MOST Ethno-Net publication: Africa at Crossroads


Africa at Crossroads: Complex Political Emergencies in the 21st Century,

UNESCO / ENA, 2001

Federalism, Fiscal Centralism and the Realities of Democratisation in Nigeria: The Case of the Niger Delta

Edlyne E. Anugwom
Department of Sociology
University of Nigeria
Nsukka, Nigeria

The paper argues that the practice of federalism in Nigeria is undoubtedly skewed in favour of the ethnic majority groups in control of state power. The skew manifests prominently in the use of fiscal centralism in revenue allocation in the country that ultimately marginalises the Niger Delta region from which almost all the revenue is derived. This situation that predated the present democratic dispensation in the country is a threat to the sustenance of the new - found democracy. The current agitations in the Niger Delta zone for resource control, in spite of the increase in the derivation component of federal revenue allocation stems from a general dissatisfaction with the efforts of the government to redress this anomaly. It is the contention in the paper that only a genuine federal system based on a fair fiscal policy can guarantee democracy in Nigeria. 

The eventual transformation of Nigeria into a federal state started in 1954 as a result of the 1953 Lyttleton constitutional conference.  The 1953 constitutional assembly was an effort to right the anomaly of the 1951 quasi-federal constitution that proved largely unworkable.  According to Fadahunsi (1997), the agitation for a constitution that will guarantee a just, equitable and prosperous nation was led by the political parties and pre-independence era politicians.  For these politicians, federalism was an escape route from imminent disintegration of the nation.  Therefore, "to optimise the political security and socio-economic benefits of coming together of the different Nigerian ethnic nationalities in a federation, the authoritarian fiscal centralism that has been promoted and institutionalised by successive Nigeria military regimes since 1966 has to be reversed and replaced by ethnocentric and more democratic fiscal federalism"(Ibid:12).

At this juncture, there is need to clarify some concepts in order to facilitate a better comprehension of the paper. In this regard, the expression ‘fiscal federalism’ should be seen as the direct opposite of fiscal centralism and both are terms denoting the nature and source of fiscal policies and revenue allocation in a given nation-state. In fiscal centralism, revenue allocation and fiscal policies are left at the total control of the central government. In other words, the central government makes fiscal policies and allocates revenue to constituent units on the basis of criteria decided by it. This is contrary to the situation in a state with fiscal federalism that ideally goes with a federal system of government. In fiscal federalism, the federal state shares fiscal policy making with the constituent units or regions/states and this includes the nature of revenue allocation. In this case, fiscal policy is devolved to the constituent units that make up the federation and they share this responsibility with the central government. More than this, fiscal federalism connotes recognition of the different contributions of each unit in a federation to the national revenue in the process of allocation. However, the whole issue of federalism and appropriate fiscal policy brings to the fore the question of citizenship in African states. In other words, the concept of citizenship requires further interrogation in a situation where all citizens pay taxes but revenue allocation may be lopsided in favour of a majority who may be minor contributors to the national wealth. A scenario emerges whereby people from a particular section of the country pay taxes and their region provides the lion share of national wealth in terms of mineral resources and still a fiscal regime that allocates revenue on ambiguous and biased principles ensures that the people of this region and their region get less than regions providing less resources but with the dominance of state power.  Against this background, what are the rights of citizens and their entitlements?

Citizenship and Federalism in Nigeria
The concept of citizenship even from the bourgeois paradigm entails a form of reciprocity between the citizen and the state.  In this reciprocal relationship the citizen gives only when he receives (see, Osaghae, 1990; Ekeh, 1972).  In this sense, the state guarantees the citizens some rights, freedom and basic amenities or infrastructure and in turn demands the payment of taxes, obedience of constituted authority, performance of civic duties etc.  Federalism as a principle of governance is hinged on a framework that guarantees citizens rights as well as those of the groups making up the federation.  Therefore, the ideal is for a fiscal policy that sees revenue derivation and allocation from a decentralised rather than centralised perspective.  So far, the agitations of ethnic nationalities especially in the south of Nigeria over revenue allocation (oil wealth) may suggest a tendency towards fiscal centralism that is at odds with a true federation.

Even with democracy, such agitations and contestations regarding revenue and power allocation pose the threat of derailing the needed democracy.  Moreover, the real threats of balkanisation as represented by conflagrations as the Kaimaa Declaration, the Ogoni debacle, the Zango-Kataf mayhem, the Odi shootings among others as well as the large - scale skirmishes in the Niger Delta in the last five years (The Guardian on Sunday, 1998a) suggest a dissatisfaction with a federal state that emphasises fiscal centralism.  According to a youth leader in the Niger Delta area, "we are in this struggle to get what belongs to us.  We provide over 90% of Nigeria's oil revenue and ironically get less than 5% in terms of allocation of the same revenue”(MOSIEND Rally, 1998).

