On Restructuring: Matters Arising

For the past year or so and more intensely in the past few months, the debate on restructuring Nigeria has been the most dominant political topic. For those of us who canvass for restructuring, we are of the belief that the powers concentrated at the federal level are excessive and do not allow for economic growth at the state and local government levels:

Value-added tax. Company income taxes. Ports and railways. Minimum wage. Mineral rights (petroleum and solid minerals). Police. Prisons.

These are just a few of the powers that are exclusive to the Federal Government as on the Exclusive Legislative List of the Nigerian Constitution. These items will be better handled by states or in the case of land ownership, by individuals.

Personally, restructuring Nigeria to be a truly federal nation fiscally and otherwise is the closest to a silver bullet I know for solving our retarding situation. I believe true and fiscal federalism will free up states to grow economically by building a tax-based society and will have multiplier effects into our socio-political lives and even how we co-exist as a nation.

Not surprisingly, there is quite some opposition to the idea of restructuring Nigeria from many quarters and for varied reasons. Let me try to address a few of these reasons:

“Nigeria’s biggest problem is corruption. If you address corruption, we will grow as a country.”

It cannot be denied that corruption is a huge problem in Nigeria. We see its effects every day and it affects us in every single way possible. However, like I pointed out in this January 2015 article, corruption is not the root cause of Nigeria’s problems; rather, it is a symptom. The root cause is our dependency on an extractive resource – oil – rather than the hard work and productivity of our people. Corruption in an extractive economy is not unique to Nigeria, and tax-based societies deal with far less corruption than those who survive by simply selling the minerals they have in the ground. The article I referred to above goes into more detail.

“What we need is good leadership, not restructuring. With good leadership, we can make the present system work.”

There is a lot of truth in this statement: many leaders have been able to make visible and impactful positive change while in government under the current system. Also, a lot of government projects and programs (or the absence of them) comes from a serious lack of imagination and rigorous thinking. It is common to see states that need roads prefer to build airports despite not having enough traffic to sustain them, or those that need more primary and secondary schools building universities. Even if these projects are done at the actual cost without corruption, they still remain a misplacement of priorities.

However, these states can afford to misplace these priorities because they do not survive on the productivity of their states; instead, they are sustained by aid and handouts otherwise known as federal allocation. If they survived on their own, every project and program will be looked at from a cost-benefit perspective and based on what is needed now.

In such a situation, good leadership is an option, and not a must. This is where restructuring will make it the need for excellent leadership non-negotiable – when states know that they do not have federal allocations to live on coupled with being given the powers to raise revenues from taxes such as VAT and company taxes, they will be forced to grow their economies by doing the important things first.

After all, it is at the precipice of disaster that humans are most creative.

“The call for restructuring is just a ploy by the South to punish the North.”

Now, this is an opinion that is not expressed loudly, but there are many that hold this view, especially politicians: they view any call for restructuring, true federalism or resource control as anti-North.

Nothing is farthest from the truth.

I will admit that some people who canvass for true federalism or resource control express the sentiment that the North especially is living off the wealth of the South (and the Niger-Delta especially). For these people, the opinion is “let us control more of our oil wealth.”

However, what even these people do not realize that merely having more money to the states by say, increasing derivation, but without changing how the state makes its money changes nothing.

Resource control through getting more allocation from oil wealth does not equal true federalism.

The goal should be to transit from a resource-dependent country to a tax-dependent one. In such a system, it might not even be the oil-rich states that will be the richest, but the states that are better at spurring productivity within them and capturing value from it.

Who is to say that Borno State won’t be able to build an economy around low-cost manufacturing targeted for export to Central Africa and an agro-processing industry based on grains and cash crops like gum Arabic and jatropha – and make money than Akwa Ibom with its oil?

Who is to say that Kano State cannot be a trade and manufacturing hub and make money than Delta State? Or that Plateau State cannot have a tourism industry larger than Cross River’s?

When a society is tax-based, the opportunities are limitless in how to create wealth. The creativity of the people is unleashed with the help of the government that is looking to create wealth that can be taxed to provide the right environment to create even more wealth.

For example, the two richest states in the United States, California and New York, do not have oil while Nevada got creative by using its gaming and tourism industry with its casinos and hotels to build its economy.

Our current system disincentivizes such creativity on two fronts: federal monthly allocations does not give a state or local government the sense of urgency and need to have a thriving local economy; also, even if a state or local government desires to work towards having such an economy, the system is skewed against it.

This is what restructuring is about – reducing the powers at the centre to give component units more powers to raise revenues and adding responsibilities that are best handled at those levels to them.

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