Reconstructing Nigeria for Prosperity

By Chukwuma Charles Soludo


Today, at independence, we focus part three of the series on a re-examination of Nigeria’s political structure. We ask whether Nigeria can create and sustain prosperity under the current multiplicity of unviable States as federating units and the uniform local government system- all ‘created’ by the Federal Government and enshrined in the constitution.

At independence in 1960, Nigeria had three regions: Eastern, Northern and Western regions. In 1963, the Mid-western region was ‘created’ out of the Western region to assuage the demands of the ‘minorities’. As the threat of Biafra and civil war became imminent, the military again thought that state creation was the means to ensure ‘stability’.In order to ensure ‘stability’, ‘equity’ and ‘justice’, the four regions were divided into 12 states by Gen. Yakubu Gowon on May 27, 1967, with six each from the North and South, and thus supposedly addressed the ‘fears of domination’ by minorities following the Report of the Willink Commission of 1958.

Obsessed with the central goal of keeping Nigeria so ‘united’ that no component part of it would ever be strong enough to threaten its ‘unity’, the military went ahead to literally dismantle most of the building blocks of federalism. A new revenue allocation formula (as promised by Gowon in his 1967 speech) was adopted. All minerals (oil, gas, solid minerals) became the exclusive properties of the Federal Government. Rights over revenues changed. States became the basis for sharing the common pot. In effect, the more ‘states’ any group could get, the higher their collective ‘share’ of the national pot. Fiscal viability was not an issue. The free money from the centre, especially following the oil boom, destroyed the incentive for states to expand their tax bases through wealth creation, and also destroyed the local institutions for tax administration that existed under the regions.

A perverse incentive was immediately created, and centred around the struggle for maximisation of the share of the national cake rather than competition to bake it. The politics of state creation quickly moved away from ethnic balancing to an economic struggle. The hitherto relatively homogenous groups suddenly found a dozen reasons why each village or clan is so different that it deserved its own state. To complete the unitary structure, the military also imposed a uniform local government administration throughout the country, and proceeded to also ‘create’ local governments. Not done, these created local governments are now directly funded from the Federation Account.

For the military, state creation became an instrument of divide and rule and elite appeasement. As a legitimising carrot, powerful elite who constituted major oppositions to successive military regimes were patronised by ‘giving’ them a state or local government or ‘capital’ of state or local government. At least, those elite could have their own ‘empires’ to rule or ‘chop’ from. Almost every military regime dangled state creation to keep the elite busy and to also buy support. Currently, state creation is also being dangled and the elite are busy campaigning and lobbying. The legislators and executives are promising different groups that they will ‘give’ them more states. It always works, but to Nigeria’s collective loss.

For a start, we must admit that state creation is a failed strategy. After the 12 states failed to ensure ‘stability’, ‘equality’, ‘justice’, and ‘remove the fear of domination’ as envisaged in 1967, we have now tripled the number to 36, and there is still demand for another 57 or more states. The more states we create, the greater the demand for more.

Our major hypothesis is that under the current centralised, obtuse but largely inefficient Federal Government and the consumption drains as states and local government, Nigeria will not be able to muster the level of savings and investment required for economic transformation. The consolidated public sector basically consumes much of our national income, and the kind of federal structure we run is at the heart of it. On a per capita basis, and compared with any other viable federation in the world, Nigeria has too much government.

The purported economic argument for state creation is to ‘bring development closer to the people’. Examples are given of how the new state capitals have ‘developed’. Unfortunately, this argument is often repeated without much scrutiny: no counterfactuals are examined. But the economic waste inherent in the multiplicity of states can be seen through a simple illustration. Assume for the sake of discussion that each of the six geopolitical zones is a state. There would be six state ministries of education in the country, with six commissioners for education, six permanent secretaries of education, etc. Today, in each zone, you have five, six or seven states. In sum, you now have 36 such ministries of education, 36 commissioners, and 36 permanent secretaries--- doing the job that could have been done by six. We now have 36 state parliaments, 774 local government councils. The other recurrent costs are also multiplied, as there are certain fixed costs irrespective of the size of the government.

Currently, most state governments spend more than 70 per cent of the budget on recurrent expenditure. The implication is that in each zone, if you were to aggregate the total recurrent expenditure for running governments relative to what it should have cost, you get a sense of the monumental waste. Our casual computation is that aggregating the states and eliminating the duplications will free up between 65 and 80 per cent of current expenditures for investment in infrastructure. If such investment is efficiently made, the private sector will be unleashed and the true development that is closer to the people will begin to emerge.

