Fiscal Federalism: The Struggle For Resource Control

Project and Seminar Material for Political Science

Fiscal Federalism: The Struggle For Resource Control


The issue of fiscal federalism and the management of the country’s resources has been a complex one among the federating multi-ethnic nations within the Nigerian federation. Several conceptual and theoretical analysis expounds the way economies can be managed in a bid to abridge developmental crisis. The crux of Nigeria’s problem lies in her federating arrangement started in 1954 till date which has culminated in poor fiscal arrangement, disparity in the sharing of resources among the local, state and federal government, minority domination, and agitation for resource control. Based on the above, this paper seeks to critically review the challenges of fiscal federalism and resource control in Nigeria. It argues that if the fundamental issue of resource control is not pragmatically addressed by the Nigeria state the problem could trigger another phase of insurgency in the Niger Delta, with grave implications for the nation’s economy.

Chapter One


1.1 Background of the Study

The nature and condition of the financial relations in any federal system of government is crucial to the survival of such system. This, in most, if not all federal countries, one of the most constant sources of wrangles centres on the problem of securing adequate financial resources. Resources control is a very vital aspect of Fiscal federalism the very nature of Nigeria in terms of diversity of its people, the size of the country, their separate histories, cultures, a high heterogeneous society, made some forms of federalism inevitable.

The issue of resources control has gained currency owing mainly to the large scale ignoring of oil producing areas on which the wealth of the country is dependent in the development efforts. Clamoring for resource control is a quest to true and functional federalism or classic federalism. Perhaps by omission or commission, the underlining principle behind resources control is misrepresented and misunderstood in some quarters as being only in the interest of the Niger Delta people.

The centre stage that the resource control struggle now occupies in the national discourse is of deserving compensation. What they have not realized is that resource control or classic federalism is indeed a veritable path way to the nation’s rapid socio-economic development because it is a wake up call for all Nigerians to harness the opportunities in their immediate environment for our collective greatness. This assertion is buttressed by the fact that it is only through fiscal federalism of which resource control is an adjunct that we can upgrade our economic base to a multi-product as opposed to its current mono-product status.

The fact that there has been a lot of politicization in the scheme of things cannot be over emphasized. It is from this that the clamour for self determination by several ethnic groups in Nigeria recently assumed unprecedented dimension when the south-south governments called for control of the natural resources found in their geo-political region. Before then, the Ijaw nation under Adaka Boro and specifically the Ogbonis under the Ken Saro-Wiwa had at various times undertaken progressive campaigns to halt the exploitation and plundering of petroleum resources of the Niger Delta areas by successive governments in Nigeria.

The aggressive campaigns by the then president of the Movement for Survival of Ogboni people (mosop). The late Ken Saro-Wiwa to halt the aforementioned problem most especially the problem associated with the irrational exploration of crude oil in the Niger Delta area earned Ken-Saro-Wiwa’s death as punishment for his Mosop’s leadership for resource control. It is adequate to say that the agitation for resource control by the south-south state is aimed at appropriating resource located within their region. The advocates of resource control argued from two factors, firstly, the underdevelopment of the Niger Delta area by successive military government in spite of the bulk of wealth gotten from the Niger Delta area to sustaining the whole country come from the area. It is therefore, the argument of resources control advocates that despite the irrational exploitation of crude oil in the Niger Delta area. There is nothing to show for it in terms of development, whether infrastructural or human.

Secondly, the proponents of resource control posited that the clamour to control resource by the states is simply an attempt to entrench a classic federal system of government in Nigerian politics. Although the control of resource agitated by some states precisely the southern states does not go down well with some eminent Nigerians hence the contesting states are not celebrating the supreme court judgment on the suit field by Bola Ige the late slain Minister of Justice and Federal Attorney General on the Interpretation of (section 162, subsection 1 of the 1999 constitution) that touches on the distribution of the country revenue.