The disenchantment of various nationalities over the operation of federalism in Nigeria particularly in the area of revenue and power allocation may breed a vicious cycle of intra-national conflicts.  This type of conflict has been linked to frustration. Thus, "angry at themselves and everybody, the communities often turn against themselves and unnecessary wars of attrition rage on in different parts of the Niger Delta"(The Guardian on Sunday, 1998a:17). A classic case of this sort of frustration can be glimpsed from the activities of the Ijaws who have engaged both the government and oil companies in running battles and in occasional frustrations have turned on their Itsekiri and Ilaje neighbours (see, The Guardian on Sunday, 1998b).  In fact, the Ijaws believe that since the discovery of oil in Oloibiri in 1965, they have provided over 90% of the national wealth, pay their taxes and yet have virtually nothing to show for it.

While federalism seems attractive in view of Nigeria's multiethnic composition, the negation of this principle in fiscal policies may spell doom for the development of sustainable democracy.  Thus, one may perceive a setting of the stage for inter-ethnic schisms and conflicts, in spite of democracy, which has marred the history of the Niger Delta for over a decade now.  A conflict anchored on the resolve of the oil bearing Niger Delta minorities for severance or a redefinition of the bogus federal concept in Nigeria.  After all, the unfair or perceived unfair treatment of certain nationalities and the withdrawal of citizenship in fiscal terms may breed a feeling of alienation that may inhibit citizens’ participation in a democratic exercise.

Also in face of this ground swell of distrust and conflict, the necessary consensus needed for democracy may be impaired, development stagnated and the struggle for democratic space becomes mired in ethnic contestations.  In other words, a fiscal policy that does not live up to the ideals of a true federalism and democracy in which equity and fair play are held supreme may ultimately work against the evolvement of sustainable democracy.  Actually, as has been pinpointed out there is a basic divergence between Nigeria's federalism and the centralisation of revenue (Olowonomi, 1998).  This sort of contradiction may sow the seeds of discontent and conflict with their apparent repercussions on national development.

The issues raised above are more real than imagined.  With the initial suspension of elections in Bayelsa state and the hitherto inconclusive one in Rivers state on January 9,1999 during the gubernatorial elections that ushered in the present administration, it now seems probable that the Niger Delta problem is a multifarious one which may impact on the democratisation process.  This stems from the fact that the Niger Delta people may see no future in a democratic Nigeria until the more salient questions regarding the nature of federalism in Nigeria are resolved.  As one spokesperson of the area has argued "we're taking oil from one part of the country and investing it in the North.  I do not think you can go on taking money from a place without enhancing life there " (Tempo, 1999:10).  It is obvious though that widespread poverty among the 7 million inhabitants of the Niger Delta may be part of the problem and the major engendering motive behind the agitations in the area.  As reported by Cohen (1999:22), "oil has now become a subject of vehement dispute, a catalyst for pent-up claims fed by poverty and state neglect".

However, pertinent as this observation is, the treatment of the Niger Delta problem as that of frustrated youths, communal riots or that of everybody wanting a piece of the action (see, Cohen, 1999) may be too simplistic and thus obscures the real issues at stake.  This sort of orientation may have inadvertently exacerbated the problem as it were.  It has been argued by scholars (Fadahunsi, 1997; Obi, 1998) that the military have emphasised fiscal centralism in Nigeria.  While this may be so, the agitations for and actualisation of power shift in Nigeria may have been driven by the realisation that a democracy originating from the career or geographical bastion of the military may fail to address basic questions of equity and citizenship.  Fiscal measures in this paper goes beyond the mere allocation of revenue formula but include the actual disbursement of infrastructure, road contracts, hospitals, industries etc and the recruitment of personnel into top or plum jobs in federal ministries and  parastatals. 

The oil- bearing communities simply desire allocation of revenue on the basis of derivation that was the principle before the emergency of oil (Okilo, 1980). In this sense, the Niger Delta people perceive a conspiracy on the part of the power holders to short-change them in the allocation of revenue in spite of the dominant role of the region in revenue generation and the half-hearted attempts by the new democracy to address this issue more or less lends credence to this belief.

Overview of the History of Revenue Allocation in Nigeria
The derivation principle was first mooted by the Phillipson Commission of 1946 that saw it as the principle through which a region would benefit from its non-declared revenue according to the proportion of its contribution to the central revenue (Adebayo, 1988).  Despite the fact that this principle was equally challenged early enough by the Northern delegates to the General Conference on the review of the Richards Constitution at Ibadan in 1950, it was retained. Between 1954 and 1957, the derivation principle became the chief allocation principle mainly as a result of the dominance of Nigeria’s export market by primary products from the three major ethnic groups especially the cocoa rich Western region. Also in 1957, a new revenue commission, the Raisman and Tress Commission argued for a reduction of the fiscal gap or imbalance between the Western and other regions. Thus, the committee narrowed the scope of the application of derivation by setting up the Distributive Pool Account (DPA) for other taxes not declared regional or federal. These were made up of mining royalties (30%) and general import revenue (30%) that are to be allocated to the regional governments.

