Restructuring, Growth And Inclusion, By Olumide Ijose

Nigeria’s system of states, was first implemented by the General Yakubu Gowon-led administration during the Nigeria civil war in 1967. The expectation was being smaller political units, states would reduce the power of political office holders, minimize the role of ethnicity in governance as well as the struggle for political power at the national level. It was also felt that a state structure would be better at driving economic growth and fostering a broad and strong sense of nationalism and inclusion as Nigerians as opposed to a dysfunctional ethnic based identity system. In essence, state creation was a response to a diagnosis that the prior regional structure was culpable in maintaining a sense of tribal affiliation and a hindrance to faster economic growth.

The country was under military rule during the next 30 years and the military progressively split the country from four regions to 36 states. The military also created a revenue allocation system that aggregated fiscally generated revenue – taxes, levies, royalties from crude oil sales, tariffs, licence fees, duties etc. – at the federal level. This was then shared among the tiers of the political structure (federal and state governments) using a formula based on a percentage set aside for the Federal Government and a state’s population, geographical size and number of local governments.

Arguably, one of the most significant events in this time-period was the enshrinement of the state system and the revenue allocation mechanism into the 1999 federal constitution. However, a long history of consistently slow growth rates and a failure to engender a strong sense of nationalism and inclusion, has led to increasing doubt about the efficacy of the system and calls for restructuring the country. The worry is that barring a course correction, the present state based governance and revenue allocation system, will only but perpetuate slow growth and negative collateral effects!

Understanding the reasons and mechanisms responsible for the failures of the current system is a complex endeavour. These include an inability of governments at all levels to generate sufficient revenues to fund their bureaucracies and development agendas and reliance by state governments on the Federal Government for financial bailouts. Other important factors are the perpetuation of ethnicity as a basis of identity at the individual and group levels, maintaining cries of marginalisation and weak political, legal and economic institutions relative to the task of nation building and fostering fast economic growth. The suppression of dissent and free speech and thus a reduction of civil pressure for good governance is also a factor.

Also germane is a value system that emphasizes following leaders, rather than objectively confronting and robustly criticizing them when necessary; zoning and federal character as a basis for making appointments into key political, policy making and executive positions, rather than merit on the assumption that the possibility of zoning and federal character bringing balance and reducing ethnic tension, trumps merit and the promise of solid governance; selection as an overriding basis within political parties for identifying candidates for political office rather than competitive primaries; and a gross failure of local businesses to meet local consumer needs.

The extent to which the current paradigm contributed to and perpetuates these weaknesses is controversial. Also controversial is the notion that a reversal to a regional system of political governance and the dismantling of the unitary revenue allocation system will propel faster economic growth and increased patriotism. Defenders of the current system contend that it is not the system by itself but its operation that is the problem. In essence, that there is no pressing need to restructure the country but an urgent need to implement the current system to generate good outcomes for all Nigerians.

Clearly, socio-economic conditions in the country did not come out of nowhere. On the contrary, there are definite structural challenges on the ground, that political leaders fail to recognise and by extension, fail to recognise the weaknesses of the current system and the extent to which it is failing to deliver its broad twin objectives: fast economic growth and a sense of inclusion. As such, the status quo continues and opportunities that can engender faster growth go untapped, reducing the impact of the real economy on the populace by failing to prepare businesses and entrepreneurs to leverage them in full.

The destabilising consequence of this long drawn situation is compounded by the rise of China and India as economic powers able to produce decent quality but low priced goods and services. Consequently, Nigeria is dependent on imports for meeting consumer and industrial needs, reliant on crude oil prices for economic growth and revenues, and hamstrung in enacting growth supporting monetary policies, especially business friendly low interest rates and massive infusion of capital to spur consumer demand and hence business capital investment, and a competitive and comprehensive tax structure that provides revenue for infrastructure development.

For example, numerous states and the bureaucracy they entail is counter to the growth history of the advanced and emerging economies. For example, Texas, a state that is geographically the size of Nigeria is one state in the United States, a country that is 10 times the size of Nigeria and has 50 states to Nigeria’s 36. In addition, the history, number and complexity of the features of the country’s federating units – language, customs, norms and values – suggests that a federal structure based on regions, will be better for growing the economy. Switzerland a country with a similar – but much lesser informal complexity – is a federation of loose federating units and is one of the richest and most innovative countries in the world.

As a result, the process of controlling winners and losers has become even more complicated not just economically, but also politically and socially. With a young and fast growing population, the risk of too many young people feeling marginalised, dispossessed and forgotten is growing. This can result in anger at political leaders, businesses and anyone deemed to be successful, with potential but serious negative consequences. The danger is these same conditions can lead powerful political and economic blocks, to turn inwards and block attempts to restructure, in the hope of maintaining advantages and privileges.

The question though is the extent to which restricting into regions, devolving power from the Federal Government to regions, and revising the revenue allocation system accordingly, will facilitate fast economic growth and a sense of inclusion. It is unlikely that restructuring by itself will deliver these outcomes because there is little reason to assume that the mere fact of restructuring will eliminate corruption and inefficiency in the allocation of scarce revenue. Indeed, the real structural changes Nigeria needs is in the informal architecture of values and norms, a cultural revolution, that does not tolerate corruption, does not deify leaders, and emphasizes quality education, hard work, discipline and nationalism as a Nigerian. A structural change that enables the legal institution to counter corruption regardless of who is involved.

These changes are not premised on the structure of the federation, rather they are embedded in good governance. However, good governance will remain challenging achieve as long as merit is subordinated to perceived tribal and power block imperatives at the government and political party levels.

As long as governance is subpar, socio-economic conditions will remain depressed and fearful and calls for political restructuring will continue. In essence, regardless of the governance structure and system, the transparent enthronement of merit at all levels – and in all organised activities – and the creation of a fearless and independent legal system are the real keys for efficient utilisation of resources, unlocking good educational and health outcomes, creating a skilled and capable workforce and faster economic growth and greater inclusion.

Clearly, the seeming truism that smaller federating units (states and local governments) are an effective counter to tribalism and a lever for fast, real economic growth has failed. While restructuring may be useful, it is by itself neither a panacea, guaranty of nor, a substitute for merit in making political appointments, active display of supportive national values by the citizenry, a solid educational system, a supportive legal institution, excellent policy making and execution, and a consistent display of good governance in all tiers of government. These are the real keys to a fast growing and inclusive economy. In essence, while restructuring to a regional structure and greater fiscal control at this level is very necessary, the mere act of restructuring will not bring about these preconditions.