But What About the Money?

By Olusegun Adeniyi

The idea of decentralising the Nigeria Police Force (NPF) and Nigeria Correctional Service (NCS) by moving the two items from the Exclusive List of the constitution to the Concurrent List started under the late President Muhammadu Buhari. But perhaps because of the urgency of the moment, it has received greater impetus under the administration of President Bola Tinubu who is even pushing the envelope further. And for six hours last Thursday in Abuja, critical stakeholders in our country gathered to discuss the proposed idea of creating ‘state police’ at a session convened by THISDAY/ARISE Television chairman, Prince Nduka Obiagbena. While the contributions were insightful, it was Governor Chukwuma Soludo of Anambra State who flagged the real elephant in the room: the revenue allocation formula. “If we are devolving powers, we must also devolve resources,” Soludo said in the course of his intervention. 

Considering that the National Assembly is yet to come up with a final bill on ‘state police’, my comment will have to wait, but the issue of funding is crucial; and it cannot work the way some of the lawmakers envision it. Any paternalistic approach that gives Abuja a say in how each state funds its police in the name of ‘guardrails’ would defeat the whole essence of devolving powers. But I would rather hold my powder on this issue until we see the final bill. Meanwhile, since we inhabit a country where everything revolves around the ‘national cake’ which I once surmised no one is interested in baking, ‘Revenue allocation formula’ refers to the methods by which all the money that accrue to the federation account (which used to be basically rent from oil) is shared between the constituent units: federal, state and local governments in Nigeria.

It all started in precolonial Nigeria in 1946 when Sir Arthur Richard established the first Revenue Allocation Commission, headed by Sydney Phillipson. The 1952 constitution that followed their work came up with the allocation formula that has provided a guide for subsequent regimes. I recently found an interesting April/June 1996 Central Bank of Nigeria (CBN) publication online. Titled, ‘Fiscal Federalism: Revenue Allocation for Economic Development in Nigeria’, it was authored by a Mr T.O. Okunrounmu, then Deputy Director, Fiscal Analysis Division, Research Department of CBN, Lagos. The study, as he wrote, “evaluates the historical development of revenue allocation systems, principles and formulas adopted in Nigeria between 1946 when the regional administration and political units were established, and 1979 when the military temporarily withdrew for a civilian regime.”

While Okunrounmu’s thesis provides insights into the political economy of the revenue sharing formula at different epochs, it is also evident that nothing much has changed in terms of resource allocation between the federal government and other constituent units in the last half century. In 1980, for instance, the federal government received 55%, States 34%, local governments, 8%, special funds, 2.5%, and FCT, 2.5%. While the federal government and local government retained its 55% and 10% respectively in 1987, that for the states was reduced to 32.5%. But aside a special fund of 2.5%, two new components were introduced: Development of mineral producing areas (1.5%) and general ecology (1%). From the 1990 arrangement to that of 1993 and 1995, the federal government merely created new components whenever it ‘reduced’ its share from the pool, with no tangible increase in the allocations for both the states and local governments.

By ending the wasteful regime of subsidy in the downstream sector of the petroleum industry and unifying the foreign exchange market, more revenues now accrue to all tiers under the current administration, at least in nominal volume. But when you factor in the purchasing power and foreign exchange rates, the quantum, in real term, is not that much, even when the power dynamics are changing. With the power sector reform that has ceded the control and regulation of electricity markets, states can now generate, transmit, and distribute electricity to address their needs. The federal government has also embraced the decentralization of rail networks, enabling states to pursue localized transit projects and public-private partnerships. 

Overall, the Tinubu administration is actively promoting legislative and constitutional efforts aimed at devolving more powers to the 36 states and ultimately to the 774 local governments as well. But, as Soludo quite rightly pointed out, when you devolve all these powers to make the federal government leaner and the states fatter, the former cannot continue to hold on to the enormous resources that have encouraged some smart people to be establishing ‘fake’ agencies for themselves! Going by the current revenue sharing formula, the federal government receives 52.68%, the 36 States receive 26.72%, and the 774 local governments receive 20.60%. In practical terms, that boils down to an average of 0.7% of all federally collected revenue for each state!