The Raisman and Tress Commission recommendations formed the basis of revenue allocation in Nigeria until the late 1960s. The effort of the next Dina Commission that recommended a federal control of the larger part of revenues was brought to nought by the non-implementation of its recommendations. This effectively created a lacuna that enabled the military government to centralise revenue allocation. This attempt was given legal backing through Decrees 15 of 1967; 13 of 1970 and 6 of 1975 all of which established a fiscal policy centralised at the federal level. These Decrees were hinged on a progressive enlargement of the DPA and the reduction of derivation. This really marked the advent of acute fiscal centralism that reached its climax during the authoritarian Babangida/Abacha government between 1983 and 1997.

The history of revenue allocation in Nigeria especially in connection with the derivation principle and the Niger Delta problem has been quite intriguing. Prior to the emergence of oil as a serious foreign exchange earner, the revenue allocation principle was mainly on the basis of derivation as already stated. Even though oil export began in Nigeria in 1958 it was not until 1980 that the share of oil revenue in the national income rose to 80% (see, Ikein and Briggs-Anigboh, 1998) from about 27% in 1970. Thus oil became prominent in Nigeria’s revenue from 1980 and has been on the increase since then, constituting over 90% of national revenue nowadays. However, while the revenue from oil was increasing the percentage of revenue allocated through derivation to the states on whose soil the oil was being produced kept decreasing. 

At the onset, the oil communities enjoyed the 50% derivation that was also in operation during the heyday of primary products exports. But this 50% was at a time the oil only contributed about 3% of national revenue (that was before 1971). This 50% was reduced by the DPA Decree No.13 of 1970 to 45%. The DPA is usually distributed by the federal government to the states or regions using mainly the criteria of size and population. The DPA was further increased by Decree No. 6 of 1975 to 80% thereby leaving the states with oil with only 20% of the revenue. 

The 1979 Constitution that conferred on the federal government with rights over both onshore and offshore minerals enabled the drastic slashing of the derivation allocation to a paltry 5% by the Shehu Shagari government. This was further reduced to 3% by the military government of Ibrahim Babangida. The total picture which emerges from the above is that the powers that be allowed the derivation principle a larger scope only when the revenue from oil was not massive (1965 – 1970) but the moment oil jumped far ahead of all other export commodities in revenue yield especially from 1980, the derivation share plummeted through the issuance of Decrees and other arbitrary laws especially by the military that held sway for most of the period. 

Federalism, Democracy and Fiscal Policy: Whither Nigeria
A federal government is a constitutional arrangement that divides law making powers and functions of the state between two levels of government that are co-ordinate in status (Wheare, 1944).  This then implies that the centre and constituent units of a federation are equal in importance in both intents and purposes.  But more incisively, Wheare argues that financial subordination makes an end to federalism.  In this sense, each unit is ideally empowered to access and have control of its own sufficient financial resources.  However, this ideal of federalism is often sacrificed at the altar of "superior" economic logic that sees fiscal decentralisation as negating economic development.  Thus, it has been argued that the practice of total fiscal federalism typically contradicts sound fiscal policy of the central government and breeds economic fluctuation (see for instance the earlier work of Hanson and Perloff, 1965).  But equally strong in weight is the contention that fiscal federalism may not necessarily work to the detriment of the entire state.

The emergence of federalism in Nigeria has been traced by Adebayo (1993) to 1946 with the coming into effect of the Richards Constitution. According to him, this constitution was not strictly federal but created regions as tiers of government and thus paved the way for eventual federation.  However, the real journey to federalism in Nigeria commenced in 1954 with the 1953 Constitutional Conference, which was predisposed by the anomalies of the 1951 constitution and the activities of the political parties of that era (see, Fadahunsi, 1997). 

The onset of federalism in Nigeria threw up the problem of revenue allocation between the units.  Revenue allocation in this sense can be seen as going beyond the mere economic but is situated in the context of the politics of control and domination among various classes and interest groups.  In the words of Obi (1998:262), "the issue of revenue allocation strikes at the very basis of the existence of the Nigerian federation and the rules of entry and exit from the ruling class". Crucially, derivation, which is at the crux of the Niger Delta revenue logic is a revenue allocation principle hinged on some form of compensation. In this way, derivation as a revenue sharing mechanism among various units making up a federation is based on the proportion of certain taxes assumed to have been paid by the citizens (Olaloku, 1979).  Also, Anugwom (1998), in making a case for bringing back derivation to the fore in Nigeria, sees it as one way of compensating the oil bearing communities for the environmental degradation they suffer as a result of the pollution resulting from the activities of the oil producing firms.