The issue of resource control and derivation formular is not a new phenomenon in Nigeria. It started as far back as in the colonial era. To be precise it was in 1946, during the regime of Sir Author Richard as the Governor General of Nigeria. And because of the problem of resource control a commission was setup. The governor general headed by Sir Sydney Philips on, the Commission was constituted to fashion out financial and administrative procedures for the country. The committee recommended “Declared revenues” which were exclusively for the regions and “Non-declared” revenues for federal government the accepted principle here was derivation, even progress and population in the order of importance. However, this did not benefit some regions and as such it was not accepted fully.

When military handed over political power to elected civilian in May 1999, the problem of resources allocation sharing was still not resolve. The governments of Niger Delta area stated making moves for resources control, a review of the derivation formula, a true federalism and a national conference: These agitation were later joined by the Nineteen (19) governors of the south.

It is from the very perspective that they project will examine the impact of resources control by the Niger Delta region on Nigeria fiscal federalism and also take a critical look into all problem in demands with the aim of identity and proffer solutions for the sake of co-existence and for the unitary of the nation.

1.2 Statement of Research Problem

There is no doubt that there is retardation of the progress of the Niger Delta Region and Pauperization of its peoples. These situation have led to the wide spread poverty with over 75% of the population on or below, the poverty line, poor sanitation and waste disposal and pollution contributing to illness, absence of electricity and pipe borne water supply and most especially, severe environmental degradation which has an adverse communities impact from the exploration and exploitation of oil and gas in the region as these constitute part of the statement of problem.

There was also deforestation and shortage of farmland which has resulted in high level of unemployment as a result of oil exploration and the failure of the federal government to listen to the clamoring and compromise with the struggle for resource control by the people of Niger Delta Region as a quest for a true and functional federalism with principle inherent in the spirit and letter of Fiscal federalism and also the implication for the resources control shall all cover our statement of problems.

The Nigeria government over reliance of the federal government on the oil and gas sector of the economy and neglect of other sector such as agricultural sector and other untapped resource in other parts of the federation also constitute another problem of the research study. It also includes the Niger Delta region in their attempt to strive for justice, fairness and also equitable resource control.

Lastly, the influence of the multinational corporations and the compradors on the exploration of oil and gas in the Niger Delta Region is also one of the problems of the research study. As some Greeks are praying the water should not consume them as in the time of Biblical Noah or the Tsunami experience, the oil companies are busy spending protective barriers of their oil rigs and installation against ocean encroachment leaving their host communities to perish.

1.3 Objectives of Study

The objectives of study are as follows:

  1. To understand factors responsible for the agitation by some states to control their resources.
  2. To find out the impacts of the agitation by some states to control their resources.
  3. To find out whether resources control can halt to or rather minimize the recurring problem associated with Nigeria fiscal federalism.
  4. To find out whether resource control would either promotes centripetal or centrifugal forces in the Nigeria policy.
  5. To find out whether resources control would bring development to the federating units.

1.4 Research Hypotheses

The following hypotheses were formulated to guide the study;

  1. H0: resources control cannot halt or minimize the recurring problem associated with Nigeria fiscal federalism
    H1: resources control can halt or minimize the recurring problem associated with Nigeria fiscal federalism
  2. H0: resources control will not bring development to the federating units
    H2: resources control will bring development to the federating units

1.5 Significance of the Study

The principal and dominance significance of this research study is that of the exposure of the members of the public to the controversial issues associated with the problem of Fiscal federalism and resource control. This is expected to raise consciousness and awareness of the members of the public.

More importantly, the project work will not only look at the conflictual relationship that existed between federal and state governments (Niger Delta states) but also to find or rather proffer solutions that will in turn enhance cordial relationship for an enduring federalism.

The study is desirable because of the overriding need to understand the inherent difficulties in the operation of federalism in Nigeria as it relates to resource control and its impacts on the contemporary times.