Make no mistake about it: there is some less than one per cent of our population that benefits from the state creation. There have been more state governors, more commissioners, more personal assistants, etc, and the ‘sharing’ that has gone with it but the common man gets poorer and worse off. On the economic front, we have set out to create many empires (states) but have ended up with a plethora of insulated and unviable villages all of which do not add up to one glorified town.

Rather than uniting us, it is my observation that Nigerians are more divided under the state structure than before. Suddenly, the man from Abia State thinks he is different from one from Imo State or one from Bauchi as different from Gombe.

Can there be an optimal number of states at which the demand for more states will cease? It is my view that in so far as states continue to receive ‘allocations’ from Abuja, there will be no end to the demand for states until every family has one. There will be no end to ‘fear of domination’. Estimates of the number of ethno-linguistic groups in Nigeria range from 102 to over 374. Just imagine that every group gets a state. Today, there is hardly any state where there is no ‘fear of marginalisation’ and clamour for ‘equity’.

What is to be done? The first point to make is that there will be no easy solution. Institutions, once created, assume a life of their own, with powerful interest groups that would do anything to ensure their continued existence. So far, in the public discourse, there seem to be two options. They are no tailor made solutions but as starting point for serious debate.

First, consolidate the states in each geo-political zone into potentially more viable six regions. The six regions become the ‘federating units’, and operate largely on the principle of equality of regions in terms of representation and all spheres of national engagements. Under this, Nigeria should return to the revenue allocation formula in the 1963 Republican constitution, thereby stopping the feeding bottle federalism. Each region should take charge of its mineral resources and pay taxes to the Federal Government.
The aggregation will eliminate the unbelievable waste and duplications in bureaucracies and free up resources needed for investment. Economies of scale resulting from the consolidation of states will ensure. Competition among the regions as was the case before the oil boom and ‘creation of states’ could unleash a transformation boom, with one or two regions becoming bigger than the current Nigerian economy in the near future. We look forward to seeing regional interconnected rail lines, private sector-led regional power plants, water schemes, etc. The current states could still exist as provinces within the regions for purposes of service delivery. The bottom line is for the federating units to be fiscally viable entities, because only then can they drive different economic transformation agenda. If states are no longer the constitutional basis for appointing ministers, there may be no reason to have more than 15 ministers at the federal level.

The second option is to assume that politicians and current beneficiaries of the state structure will not allow any change. Under this scenario, some analysts argue that the issue is to equalise the six zones by having seven or eight states per geo-political zone. For me, this can only be a potentially viable proposition if we fundamentally re-think the revenue allocation formula and entrench fiscal responsibility in the constitution. At the minimum, we should revisit the 1963 constitutional provision. Once states stop receiving free money from Abuja, demand for new states will be based mostly on fiscal viability, which in turn, drives wealth creation.

I have seen some weak arguments that most states will be ‘viable’ once they are allowed rights over minerals in their states. Yes, some will be viable in the short to medium term. However, such minerals are depleting and if fully exploited, will probably not last more than 30 years. In the long term, innovation and productivity which emanate from competition are the only true drivers of sustained prosperity.

Whether the current state structure or regional structure is adopted, it is absurd and wasteful to retain the current ‘uniform’ local government structure. Each state or region should decide on the best local government system that serves it best, and the number that it can adequately fund. The greatest absurdity of our ‘federation’ is the ‘creation’ and direct funding of 774 local governments by the centre. There is no logic to the number of LGAs per state where Lagos State which, by official census figure, is of equal population with Kano has less than half the number of councils of Kano State. If you believe Lagos State government’s census which puts it at twice the population of Kano, the absurdity becomes gargantuan. Why impose ‘common’ ‘local’ system everywhere? Why not let it become the preserve of the regions or states to determine the nature of ‘local government’ they desire? For example in the South-east, the ‘community’ is the authentic local administration with functional town unions and most developmental projects are community-based. Why, if the South-east chooses, would it not adopt a different kind of ‘local administration’? These are issues for debates. We are currently wrongly preoccupied with getting ‘autonomous’ council funding instead of asking whether they make sense at all.

I wish all Nigerians a happy independence day! There is no better way to celebrate it than to ponder the dysfunctional structure of our federation and agree to re-engineer it. The powers of the various levels of government must be seriously reviewed: Abuja is too powerful to permit a competitive federalism