For Mbanefo and Egwaikhide (1998), the issue of revenue allocation has been a recurring theme in Nigeria's fiscal federalism.  But the core of discourses on revenue allocation has centred mainly on the question of the derivation principle of revenue allocation.  Authors like Phillips (1971), Teriba (1966) and Hicks (1961) have argued much earlier that the derivation principle tends to favour wealthy regions at the expense of the not wealthy ones.  The emergence of oil, in the case of Nigeria, has not really quietened this argument as people like Phillips (1975) have seen derivation as excessively favouring the oil producing states.  However, Okilo (1980) argues that the discontent of the oil- bearing communities in the Niger Delta stems from the change in the derivation principle that coincided with the pre-eminence of oil as the revenue base of the country.  This form of sentiment can also be seen in the Ogoni Bill of Rights (1990) in which the Ogonis made a case for a revenue regime that would, figuratively, recognise the goose that lays the golden eggs.  Also, it is the contention of some scholars that the derivation principle in Nigeria would have continued as the basis of fiscal federalism were the dominant groups the oil producing areas (see, Mbanefo and Egwaikhide, 1998; Okilo, 1980). 

However, the relegation of derivation to the background almost at the same time the revenue base of the economy changed from agricultural produce to oil raises some questions. These are questions that deserve answers in view of the fact that the change in revenue base would have also meant a change in the fortunes of the regions/units if derivation had continued. This notwithstanding, the creation of special revenue accounts in Nigeria such as the Stabilisation Fund, Dedicated Accounts and Petroleum (Special) Trust Fund and the current Niger Delta Development Commission may have signalled an increased use of ear-marking which reduces budgetary equity and flexibility since it hampers fair and adequate allocation of budget among competing units (see, McMalon and Sprenkle, 1970; Buchanan,1963).  Actually, the petroleum fund which was set up in 1994 by the discredited Abacha government to aggregate and disburse through social amenities the enhanced revenue from the increase in the pump prices of petroleum products has been seen as one manifestation of fiscal bias at the centre. In fact, this belief is supported by the fact that the body headed by a former military dictator, Muhammed Buhari, concentrated mostly on improving the North of Nigeria, especially the Kano – Kaduna axis. 

The imperative of fiscal fairness in a federal democracy cannot be over-stressed.  Democracy according to Olowu (1995:16), is a “system of governance that underscores the plural nature of politics and hence gives recognition to the diversity of social forces in any political community".  In a more general note, however, Soremekun (1995) argues that between 1970 and 1994 oil and the revenue from it had proved the greatest obstacle to democracy in Nigeria.  Though, he sees, the military as the culprits since the revenue from oil was used in lining their pockets.  The point is that there is a certain connection between the sustainability of any governance arrangement and the manner of revenue allocation in a federation. 

That explains Eme Awa's (1976) contention that the component units in a federation look up to the system of revenue allocation as a means of realising their economic aims of joining the union and helps to settle the imbalances between unions on one hand and between the revenues and responsibilities of each union on   the other hand.  Thus there exist some bond between the continued existence of a federal system and the nature of financial relation in it.  Therefore, the lopsidedness of revenue allocation or the non-recognition of regional contributions and needs in revenue allocation invariably breeds some dissonance among these regions.

A potent factor in the crisis of revenue allocation in Nigeria has been the multi-ethnic or heterogeneous character of the nation.  Thus, given this heterogeneity and complexity, the competition for resources of the state would take place in a situation of ethnically contextualised scenarios (see, Suberu, 1998; Williams, 1980). It is quite possible that this factor and the interpretations of revenue allocation along ethnic prisms will spawn enduring political conflicts and contestations.  In fact, a recognition that federalism arose in Nigeria as a check to the country's economic statism and ethnic pluralism makes revenue allocation a subject of intense ethnic sentiments and perceptions. Predictably, the ethnic factor has played a prominent role in the situation so far. The majority of the people from ethnic minority areas of the Niger Delta see the present fiscal policy as motivated by ethnic considerations and power play (see, Okilo, 1980; Olowonomi, 1998).

According to Olowu and Ayeni (1988), fiscal powers closely inter-relate with the character and dynamics of any federal arrangement.  Inherent in this assumption is the fact that the principle of fiscal allocation and the survival of federalism go together.  It is therefore, unsurprising that the units in a federation are conscious of the reality that their share of the national revenue depends on how policy executors interpret and implement the revenue law (Nakamura and Smallwood, 1980).  However, the concern of these units go beyond this to focus on the law of revenue allocation itself or the principle of allocation adopted.  Usually in a new federation, three main principles are used in guiding revenue allocation.  The first and most popular is the derivation principle, which main feature (see, Bachrach and Baratz, 1970) is to distribute federal revenue to the various units on the basis of total or some population of certain taxes assumed to have been paid by the citizens of the units. 

Derivation thus may be seen as having the inherent ability, due to its relationship to taxes and compensatory features of overcoming the feeling of alienation by members of any unit.  Pervasive feeling of alienation amongst Nigerians has been identified by Mabogunje (1995) as one of the factors militating against governance and democratisation. Other principles are those of need that is allocation determined by the size of the population of the unit concerned and that of national interest and even development that is on the basis of the nation as a whole.  However, Olowononi (1998) sees ethnic conflict as largely responsible for the origin of centralization of fiscal powers in Nigeria even though this raises some questions since Nigeria is a federal rather than unitary system. 

