronement of true federalism for what made the regions strong in the first republic was their financial independence. Each region took care of itself and its needs of itself and its needs within the limits of its internal revenue resources.

5.4 Recommendation

No doubt, Nigeria cannot become a strong and united federation unless and until the constituent parts are sufficiently empowered by the enabling practices that conform to the principles of true federalism. It is the recommendations of this paper that:

A major constitutional reform should be in place to make the states autonomous and truly independent. All manifestation of unitary system of government should be removed from Nigeria’s federal structure by allowing the states the degree of freedom and autonomy consistent with federalism.
There is need for review of the revenue allocation formula in order to increase the share of the federating units- the states- to facilitate the discharge of the additional responsibilities discharged to them. The derivation formula should be increased substantially from the current 13% to about 50% for the oil producing states, and the derivation principle should be extended to other resources including solid minerals and agricultural resources.
An agreed percentage of tax or royalty should be paid by the states to the Federal Government. The federal Government should identify and repeal all legislations that encourage economic oppression, political repression and environmental pollution of the Niger Delta and other parts of the country.
The Federal Government should tie accruable fund from the federation account to specific development projects in the oil producing communities to prevent misappropriation. This will enable the oil producing communities to benefit more from the revenue allocated

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