Recently some state governors and the federal government have been trading blame over the failure of the governors to pay their workers’ salaries due to dwindling income from the federation account. In this piece, Assistant Editor, MIKE ODIAKOSE posits that rather than trading blame, the in-coming APC administration should extend their change mantra to true fiscal federalism, which is bound to make the states look inward to improve their Internally Generated Revenue, IGR, instead of depending solely on income from sale of crude oil.
In the past six months or thereabout several states across the country have been having difficulties paying the salaries and other emoluments of their workers due to dearth of funds. This ugly development started even before the price of oil in the international market nose-dived to the lowest rate in two decades.
State governors’ alibi for their inability to pay their workers is the dwindling allocations from the federation account. The issue took a new twist about a month ago when some indolent governors shifted the blame for their low income to the federal government. When the accusation became persistent the minister of finance and coordinating minister of the economy, Dr Ngozi Okonjo-Iweala slammed the governors saying they were advised to make payment of salaries their first priority following the fall in the revenue accruing to the federation account from the sale of crude oil. According to the minister, the some state governors never heeded this advice and that is the reason they have backlog of unpaid wages.
APC governors took the blame game to the president-elect, General Muhammadu Buhari last week in Abuja and called on him to probe the individuals responsible for the inability of government to pay workers’ salaries. The Imo State Governor and Chairman, APC Governors’ Forum, Rochas Okorocha, declared President Goodluck Jonathan and the Minister of Finance, Dr. Ngozi Okonjo-Iweala, must take responsibility for unpaid salaries.
Okorocha decried a situation where state governments had found it difficult to pay workers’ salaries, maintaining that the President and the minister should own up to their mistakes. The governor, who through his Chief Press Secretary, Mr. Sam Onwuemedo, argued that Okonjo-Iweala should not have shifted the blame since the complaint of the inability to pay salaries was also coming from some of the Peoples Democratic Party-controlled states.
Okorocha said, “God has begun to do something for Nigerians. The man, Buhari, who is coming in now, is a person who does not joke with discipline. When you talk about discipline, it is all-embracing. He will bring financial discipline into the system.
“By the time the man takes off, most of these things would be corrected. When the man at the helm of affairs is disciplined, invariably, other people must follow. Nigeria is a rich country because God blessed this country. It will only take a strong leadership to get things moving.
Also, two other APC governors, Abiola Ajimobi of Oyo state and his Osun State counterpart, Rauf Aregbesola faulted the claim by the Federal Government that many state governments could not pay salaries because they did not prioritise the payment of workers’ salaries.
Speaking in separate interviews, the governors laid the blame of the inability to pay workers’ salaries at the doorstep of the Federal Government.
Mr. Festus Adedayo, who is the special adviser (media) to Oyo State Governor, Senator Abiola Ajimobi, said the Federal Government was wrong to pass the blame on state governments. A statement by Adedayo on Thursday said that the fall in the allocation accruable to the states was responsible for the financial challenges being faced by states.
The Governors’ failure to meet their financial obligations to their workers is a reoccurring decimal. When the minimum wage was raised to paltry N18, 000 the governors, who allocate several billions to themselves, were reluctant to pay citing low revenue as alibi. It took the threat by the Nigerian Labour Congress, NLC, and Trade Union Congress, TUC, to embark on industrial action before the governor agreed to pay the new minimum wage.
The major complain of the governors is that the states are not buoyant enough to afford payment of the new minimum wage. The argument was punctured by some political analysts who argue that the state governors are lazy, indolent and lack initiative in improving their internally generated revenue, IGR. Opponents of the position of the governors are of the view that if Lagos state can survive for over 29 months when former President Olusegun Obasanjo withheld allocation to all the local government councils in Lagos state over the creation of additional councils by former governor, Ahmed Tinubu, there is no reason why any other state cannot do same if they work on their IGR.
Unlike most states that are always coming to the nation’s capital cup in hand at the end of every month for allocation from the federation account, Lagos state was able to survive because of the resourcefulness and aggressive IGR drive by the state government. Granted that some of the states are not as endowed as Lagos state, there is no gain-saying the fact that some states simply pay little or no attention to revenue drive in their states. This parlous state of affair has led to a renewed call for a return to fiscal federalism, which is believed will force every state to look inwards rather than running to Abuja for every dime they need to run their state , which the Deputy Senate President, Ike Ekweremadu once described as feeding bottle federalism.
Politics of revenue sharing is said to be as old as the republic of Nigeria. The issue of Fiscal Federalism has engaged various commissions and committees since the colonial days. Between 1948 and today, nine commissions, six military decrees, one Act of the legislature and two Supreme Court judgements have been resorted to in defining and modifying fiscal interrelationships among the component parts of the federation. The first phase of the development of fiscal federalism in Nigeria occurred during the 1948-1952 period. This phase was marked by a centralised financial arrangement in which the excess in the budget of the central government was allocated to regional governments on the principle of derivation.
