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The Economic Structure Of Nigeria By Simon Kolawole by silami(m): 6:22am On Jul 17, 2011
Federalism: What Economic Structure?

17 Jul 2011

I’ll say it again: all I ever want to be in life is a journalist/writer, teacher and farmer. When I eventually disengage from active journalism (and I will still be involved in any capacity at all until I draw my last breath), I will go into teaching. But because teachers’ rewards are in heaven, I would like to earn a few rewards here on earth by going into farming as well. I find farming very attractive because, apart from the fact that food is good, agriculture is one sector whose potentials are largely untapped. I’m scared anytime I study the agricultural potentials of Nigeria. Bayelsa alone has the potential to feed the whole Nigeria with rice. Across Northern Nigeria, the potential is crazy: crops, livestock, name it. Nigeria can become a leading country in the world of agriculture if only we can get our act together.
My wife and I want to be farmers. But we don’t want to be selling mangoes by the roadside. If we decide to set up Sheri & Simoni Farms Ltd to grow mango, for instance, we want to have a factory that would produce canned mango juice. That is where the real value is. We want to grow mango, add value, sell locally as well as export to earn dollars. The raw mango I’m going to sell for N10 by the road side can actually fetch me as much as N100 if I add value. The Nigerian economy would be the better for it. The company making cans and bottles would benefit from Sheri & Simoni. The printer of “Sheri & Simoni Mango” packs would benefit. Sheri & Simoni would employ electrical, mechanical and electrical engineers, as well as technicians. Sheri & Simoni would employ accountants, administrative staff, truck drivers, cleaners. Sheri & Simoni would remit personal income tax and corporate tax to the government.
How come we are not tempted to jump into farming straight away then? Well, that would be suicidal. To start with, if we decide to go into the business, who would finance it? If we get finance, who is going to construct the roads leading to the farm? Who would supply the water and electricity? Who would provide the security? How are we going to transport the produce and the products? By the time you add all the costs together, you are dealing with a good business that is not viable because, like the general problem with the real sector in Nigeria, you have wasted so much of your resources paying for the inefficiency of the system. By contrast, if we set up Sheri & Simoni Petroleum Ltd and are lucky enough to know somebody in government to give us a contract to import fuel products or lift crude oil, we would become billionaires in dollars with a stroke of the pen, even though we are not contributing much to economic development! Why on earth, then, would anybody want to prefer farming to oil?
This is where I am going: the economic structure of Nigeria is so skewed that neither the government nor the citizens have the incentive to focus on developing agriculture. We are all rushing to Abuja to share oil money. We are all longing for the month to end for the Federation Account Allocation Committee (FAAC) to meet and distribute the petrodollars. The other sources of revenue are not of concern to us. Look at it: why would any government bother itself with constructing roads, providing water and security just to collect taxes of say N100million monthly when the same government is guaranteed N1billion monthly from the federation account for doing nothing? Government is never interested in developing agriculture. Forget all the noise you’ve been hearing over the years. It is not their fault—the incentive is not just there. If oil brings in $12 billion or more in a year, taxes from agriculture and industry (minus oil) will bring in just about 5 per cent of that! So why worry with agriculture?
That is why the infrastructure for oil production and export is always in perfect condition. The terminals, platforms and flow stations, which are of no real value to Nigerians, are the number one priority of the government. As long as the oil companies are drilling the hydrocarbon and the export terminals are in good condition and the money is being remitted to CBN at the end of the day, Nigerians can continue to ride on bad roads and live in darkness and receive ill-treatment from the “consulting clinics”. Agriculture can continue to rot, for all the government cares. Yet the oil industry is so limited in the employment opportunities it can generate and in its contribution to the GDP. As of today, 70 per cent of our population are involved in agriculture, but the infrastructural support is not there to get the best out of them.
As soon as the petrodollars began to rush in our direction some 40 years ago, the Federal Military Government quickly enacted laws to corner the goodies. The military could claim that it had a motive: to achieve some balance in the revenue profile of the states. If fiscal federalism as practised pre-oil boom was retained, the oil-rich states would have been miles ahead of the non-oil states. (But in UAE, for instance, the oil-rich emirate is Abu Dhabi. Dubai developed trade and tourism to generate its own income. All states don’t need to be on the same level). By cornering the resources and redistributing at the centre—using principles such as landmass, population and need—the military obviously wanted the oil wealth to go round. The unintended effect of this balancing act is that agriculture and industry died. Cocoa died. Coffee withered. Groundnut pyramids shrank. All the states started rushing to the FAAC meeting every month to share money. The federal structure was distorted. Fiscal federalism fizzled out.
To make matters worse, the solid minerals that every state has in abundance have also been cornered by the Federal Government. Forever and ever, we keep saying Osun has gold and Ondo has bitumen. True, Nigeria has about 42 billion tonnes of bitumen—almost twice our crude oil reserves! There are over 3 billion metric tonnes of iron ore deposits in Kogi, Enugu, Niger and FCT. We have over 7.5 million tonnes of barite in Taraba and Bauchi States. If I were to guess, I would say the value of the solid minerals would be five times more than that of petroleum. Yet, the Federal Government, by law, holds the key. Even then, states are not pushing to take control and produce this wealth. The reason is simple: there is guaranteed income from oil, so why take the pain of investing in developing other sources of income? The Nigerian story is so tragic.
The most tragic part of our story is that you hardly see anything being done in concrete terms to rescue us from the logjam that we have found ourselves. If the petrodollars had not been allowed to distort our federalism, I bet every state would be sufficiently rich and self-sustaining by now. States would have developed their resources to meet up with their needs as the regions did in the Independence era. Agriculture and industry would have surpassed oil by now. The South-east would probably be exporting cars and electronics. With the steady growth and development we were making before the oil boom, I bet Nigeria would have been a success story by now. But we found oil and went to sleep, waking up once in a month for FAAC meetings in Abuja. It is not just a shame: it is also a measure of how oil has retarded our thinking. We neither used the oil to develop the country nor allowed the states to grow originally. We started creating states to share the oil money. We are still thinking of creating more states now based on FAAC.
I want to quickly correct an impression that if we start practising fiscal federalism today, only the North would suffer. That is not true. If we enforce resource control today (that is, Sunday, July 17, 2011), only 10 states will survive—the six South-south states plus Ondo, Lagos, Imo and Abia. If we take away the oil money completely and say all states should depend on IGR, only Lagos, Rivers and, to some extent, Sokoto, will survive based on their IGR as percentage of total revenue as contained in the 2009 Annual Report of the CBN. So we all depend on Niger Delta resources for survival—in varying degrees.
A major way forward, I propose, is for us to talk less and do more about developing value-added agriculture and solid minerals. Some laws have to go. It is a gradual process but we must be committed to it. Like I said in the first part of this article last week, Nigerians must begin to see true federalism as a good thing, not a campaign to dismember the country or punish non-oil rich states. I insist that almost every state can be economically viable if we use our sense very well. But as long as we focus our attention on FAAC, we will never see beyond our nose.
www.thisdaylive.com
Re: The Economic Structure Of Nigeria By Simon Kolawole by edoyad(m): 7:56am On Jul 17, 2011

