FEDERALISM AND THE ISSUE OF REVENUE ALLOCATION DELEMMA (CASE STUDY FURTH REPUBLIC) CHAPTER ONE
1.1 BACKGROUND TO THE STUDY
To highlight some significant event and developments in response to a review of Nigeria experience as a nation state, it is intellectual to present a brief survey of the part to understand the distinct phases through which the nation passed to arrive at its present political state and economic condition vis-à-vis revenue allocation. Some of these historical periods have enjoyed such a degree of political stability that in reference to revenue allocation and political stability, not only were great or studies made in the promotion of social and economic development, the overall smoothness in the functioning of the governmental system at both the regional and federal levels over shadowed the negative consequences of the power struggles and by the late 1950’s a myth of Nigeria as a “stable democracy” enjoyed considerable international credibility.
The introduction of modern methods of governance on a gradual pace in what could be described as a semi- federal and quasi-democratic structure of 1946 Nigeria, like a newborn baby of the British colonial administration passed through various developmental phases of political growth. By 1957, the political structure has developed into a well-structured democratic federal political process upon the background and modern political process was set Nigeria; in 1979, the constitution of the federal republic of Nigeria provided for a democratic federal structure in the political process.
In this study, it is observed that the introduction of system of revenue allocation in the Nigeria political economy dates bank to the political development of 1946. It is note worthy to state that the revenue allocation system in the political process had indeed been accompanied by constitutional changes over the decades. These suggest that the constitution provides the essential political environment in a nation state.
It is significant that while the constitution emphasis national unity with its concomitant principles of deviation, population and equity of state in revenue allocation, to some observer such constructional provision were not borne out of a true desire for national unity and integration.
The revenue allocation issue in the political economy of Nigeria is a volatile as any other national question such a population. This means that how national revenue is shared among the different component political units of the federal structure is irretrievably tied to the national question. Hence no broadly acceptable national revenue allocation formula has been had since 1947 and which has not generated controversy but had to be made acceptable “in the interest of national unity”.
Since 1947, about thirteen (13) formulas have been devised for the sharing of national revenue. Everybody has formed none satisfactory and such each one has generated more controversy than the last one.
The politicians through their activities in the revenue allocation agitation and ensuring power struggle aroused the suspicion of the source but visibly political military to hostility in a military fashion and cash in one invitation to seize power in the country public opinion on national consciousness believed that the national interest has debased by the politicization of the revenue system sharing. Its outcome becomes the breakdown of the common national spirit action and consciousness.
Thus, the Nigeria economic development through nationalism was scarified on the alter of ethnic and states power politics.
Nigeria has progressively evolved from unitary system of government since 1914 with strong decentralized components (regions). The regions (Northern, southern and the eastern) as were created by sir Arthur Richard, the colonial administrator, became the bedrock under which the revenue sharing formula emanated. Authority and Resources have continued increasingly to be concentrated at ‘Federal level’, a trend which wentalong with the atomization of the country’s geographical units due to the fissiparous nature of Nigerian’s federalism. In order to properly unde rstand inter –governmental
fiscal relationship inherent in the 3 –tiers of government in Nigeria and to appreciate the problems of jurisdiction over public revnue in the country, one should be acquainted with the type of political evolutionary process that resulted in the Nigerian federalism. But suffice it to say that the 2ndhalf of the 19th century witnessed a period of active British diplomatic, political, and military manipulations of administrative process in West Africa. Such manipulations resulted in the creation of the Lagos colony in 1861, although, the Berlin conference of 1885 paved way for the de claration of the protectorate of Southern Nigeria in 1893 and that o f the Northern Nigeria in 1900. Despite the regional system put in place, the unity of the federation was strained seriously by ethnic, religious and political differences. Hence, Revenue collection and allocation mechanism was a major source of conflict in the regions and in the political parties in Nigeria. In their reaction to the state of affairs in Nigeria, Post and Vickers (1973 ); opines, ‘since the early 1950’s, one of the major grievances of various sections had been that their wealth was being used to subsidize poorer ones and the growing exploitation of oil deposits in the East and Mid-West in the 196 0’s also added to the fire which had been lit long before then.’