It is thus likely that Nigeria despite avowed claims and constitutional pretensions to federalism operates a unitary fiscal policy which negates the ethos of federalism/democracy and breeds discontent among the regions in the federation.  The potential of this sort of practice for large - scale conflict has been pinpointed by The Guardian on Sunday (1998b) which labelled the Niger Delta disturbances and agitations "a bomb waiting to explode".  In fact, the paper cites the case of the Ijaws who claim to pay their taxes, provide over 90% of the national oil wealth and have nothing to show for it.  This is not entirely surprising since fiscal policies in a multi-ethnic society is usually touchy and may breed injustice.  As O'Connor (1973) posits the allotment of money in a plural society reflects social and economic conflicts between classes and states.  In other words, the conflict may arise over the principle guiding the exercise and the fiscal policy in spite of reasons may be a tool for the perpetuation of dominance, and the protection of sectarian interests.

There is a consensus in the literature that the issue of fiscal policy or revenue allocation, has posed the most challenge to the continuation if Nigeria's federation especially since after independence (see, Adesina, 1998; Awa, 1976; Phillips, 1971).  This difficulty has been naturally heightened by the discovery of oil largely in the East and the unwillingness of its leaders to accept a subordinate political position (Ade-Ajayi, 1983).  But the problem probably goes beyond the simplistic notion of the non-acceptance of subordinate political position but involves a re-interrogation of the principle of revenue sharing that willy-nilly makes the South-South and South-East the least developed Nigerian regions.

All the same, it is important to note that federalism in order to live up to its promises of taking cognisance of the   peculiar needs and circumstances of the federating units is often tied with democracy (see, Akinyemi, et al 1979; Wheare, 1979).  In this sense, democracy and federalism can be seen as mutually reinforcing.  This relationship is not only conceptual but also processual.  Kesselman, Krigger and Joseph (1996) posit that the democratic idea is all about the challenges posed by the demands of citizens for greater control and participation. 

This notion finds adequate vent in the idea of federalism in which the federating units are given some certain autonomy in organising their affairs and the central power play a more or less co-ordinating role as expressed in the conventional wisdom "local people deciding on local priorities or matters'.  This seems to be the crux of the matter in most federal states especially in those ones like Nigeria where ethnic segmentation is very deep rooted.  This sore point has inevitably led to the regular attempts in developed civil societies to review the operation of the system whenever considerable dissension arises from the federating units (see, Ramphal, 1979).

However, this practice of review has not been adopted in Nigeria and often times there is the temptation to see this as a result of the role of the military (Fadahunsi, 1997), the new government is apparently not eager to act differently. It seems like in this regard, it is business as usual.  The need for a review of federalism is often captured in the notion of political restructuring which in recent times has characterised the emerging fourth republic politics of Nigeria.  Thus, society and the real enthronement of democracy provide opportunity for checks and balances in the working of federalism in its entirety.  On this score, it is the contention of Olukoshi and Agbu (1996) that there is a crisis in Nigeria's federalism, not only of the bickering of constituent units but about social injustices rooted in cross-national class and gender conflicts. 

After all, it is often the contention that economies constitute the first concern of a federalist or quasi-federalist arrangement while political considerations come later (Akinyemi, et al, 1979).  It is obvious from the above that the crisis of Nigeria's federalism may be related to the ways and means of appropriation or revenue and expenditure logic.  Undoubtedly, this manner of crisis is not of recent origin as the concern with fiscal equity in Nigeria has spawned a plethora of expert committees and commissions (see, Tamuno, 1998).  But the continued bickering and heightened disagreements as typified by the oil - bearing minorities may have to do with the inconsistencies of fiscal arrangements emanating from these committees and government's role in accepting some recommendations and/or re-interpreting them to suit its own purpose.

Little wonder the related mechanisms of the Distributive Pool Account (DPA) and the Federation Account have been identified by Obi (1998) and Suberu (1998) as the means through which the federal government unilaterally manipulates revenue and spends over two third of federally collected revenue.  Apart from this flaw, Adesina (1998) sees the revenue allocation principles adopted in post-independence Nigeria as basically warped.  This results, according to him, from the fact that they do not represent a general consensus but the views of commissions, individuals and groups within the "commissions" which have shown a proclivity for embracing theories, beliefs, ideals and approaches "which have not only proved unrealistic but have thereby contributed to the dislocations within the Nigerian state" (Adesina, 1998:232). 

However, it is equally important to note that the committee on Revenue Allocation of the 1995 constitutional Conference recommended a revenue allocation system based on equity and justice and which serves as inducement for the federating units to achieve self - generating growth (see, Federal Republic of Nigeria, Report of the Constitutional Conference containing Resolutions and Recommendations, vol.11, 1995). Apparently, this sound thinking has hardly guided the new democratic arrangement and the new agitations in the Niger Delta area in the last two years derives largely from disenchantment with the attitude of the present government to the problem. 

