Restructuring Nigeria #1: Regional Resource Control

Regional resource control in Nigeria would provide public goods to the Niger Delta while helping the country-at-large wean itself off oil.

The Fourth Republic has described at length the ruinous impact of Nigeria’s oil-centric political economy on the country’s national life. We were not being hyperbolic when we pronounced Nigeria’s macabre relationship with oil as, “the black sticky glue which binds together a ramshackle empire of misery known as Nigeria.” Nigeria’s association with oil has not only contributed to Dutch Disease (a rapid decline of other non-oil economic sectors), economic dependency (ex. 75 per cent of government revenue is reliant on oil). But it has also has allowed the mass looting of the country’s wealth and created decades of conflict in the Niger Delta. Moreover, the possibility of the global oil industry becoming disrupted by shale oil exporters such as the United States and alternative energy technologies such as the battery powered electric car threaten to make the oil and Nigeria share the same fate in the 21st century.

What can the Nigerian state do to ensure that Nigeria and oil do not share a future trajectory? How can the Nigerian state wean itself off oil and reduce conflict in the Niger Delta? One possible answer to these questions would be to grant resource control to oil producing areas of Nigeria (thereby abrograting the Land Use Act).

A Model for Regional Resource Control in Nigeria

As for how resource control could work in Nigeria, I propose that regions of Nigeria have sole jurisdiction (regarding exploitation, royalties and development leases) over non-renewable natural resources in the territory over resources such as natural gas, oil, coal etc. Also, local government areas (LGAs) where these resources are extracted would receive a portion of the funds which are derived from the exploitation of these resources. So that LGAs have a share of the income the rest of their region is economically benefiting from.

(It’s also important our emphasis on regions rather than states. Nigeria doesn’t need 36 states. In fact, we will argue later that Nigeria should consolidate states into regions and should also examine models of asymmetrical federalism to mitigate social tensions)

The Consequences of Regional Resource Control in Nigeria

a) Nigeria’s Fiscal Situation
An immediate consequence of Nigeria adopting this model of resource federalism would have the Nigerian state incapable of maintainining its shoddy leviathan-like control over the life of its citizens. A smaller Nigerian state would be forced to devolve more powers to Nigeria’s regions such as the generation of electricity. This is likely a good thing. The Nigerian state hasn’t had a good record in providing public goods to its citizens. Perhaps part of that problem is because of the bureaucratic/governmental distance between the average Nigerian citizen (especially if they do not live in Lagos or Abuja) and Aso Rock. Having Nigerians being one step closer to their governments on crucial matters regarding healthcare, education, electricity production and other issues would give citizens far more power than they currently know.

Moreover, sentiments in the Niger Delta which empower a narrative that describes non-oil producing parts of Nigeria (especially Northern Nigeria) as being parasitic would no longer be the case. These narratives poison Nigeria’s federation and make it much more difficult to inspire national unity among Nigeria’s peoples.

There is another issue regarding regions of Nigeria which will lack access to the funds distributed by the Nigerian state from oil revenues. Some states in Northern Nigeria are nearly wholly reliant on the revenue distributed from the federal government from oil rents. Given this status quo, the existence of those states which somehow lack the ability to generate a respectable amount of internally generated revenue should be deemed redundant. Two possible solutions exist for those areas which are afraid that in a future without easy access to oil rents, that their lives would be far more perilous.

First, they should be consolidated with other areas. That way, states like Jigawa would be combined with other states in the hopes that a large state would have access to a greater ability to provide a ‘floor’ of socio-economic support and services to their citizens.

Secondly, there should be a government initiative to redistribute revenue from ‘have’ regions of the country to ‘have-not’ regions. Thus equalizing their fiscal capacities. In Canada, this is formulated to make sure that provinces have access to per capita revenues equal to the potential average of all of Canada’s provinces. If Nigeria took on this program it would incentivize the Nigerian state to take the capture of taxable revenue (from income tax, consumption taxes, corporate income tax, customs and duties etc.) a bit more seriously than it presently does. In the status quo, utilizing oil rents to redistribute wealth merely feeds Nigeria’s dependency on a finite resource (oil). These ‘Equalization Payments’ (in addition to other forms of transfer form the federal state) will enable some regions of Nigeria to avoid having to cut taxes to a disastrously low level or raise taxes so that they become completely uncompetitive.

b) Corruption

There are those who fear that corruption will become an even stronger force in regional governments if complete resource control was realized. This could possibly occur. But, at least corruption on a national scale from the federal government’s control and access to oil rents would likely be eliminated. The damage that sort of corruption does sets an entire country back a generation. In the worse case scenario under the new political order, damage would be limited to a regional government which is under the criminal investigatory powers of a federal government.

c) Conflict in the Niger Delta

The conflict in the Niger Delta is complex and now is a mixture of criminal elements along with politically motivated fighters. Allowing regions of Nigeria to have resource control powers would knock away the political peg away from those fighters who claim that they’re fighting the Nigerian federal government because they seek freedom for their peoples. Furthermore, it would in theory make the governments of the Niger Delta more responsible to their citizenry now that they have increased fiscal capacity to provide public goods such cleaning pipe-borne water.

d) Dependence on oil

The Nigerian state, lacking access to oil rents and now being far smaller than it previously was, will have to rely upon its abilities to collect tax revenues such as income and corporate taxes to be able to provide some of the tasks that a national government should deliver to its citizenry — such as a functional military. In this scenario, the Nigerian state would be forced to look towards ways to increase the general productivity of Nigeria so that it could collect more tax revenue. It is possible that the Nigerian state would also look towards insipid taxes (taxing beggars?) as a way to pay the bills, but this would just raise the ire of Nigerians. As we previously wrote, “This would create a new problem for Nigeria’s oligarchs. In taxing Nigerians so directly (aside from making their lives more taxing by effectively ruining the country), Nigerians would have more impetus to revolt against the unfairness of the insipid individuals who rule over them. Individuals who take, but provide no social goods or contract in return.”

A Way Forward

Moving Nigeria away from an oil economy will be a gradual process. However, one of the best ways to do this is by weaning the Nigerian state itself off this resource. This can be done by creating far more separation between Aso Rock and petroleum. Restructuring Nigeria must include a re-examination of Nigeria’s relationship with oil by granting regional control to areas of Nigeria who are clamouring to assert their rights over ancestral lands. Oil and Nigeria are not synonymous. It is high time that the Nigerian state and its leaders began perceiving this as truth.

  • Eri

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The Fourth Republic

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A collection of voices who are seeking to be heard regarding Nigeria, Africa and the global black diaspora.

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