It is also hope that the study will in no doubt educate the public and various government authorities in their rights economically and legally on the issues of fiscal federalism and resource control.

Since the ends of any social science research is to proffer solution to a given social, economic and political problems, the study therefore is very significantly pertinent in proffering solutions to the problems associated or inherent in fiscal federalism and the struggle for resource control by the Niger Delta region.

1.6 Limitation of the Study

The limitations are built around its limitations, they are those factors inherent in the research situation that might affect the results which the investigators must recognize and acknowledge for the study. It shall also include the examination of horizontal developments and antecedents of theNigeria constitutions, acts, and decrees associated with fiscal federalism and resource control legal backdrop.

The major problem is that the information required is not easily come by as a result of the official bureaucracy involved in collecting relevant government materials.

1.7 Definition of Terms

Before going into more rigorous and systematic aspect of this work, it is necessary and imperative to begin by given operational definitions of certain terms or concepts whose clarifications are basic to the understanding of the whole work. The terms that are commonly used in this study are operationally defined as follows:

a) Federalism:

This is the method of dividing powers so that the central and regional governments are each within its sphere coordinated are independents. It can also be seen as a constitutional arrangement for the distribution of government authority by area in other to maximize freedom of expression of cultural socio economic and political attributes.

b) Resource Control:

This involves three major component of power, the right of a community or state to raise fund, by way of tax or person’s services and material within its territory. The exclusive rights to the ownership and control of resources both natural are created within its territory.

The rights of custom duties or destined for its territory excise duties on goods manufactured in its territory. It can also be conceptualized as a strict adherence to the principle of deprivation.

c) Fiscal Federalism:

Fiscal federalism can be described as financial governmental relations among the different tiers of government in a federation. It is a consequences of federalism that is concerned with the relationship among the various levels of government with respect to the allocation of national review (National cake) and the assignment of functions and tax powers to the constituent unit in a federation.

d) Derivation:

Derivation can be defined as revenues allocation principle by which certain amount of finance is allocated to the component units of the federation based on the revenue generated from the mineral resources of the area. It is seen as having the inherent ability, due to its relationship to taxes and compensatory features of overcoming the felling of alienation by members of any unit.

e) Niger Delta Region:

Niger Delta Region comprises of Nine (9) states that are not actually united based on geo-political zone but bounded by their economic emancipation to control their God-given national resources of their region.

There are differences between the south-south zone and the Niger-Delta region. While the south-south zone is the geopolitical zone comprising of six (6) states which have vested interest bordering more on the political. The Niger-Delta comprises of nine (9) states. These nine (9) states which have come together are united in the struggle or rather are united in the fight for the economic emancipation of the region.

The nine (9) states of the Niger Delta Region are: Abia, Akwa-Ibom, Bayelsa, Cross-Rivers, Delta, Edo, Imo, Ondo and Rivers states.

1.8 Organization of the Study

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

  1. 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.
  2. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  3. Chapter three deals on the research design and methodology adopted in the study.
  4. Chapter four concentrate on the data collection and analysis and presentation of finding.
  5. 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 the challenges of fiscal federalism and the struggle for resource control.

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 challenge of fiscal federalism and resource control

5.2 Summary

The issue of fiscal federalism and the share of the country’s resources has been a complex one among the multiethnic nations of the country, Nigeria. The fact that communities surrendered their sovereignty to become one of a confederating unit is not an impetus for more advantageous group to trample on their God given wealth. Being traumatized under a central system of share of resources that derogates their opportunity and right to ownership and development negligence, accompanied with unemployment and inequality, the people continue to remain poor and thus subservient to the aristocratic and opportunist rulers who continue to implement uncompromising resource sharing formula. In this regard therefore, and to complement existential realities, the down trodden minorities agitate for equitable distribution thought resource control and management.

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 Recommendations

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. The agitations for resource control should be settled through dialogue, diplomacy, superior argument and legal means instead of recourse to violence and militancy

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