So we all are agreed that our country is in serious need of change. We need improvements in security, infrastructure, health, energy, unemployment, education, food, economy, politics and governance, in fact it doesn’t matter which strata of society you look at, we need major help.
Unfortunately we also have to contend with corruption, mismanagement, dwindling government revenues and impending austerity whilst trying to deliver the improvements erstwhile stated. Besides these contending challenges, we also have a nation that is struggling with inter/intra ethnic disharmony from years of ‘divide and rule’ strategy initially imposed by the colonial masters but more recently by “cabals, vested interests and ruling elites”. Further, the underdevelopment among regions and states is unequal meaning some regions in spite of our challenges have developed better than others.
We currently use a top-down revenue allocation structure that besides the Niger Delta derivation formula, seeks to distribute revenue in an equitable manner. In the words of the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) from their recent review of the revenue sharing formula, “the need for distributive justice, fairness and equity in the allocation of resources as enshrined in the 1999 Constitution guided the review exercise. According to him, the basic principles taken into cognizance include the indivisibility of the country, public opinion and weighted constitutional responsibilities and functions of the three levels of government”.
What we can deduce from the above is that resources are not shared based on developmental needs of the states or regions. In effect the government will find it difficult if not impossible to allocate more revenues to say Borno state to help it recover from the aftermath of boko haram without other states screaming blue murder as a result of reduced federal allocation. Our current allocation structure lends itself to a zero-sum game. If we are going to make effective use of our revenues and develop at a pace that is reasonable given our human and natural resources, then we need it to be less so. For example, the Buhari campaign promised a N300b (circa $1.5b) regional development fund (RD Fund) for each geopolitical zone with each zone receiving N50b (circa $250m). The SW region represents about 15% of Nigeria’s GDP based on rebased figures, the RD Fund will represent circa 0.32% of the region’s GDP. I understand the need to be equitable in dividing the RD Fund equally, but what impact will less than 1% of GDP really have on the SW region? Does this offer the most strategic use of our meagre resources? Will it not be better to allocate funds to the region that is most in need or the region that offers more strategic opportunity of realising the nation’s economic diversification goal, e.g. through improvements in the agricultural sector?
A widely held wisdom in financial markets is that besides good business results, successful companies also achieve success through efficient and proper allocation of capital. The importance of efficient resource allocation cannot be over-emphasised as poorly invested capital can act at a minimum as a temporary tax on future productivity. The way the Jonathan administration allocated revenues from the excess crude account (albeit due to pressure from state governors) is a good example of an inefficient use of revenues as little to no productivity has been gained from their disbursement. This is one of the reasons why we cannot continue to do things the way we’ve always done. We cannot afford to make fairness and equity the only driving force behind how we allocate national revenues. If we have to retain the top-down revenue allocation method, then we should let comparative economic advantage play a more pivotal role in the revenue sharing formula. So if allocating half of the RD Fund to one region offers the most strategic economic advantage that aids diversifying our collective dependency on oil, then that is what the government should do.
The reality is our resources are finite and we’ve so far been unable to avoid the resource curse known as the Dutch Disease. Similar to how corporations seek to achieve the optimal product mix that maximises productivity risk and reward, we need to also ensure that the capital expenditure of the federal government and/or invitations to foreign capital reflect the optimal resource mix that maximises our capacity and economic productivity. Of course this will require huge political capital to be spent by the President-elect as the returns from such investment or policy may not be realised during his term of office but he must convince Nigerians of the need for this path.
Further, the burden on the federal government to develop the whole of Nigeria at a pace that is almost equal among regions is too great to bear. Sacrifices will need to be made with allocation of resources being a near zero-sum game. We need to help the federal government allocate resources better and this goes beyond just appointing the right people. Regions that aren’t immediate beneficiaries of government expenditure will need to be sacrificial and keep the bigger picture in mind.
Of course there is another alternative which involves devolution of powers by giving the federating units more constitutional power to control revenue generation and natural resource exploitation. This should enable each unit to develop at its own pace using the resources available to it rather than depending on hand me downs from others. Besides the dignity from self-providence, the reliance on resources local to each federating unit could foster better inter ethnic relation once the ‘Abuja’ factor is removed from the resource governance structure. This alternative approach is one of the key points of the Kowa Party.
The Buhari government is still in its honeymoon period, it also benefits from added advantage of its party being the majority in the National Assembly. It will be a real shame if it fails to seize this opportunity to make positive structural changes necessary to unshackle and unleash the potential within Nigeria.
But are we ready to be sacrificial for the greater good?