More so, not only the mobilization of material resources but their distribution was an important source of inter-sectional competition and conflict, coupled with constant accusation of unfair treatment. The history of Nigeria’s revenue allocation system has witnessed significant shifts from principle of fiscal decentralization and then back again to fiscal centralization. The adoption of a federal system of government in 1954, the Vol. 4 (4), Serial No. 17, October, 2010. Pp 76-95 Copyright © IAARR, 2010: www.afrrevjo.com 78 Indexed African Journals Online: www.ajol.info advent of military rule in 1966, and the outbreak o f Nigerian Civil War in 1967 were the most significant factors behind these shifts. Nigeria’s revenue allocation system was dominated by the principle of fiscal centralization for several years before the country was federalized in 1954. However, the earliest step towards fiscal decentralization was made in 1946 when Nigeria was divided into three regions. The 1946 Constitution which recognized Nigeria also gave the regional governments “a large measure of financial responsibility” requiring revenue powers (Adedeji 1 969:49). Despite the regions’ expenditure responsibilities, the supreme fiscal powers remained with the central government, since the country cont
inued as a unitary state. At that time, the central government controlled all national revenues, exceptfor the direct or poll tax which was levied and collected by the regional governments (Nnoli 1995:95).
1.2 STATEMENT OF PROBLEM
The tendency of resource allocation or distribution n to foment conflict in a plural society like Nigeria is an issue that requires careful consideration. The agitation of ethnic minorities (Niger Delta People) over the management and ownership of Nigeria's oil resources which account for more than 80% of total revenue accruing to Nigeria demands solution. This agitation basically rests on revenue allocation system. The issue of how much of the centrally collected revenue that should be retained by the federal government and how much that should be allocated to state governments is still an issue to be permanently resolved. The relevance of the agitation n for new states to revenue allocation and the sharing of federal units based on the hierarchy of power within the five ethno-regional elite groups I n the country seem to be a source of worry to the federal government.
1.3 OBJECTIVES OF THE STUDY
The objectives of the study are as stated below:
1. To determine reasons for the constant change in revenue sharing formula of the federal government.
2.To examine the relationship between the demand for new states and interest to share in the national ‘oil windfall’ from federation account.
3.To examine if there is a significant impact of revenue allocations on the Socio-economic status of the States.
4.To ascertain if the states with higher amount of allocations from federation account show better signs of economic development.
1.4 RESEARCH QUESTIONS
1. Is mobilization of revenue more effective in fiscal centralism than in fiscal decentralism?
2. Do States with higher revenue allocations from the federation account show better signs of economic development?
3. Does interest in sharing in the revenue allocation from federation account influence demand for new States?
1.5 SIGNIFICANCE OF THE STUDY
This study is very relevant to both the politicians, academics and the general public since it highlights vital variables in Revenue allocation and its implications on the states. This article examines the truth in the view that some ethnic groups in Nigeria crave for new states in order to have a share of Revenue allocation accruable to states. According to Smith 1981, “the creation of more states in areas of the dominant elite groups led to dissatisfaction by the minority elite groups with the state creation. The minority elite were upset by the failure of their expectations that the creation of states would produce viable federation” Knowledge of the trend in the Revenue allocation sharing formula will help us to appreciate the politics of revenue allocation in Nigeria.
1.6 SCOPE OF THE STUDY
Jurisdiction in our context refers to the scope of the constitutional powers of the Federal government to legislate on the modalities by which money in the federation account and other federally collected revenue are allocated to the Federal, States and Local government councils in Nigeria. This article examined the impact of allocation of revenue from the federation account on the States and not necessarily on how they are raised or collected.
1.7 LIMITATIONS OF THE STUDY
The researcher met with some problem in undertaking this study, notably in some areas of data collecting. The problems are as follows:
Time was a problem as the time allowed for the study was grossly inadequate. The researcher has to use the time allowed for Lectures for research.
Resources was another constraint as the researcher was unable to execute the work more effectively due to insufficient financial resources because of this, the researcher has to make use of the little information she could get.
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Laxmikanth, M. (2006). Public Administration for the UPSC Civil Services Preliminary Examination. India: Tata McGraw-Hill Publishing Company Limited.
Okoli, F.C. and Onah Fab .O. (2002). Public Administration in Nigeria: Nature, Principles and Application. Enugu: John Jacobs Classic Publishers limited.
Nwafor .J. (2009). Intergovernmental Relations. Enugu: Unpublished work.
Nwokedi, Ralph Chiemeka (2002). Power Sharing in Nigeria M Federation. Enugu: Snaap Press.
Ugwu, Samuel Chijioke (1998). Federal System; The Nigeria Experience. Enugu: Mary Dan Publishers.
FEDERALISM AND THE ISSUE OF REVENUE ALLOCATION DELEMMA (CASE STUDY FURTH REPUBLIC)
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