Towards a Theoretical Understanding of the Agitations by Minorities in Nigeria
It may be instructive at this juncture to take a brief look at the theoretical basis of state responses to agitations by oil bearing communities in a democracy.  According to Keller (1983), this may be characterised in three main ways viz. the re-distributive, the re-organisational and the regulatory or repressive.  In the re-distributive mechanism, state resources allocation are altered to favour one group or some groups at the expense of other(s); in re-organisational strategy, the existing state structure is reconfigured or restructured to accommodate genuine demands by hitherto marginalised or inadequately represented groups and in the regulatory framework, the state makes use of coercion or repression to stifle dissension.

The point then emanates that the wrong approach may breed alienation and conflict (see, Anugwom, 1998) that may mar the participation of the people concerned in the democratic process. Equally theoretically germane in this regard is the rentier economy notion popularised by Beblawi and Luciani (1987).  The rentier notion refers to the sharing of a produce or natural stock of wealth without contributing to it.  In the Nigerian situation, it is often the contention of minority agitators in the South that the wealth produced by the South is used mainly to develop the North by virtue of the Northern hegemonic domination of power.  This was the main basis of the clamour for power shift and restructuring which led to the election of a Southerner as president in the present dispensation.

As stated elsewhere this sort of perception or thinking raises the question of citizenship and its meaning in the African context.  Therefore, whether one sees citizenship from the bourgeois view that hinges on reciprocity or even from the radical perspective of class differences between the individual and the operators of the state and its machineries, fiscal policy should in practical terms define citizenship.  This is possible only to the extent the fiscal policy gives to the citizen in equity with his contribution (in taxation, manpower and natural resources) to the state.  For the minority oil - bearing communities of the Niger Delta, this may be quite a crucial consideration given the prominence of oil as the fiscal basis of the Nigerian state.  In fact, oil accounts for over eighty percent of all federal revenues in Nigeria and ninety percent of all foreign exchange earnings (Obi, 1998).

This notwithstanding, our theoretical underpinnings reveal that, the military dictators who ruled Nigeria for a long time made use of the regulatory framework in facing the agitations of the minorities. The plethora ethnic/oil conflicts, mayhem and even the epitomic death of Ken Saro-Wiwa signified this crass use of coercion and repression to stifle genuine dissension. Little wonder, the present administration was welcomed with high hopes by the people.

In spite of the relative newness of the administration, a marked ambivalence that ultimately favours the regulatory framework is emerging. This thinking is supported by the ruthlessness exhibited in dealing with both the Kaimaa and Odi episodes. In fact, in Odi an entire village was ransacked by sheer brute force for allegedly murdering some policemen and more obviously for disturbing the activities of the oil firms in that area. 

However, the government in a bid to play the good guys role has also toyed with the idea of using the re-distributive framework. But this has manifested basically as both a form of tokenism and a political weapon. But more than this, the celebrated hike in the percentage of the derivation share in revenue allocation has been viewed as inadequate by the people. Moreover, the blunt refusal of the government to entertain calls for a sovereign national conference and apparent unwillingness to tamper with the existing federal structure and provisions underscores a leaning towards at least, a moderate regulatory framework. 

The Niger Delta and the Realities of Federalism in Nigeria
Perhaps nothing epitomises the skewed nature of Nigeria’s  federalism more than the allocation of revenue among the constituent units. This allocation principle which does not take cognisance of the derivation principle which was very prominent in the pre-independence allocation formula. The present allocation formula that takes care of such things as size and population but has relatively insignificant provision on the basis of derivation has been a sore point in the relationship between the Niger Delta minorities and the federal government in the contemporary socio-political history of Nigeria.

The increase in demands for a more federal oriented fiscal policy in Nigeria may not be unconnected with the worsening economic situation and the growing inability of the people to meet the economic demands of existence as individuals or groups. Actually, it has been demonstrated that the adoption of structural adjustment in most African countries in the 1970s and 80s has led to a trend of resource wars or environmental conflicts (see, Obi, 1999; Adepoju, 1996). Thus, the recent trend of resource control agitations and even the ever running conflict between the oil firms and the groups in the Niger Delta of Nigeria points to the sprawling socio-economic problems in the area. This point actually runs through all the demands of the Niger Delta people.

Even the recent increase in the derivation component of revenue allocation to 13% by the federal government has not really assuaged the feeling of injustice among the minorities. This situation derives directly from the long years of neglect and environmental degradation caused by oil pollution. Of course it goes without saying that Nigeria’s mono-economy is built on oil and over 90% of this oil comes from the minority Niger Delta area. The efforts of previous governments to appease the region through the provision of infrastructure in the area through the defunct Oil Minerals Producing Areas Development Comission (OMPADEC) did not achieve much result. Recently, the government in addition to the 13% derivation allocation has established the Niger Delta Development Commission (NDDC) to take charge of improving the infrastructural outlook of the Niger Delta zone as a whole. However, it is still too early to assess the performance of this commission that just kicked off this year.