In the second phase (1952-54) autonomous revenue and tax jurisdiction for the regional governments was introduced in addition to the operation of the principle of derivation for the sharing of federally collected revenue. The basic elements of the second phase were carried over to the third phase (1954-59). A major distinguishing factor of this phase was the emphasis on the derivation principle in the sharing of federally collected revenue.
This pleased the Northern and Western Regions given the boom in their export commodities: cotton and groundnut in the North and cocoa in the West. The Eastern Region, whose main export crop; palm oil, was facing difficult times in the global market, was unhappy with its application. In general, this was the period of state-centered fiscal federalism. It has remained the reference point by present day proponents of either higher emphasis on derivation or resource control, especially minorities of the oil-producing areas. The stalemate over this matter during the 2005 National Political Reform Conference led to the subsequent walk-out by delegates from the South-South region.
During the first republic the 1960/63 constitutions provided for 50 percent derivation in respect of revenues from all minerals. All the regional governments were able to achieve giant stride in various sector of their region as the revenue allocation arrangement made it possible for them to reap maximally from the efforts they put into avenues that will yield them revenue. This scenario made the central less attractive and this was one of the reason the then Premier of the North and leader of the Northern Peoples Congress, Sir Ahmadu Bello, declined to rule at the centre after his party emerged victorious in the 1960 election. During that glorious era the revenue of the country was distributed on the basis of principles of deprivation. 50 percent of the revenue from mineral resources accrued to the region from where these minerals were extracted. 30 percent was put in a distributable pool, which was divided among all the regions, including the producing region on equal basis. Only 20 percent of the revenue went to the federal government.
The military intervention in 1966 which came in with Unitarianism brought new changes as the federal constitution of 1963 was suspended. First, in most instances, the federal government took over state and local government functions for a variety of reasons. Consequently, new tax measures were introduced including the transfer of legislation and administration of mining rent and royalties to the federal government; centralisation of the marketing boards while all taxes, surpluses and fixing of producer prices were administered by the federal government. The military government also took over right to revenue emanating from company income tax, import, export, petroleum profit Tax, PPT, excise taxes and mining royalties and rents; introduced uniform rates in personal income and sales taxes while the states were to administer the taxes.
The administration of former President Olusegun Obasanjo replaced sales tax with value-added tax, VAT, in 1994 and subsequently transferred to federal government for purpose of regulation and administration while the proceeds are paid into the VAT Account for distribution among the tiers of government. The import of the changes which the military introduced from 1966 was that revenue potentials of the state governments were eroded. Discouraged by the unitary drift of the military government, most of the states went to sleep and never bordered about tapping resources in their states since the bulk of the revenue will be moving to the federal government in Abuja.
Some have argued that the 1999 constitution violates the principles of federalism in relation to revenue allocation. In developed federal systems the federating units have the right to control their resources and pay appropriate taxes to the federal government. To achieve true federalism, section 144(1) subsection 3 of the 1999 constitution should be amended so that ownership and control of all resources will be vested in the federating states. The vexatious section provides that “the entire property in and control of all minerals, mineral oils and natural gas in, under or upon any land in Nigeria or in, under or upon the territorial waters and the exclusive economic zone of Nigeria shall be vested in the government of the federation…”
Equally due for amendment is section 162 of the constitution so that the federating units will pay taxes to the federal government from the resources in their areas while Section 315(5) (d) relating to the Land Use Act should be reformed to guarantee the access of people to land and adequate compensation to those whose lands have been taken for public use.
Rather than dissipate energy trading blame with the federal government or lobbying for a review of the revenue allocation formula, state government should consider the option of championing the clamour for return to fiscal federalism and true federalism as recommended by the 2014 National Conference. This is more so since the demand for crude oil has continued on the downward trend, apart from the fact that some countries have already discovered alternatives to crude oil. If the in-coming administration of General Buhari agrees to revisit fiscal federalism then those core areas where the regions were generating income should be returned to the states which consequently will lead to devolution of power from the federal to the states and local government councils. There is no doubt that it might take some time for some of the states to find their feet when fiscal federalism is re-introduced in the country because of decayed infrastructure. There should be a window period during which states that lack the machinery and capacity to improve their revenue-yielding avenues are assisted by the federal government and neighbouring states to meet the emerging challenges.
Fiscal federalism will further encourage healthy competition between the states as witnessed during the first republic where laudable project initiated in one region is quickly replicated in other regions. It will boost inter-state relation as several contiguous states can come together to execute projects that, otherwise, might be too expensive for individual state to execute like the power project all the South-South states are jointly financing. The fear that fiscal federalism will strangulate some states is misplaced as every part of the country is richly endowed with one mineral resource or the other.
For instance Adamawa state is blessed with abundant Kaolin, bentonite, gypsium, amethst (violet), Lead/Zinc and Uranuin while Benue state has Lead/Zinc, Limestone, Iron-Ore, Coal, Clay, Marble, Sakt, Berytes, Gem stones and Gypsum. Up North, Borno state is endowed with Diatomite, Clay, Limestone, Hydro-carbon (oil and gas), Gypsum and Kaolin. All these are resources that could be tapped for the development of the state without undue reliance on the federal government.