It is not just a shame: it is also
a measure of how oil has slow
our thinking. We neither used the oil to develop the country
nor allowed the states to
grow originally. We started
creating states to share the oil
money. We are still thinking
of creating more states now based on FAAC.
I want to quickly correct an
impression that if we start
practising fiscal federalism
today, only the North would
suffer. That is not true. If we enforce resource control
today (that is, Sunday, July
17, 2011), only 10 states will
survive—the six South-south
states plus Ondo, Lagos, Imo
and Abia. If we take away the oil money completely and
say all states should depend
on IGR, only Lagos, Rivers
and, to some extent, Sokoto,
will survive based on their
IGR as percentage of total revenue as contained in the
2009 Annual Report of the
CBN.
truly sad indeed, the very dysfunctional system we operate on.
ive based on their
IGR as percentage of total revenue as contained in the
2009 Annual Report of the
CBN.[quote][/quote]
truly sad indeed, the very dysfunctional system we operate on.
Re: The Economic Structure Of Nigeria By Simon Kolawole by phantom(m): 8:52am On Jul 17, 2011
a friend said this country is the devils relaxation spot after causing havoc in other countries, i think its true, why are we cursed as a nation.why?
Re: The Economic Structure Of Nigeria By Simon Kolawole by Pukkah: 1:10pm On Jul 17, 2011
This is a beautiful and incisive article that will, as usual, achieve nothing. So sad.
Re: The Economic Structure Of Nigeria By Simon Kolawole by Nobody: 3:19pm On Jul 17, 2011
nice write-up
i think one of the greatest problem of Nigeriatis our constitution
we need a Sovereign National Conference
Re: The Economic Structure Of Nigeria By Simon Kolawole by ektbear: 6:28pm On Jul 17, 2011
Nice piece of work. He did a very good job of explaining why these other sectors are unattractive. He forgets Ogun State as one of those which will survive, though (or at least, could survive if it had more leeway to tax today.)

So what do we do, knowing that most of the states in Nigeria will not survive if there is 100% resource control? I've made my own suggestion in the past, but want to hear what others propose.

Pukkah:

This is a beautiful and incisive article that will, as usual, achieve nothing. So sad.

Hehe grin
Re: The Economic Structure Of Nigeria By Simon Kolawole by ektbear: 9:41pm On Jul 17, 2011
So few comments on one of the better writeups I've seen recently from the Nigerian media?

Na wa o
Re: The Economic Structure Of Nigeria By Simon Kolawole by chidozman(m): 1:15am On Jul 18, 2011
The truth is always simple. someone should please inforrm Mr Aganga and his principal that their bogus investment vehicle called Euro bond et al, is just a white elephant project. issues raised in this article have said it all. Nigeria has lost its course.
Re: The Economic Structure Of Nigeria By Simon Kolawole by salafiyy: 11:43am On Oct 21, 2012
may God guide you and increase you in knowledge
Re: The Economic Structure Of Nigeria By Simon Kolawole by dimssy(m): 2:32pm On Jun 12, 2015
Made sense, but if i may ask, 'why do we study the structure of the Nigerian economy'?

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