The present agitation in the Niger Delta has been the culmination of the restiveness of the groups in the area with the state of things. This agitation that was made prominent by the activities of the Movement for the Survival of Ogoni People (MOSOP) in the popular Shell/Ogoni saga has now grown to include more than twenty pressure groups in the area. The most prominent of which are, in addition to MOSOP, Movement for the Survival of the Ijaw Ethnic Nationality in the Niger Delta (MOSIEND); the Chikoko Movement (a coalition of many activist groups); the Ijaw National Congress (INC); the Ijaw Youths Congress (IYC) (the most militant in the last four years); the Itshekiri General Assembly; the Urhobo Union etc.

The demands of these groups that apparently represent the articulation of the needs of the people of the area are tied to the environmental problems and the revenue allocation issue. In other words, these groups are seeking a more humane environment defined in terms of less degraded environment that would pose no threat to the ability of the people to eke out a living. Included in the demands also are the protection of the lives of marine creatures and some compensation for damage already inflicted and a more equitable revenue allocation system that takes cognisance of the contributions of the different regions to the national revenue. In this case, it is their desire that the areas that contribute more should likewise be more rewarded in the allocation formula. The oil firms that exploited oil in this region for many years should be held accountable for their actions.

The agitations of the above pressure groups in the area has been taken over by the state governments in the area and this has led to the recent demand for resource control. This recent demand for resource control among the six states of the federation in the South-South zone or the Niger Delta, as The Guardian (2001) reports, is an outcome of the dissatisfaction of the people of the area and their elected representatives with the attitude of the present government to their demands. In fact, the paper reports that the South-South people have decided to confront the government on all fronts on the resource control demand. The people see the government as having not responded effectively to the myriad socio-economic problems confronting the area. The resource control agitation is of immense historical significance since it marks the first coalition between civil society and government at any tier against the exploitation of capital in Nigeria. 

The resource control logic is built around the desire of the people to be in control of the heavy oil revenue in the area; instead of the current practice whereby all natural resources in the country belongs to the federal government who appropriate the resources and allocates revenue using some preconceived criteria to the states. In the new system sought the states would control the revenue and give a predetermined percentage to the government as was more or less the practice in the early years of the nation’s life when primary agricultural products held sway as external revenue earners. 

Resource Control, Federalism and Democracy: The Niger Delta Dilemma 
However, the current resource control agitation by the Niger Delta region, as it were, has been further inflamed by the court action instituted by the federal government against the South-South states in this regard. In the court suit, the federal government is responding albeit legally to the claims of these states for resource control that further confirms our belief that the government, in spite of democracy, is inclined towards the use of a regulatory framework in response to the Niger Delta problem. But this framework in the present dispensation mediated by the lessening of outright coercion.

Instead of cowing the littoral states of Akwa Ibom, Cross River, Rivers, Bayelsa, Delta and Edo, the court action has emboldened them. In fact, the Ogoni Bill of Rights released about ten years ago captures in entirety the present demands of the larger Niger Delta region. The Bill of Rights asks for an end to expropriation and degradation of lands; payment of reparations and rents for the oil wealth expropriated since the late 1950s; compensation for environmental damages etc.

The whole problem as already stated can be squarely located in the practice of federalism with fiscal centralism. In this situation while the country goes by the tag of a federal state, this federalism is carefully and often times manipulatively excluded from guiding fiscal policies. This is deplorable given the fact that a federal state is usually marked by the ideals of federalism that permeates all spheres of such federation, including fiscal or revenue policies.

The dissatisfaction of some constituent units of the federation with the prevailing policy which is not in keeping with the tenets of federalism remain the greatest threat to the new democracy. As a matter of fact, the displeasure of the Niger Delta region, for instance, with the approach of the government to the issue is responsible for the current groundswell agitation for resource control (see, The Guardian, 2001). As has been pointed out, the issue of revenue allocation is a recurrent one in Nigeria’s federalism (Mbanefo and Egwaikhide, 1998) and the extent to which the present government deals with the problem fairly will go a long way in determining the success of the current democracy in Nigeria.

Be that as it may, the anger of the people of the Niger Delta, as has been poignantly expressed by Okilo (1980) hinges on the coincidence between de-emphasising the derivation principle in revenue allocation and the emergence of oil as almost the sole revenue earner. As a matter of fact, the minorities see the decline of the derivation principle exactly when oil was emerging as the sole foreign exchange earner for Nigeria as a handiwork of the major ethnic groups who would have been disadvantaged with the continued prominence of the principle in revenue allocation. 

The derivation principle which ensures that a region benefits from the central pool according to its contribution was effectively utilised in Nigeria in the period of the commodity marketing boards when the country was dependent on such primary products as groundnut, cocoa and palm oil which were largely from the dominant or major ethnic groups for external revenue. The decline of these products and the emergence of oil has coincided and produced an ironic decline of the derivation principle of revenue allocation. It stands to reason, as the people of the Niger Delta are wont to argue, that if crude oil has been discovered in the major ethnic groups, the principle of derivation would still be in prominence. In other words, the major ethnic groups have used their dominance of state power in the country to unleash a fiscal policy that punishes rather than rewards the goose that lays the golden eggs.

The resurgence of the revenue agitation has gone even beyond the confines of the Niger Delta. Even the neighbouring South-Eastern states that produce some of the oil have added their voice to the fiscal federalism demand. The situation has not really been helped by the recent enthronement of the sharia law in most states in the North of the country. The sharia law which forbids such things as the consummation of alcohol and other types of hotel and entertainment related businesses has meant a decline in the contributions of these states to the national domestic revenue derived from the Value Added Tax (VAT). The VAT has in the last three years emerged as one of the most profitable sources of internal revenue for the government. The states and local governments are usually allocated a percentage of the revenue from this source by the federal government each fiscal year and this irrespective of the contribution of each tier of government to the VAT pool.

However, with the advent of the Islamic Sharia law in the North, the Southern states have jointly called for the exemption of these Sharia states from VAT allocation since the businesses that bring the money has been outlawed in most of the North. The Sharia issue has also inadvertently strengthened the case for resource control by the Niger Delta region since the people argue that if the secularisation of the states in the North through the Sharia law, which goes contrary to the proclamation of Nigeria as constitutional a secular state, can be allowed by the federal government, then resource control is in the same sense a legitimate aspiration.

Be that as it may, the current scenario in Nigeria in spite of democracy indicates a practice of federalism that is to say the least skewed. This is particularly the case in the area of fiscal policy that tends towards a unitary than federal type of government. The attitude of the government to the resource control issue and even the allocation policy cannot really be explained by the wish to release resources for the global market while holding the people back (see, Obi, 1999) but rather by a political calculation which is biased in favour of the ethnic bloc in control of state power and which fulfils the accumulative tendency of domestic capitalists.

In fact, the intertwining and complex nature of the oil economy that drives the current discomfort with fiscal centralism has been well articulated by Rowell (1994). This tangle include the over 7 million people of the Niger Delta region, the oil firms, the very fragile ecosystem of the area and of course, the state that has stifled largely through the use of brute force the aspirations of the people for a more workable and fair fiscal regime. 

The type of allocation principle that is in vogue in Nigeria raises some crucial questions regarding the definition of citizenship and the entitlements of citizens. Those are obviously cheated, by fact of marginality in the power game, in the allocation of revenue are indirectly being classified as second- rate citizens. In this case, federalism should in all its ramifications engender both a right definition and sense of citizenship that treats all sections of the country fairly. 

In this situation, the derivation principle as a dominant mechanism for fiscal allocation should be encouraged and made prominent in Nigeria if only to erase the feeling of alienation among the ethnic minorities and create a reciprocal citizenship that equates both giving and receiving (see, Osaghae,1990; Ekeh, 1972). It is only reasonable to see the feeling of alienation as a factor that inhibits both the sustenance and consolidation of democracy (see Mabogunje, 1995). 

It would appear from the foregoing that the question of fiscal centralism or the operation of federalism without the fiscal component represents a potent danger to the new democratic dispensation in Nigeria. This is really unfortunate since Nigerians went through a lot of pains to enthrone the present democracy. The extent of threat that the fiscal problem represents can be fully appreciated when it is recognised that it is equally tied up with the issue of oil that is the bone of the Nigerian economy. As Soremekun (1995) has observed, oil was the greatest obstacle to democracy in Nigeria from 1970 – 1994. Soremekun blames the military for the situation we only pray that the civilians now in power do not fall into the same trap.

Federalism has the prospects of nipping ethnicity, corruption and nepotism in the bud (see Noyoo, 2000) when it is properly operated. Therefore, there is a crying need for a proper definition and functioning of federalism in Nigeria. Such a definition should be along the lines of what obtains in other countries like the U.S. Thus, the problem of Nigeria’s federalism as presently structured goes beyond fiscal centralism to include other issues of power and authority devolution between the units, control of internal security – police etc.

However, the fiscal problem, given the sensitive nature of issues involved and the restiveness of the Niger Delta minorities, remains perhaps the greatest threat to the new democracy. Hence, the earlier the government works out a long lasting solution to the problems along the lines of what depicts a true federalism, the better for the eventual consolidation of democracy in the country. This is also necessary in order to optimise the political security and socio-economic benefits of coming together (see, Fadahunsi, 1997). Therefore, the skewed and authoritarian fiscal centralism in operation should be replaced with a fair instrument that takes cognisance of contribution, need and size in that order. 

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© The ideas and opinions expressed in this article are those of the author
and do not necessarily reflect the views of UNESCO.

© Les idées et opinions exprimées dans cet article sont celles de l'auteur
et n’engagent pas la responsabilité de l´UNESCO.