Therefore, if we must restore the principle of a federal constitution, and that seems to be the agenda of Tinubu, then there is an urgent need to also match the functional responsibilities of each tier with the requisite resources. And the only way that can be done is to rethink the current revenue sharing formula which is no longer fit for purpose. Incidentally, as Lagos State Governor between 1999 and 2007, Tinubu was strident in canvassing the idea of shifting the balance of revenue allocation in favour of the states and local governments. He also made it a campaign issue while seeking the presidency.

In his 80-page manifesto, ‘Renewed Hope 2023 – Action Plan for a Better Nigeria’ released shortly after he became the ruling All Progressives Congress (APC) presidential candidate in July 2022, Tinubu argued that much powers and resources have been concentrated at the federal level hence the urgent necessity for a review. “More funds should be allocated to the States and Local Governments so that they can better address local concerns and fulfil their expanded constitutional obligations to the people,” according to Tinubu, who wagered that “state governments are closer to the people and must be more responsive to local needs and aspirations.” If elected, Tinubu promised to “embark on a review of the federation revenue allocation system to recalibrate the division of funds amongst the three tiers of Government: Federal, State and Local.”

Now Tinubu must walk his talk!

Yes, I am aware of the fears being expressed about ceding more powers and resources to the governors, and they are genuine. In my 1st October 2017 Platform Nigeria presentation, ‘A Nation on the Edge: Which Way Nigeria?’, I raised this same fear that many are expressing: “As things stand in Nigeria today, accountability diminishes as you move from the centre to the other units: states and local governments. For instance, no president in Nigeria can get away with half of what governors do, almost as of right, in their states where there are neither checks nor balances,” I told the audience. “The speakers of the state houses of assembly are more or less errand boys who serve and are removed at the pleasure of governors. The logical result is that the promise of good governance embedded in the theory of decentralization that many Nigerians now clamour for will still be delivered in the breach if there is no change in the behaviour of the political actors.”

While we will come back to this conversation, and it is very important that we do, the reality of the moment is that the federal government cannot continue to devolve more powers to the states and still hold on to the lion’s share of the nation’s financial resources. That is not federalism!

Still on the ‘Gbaja-Adeyemi’ Moment

The embattled Director General of the ‘fictitious’ Presidential Foreign Intervention Promotion Council, Prince Adeniyi Adeyemi, has been taken into custody. But shortly before his arrest, Adeyemi had doubled down on his allegationsagainst the Chief of Staff to the President, Mr Femi Gbajabiamila. President Tinubu, as I wrote last week, has a decision to make on how his office is being dragged into the mud on this scandal. It is also important that Adeyemi be given all his rights under the law. But in my column last week which dwelt on the critical issues, I made it clear that anybody with sufficient clout, or ‘smart’ enough to know how Abuja works, can get any amount they want into our budget. I find it rather surprising that some readers would interpret that to mean ‘trivialising’ the N1.3 billion budgetary allocation for a ‘fake’ agency. That is perhaps because they have not followed my previous writings on our national budgets, which I also referenced in the same piece. In that regard, I want to rehash the opening paragraphs from my 28 November 2013 column, ‘The Illusion of Budget Performance’, which was based on my personal experience to highlight this problem before I conclude with the summation of a friend:

It was just about three weeks after I assumed office as Spokesman to the late President Umaru Musa Yar’Adua in 2007 when I received a memo from the office of the Permanent Secretary, State House; seeking the input of my department for the 2008 budget that was under preparation. Because both the Deputy Director and the Assistant Director for Information in my office were people I knew way back from my days as a State House Correspondent, I always deferred to their experience and wise counsel. For that reason, it was easy for me to learn very fast about how government works. The explanation for the memo was that I had the power to initiate project(s) that would be accommodated in the national budget.

At that period, I really had no idea on what my budgetary input should be, and it took two other reminders for me to come up with one. Having been in Katsina with the president about three times by then, the idea I had was to build a presidential media centre in the state capital that would also include broadcasting facilities so that in the event that we were there and the president needed to address the nation, we would not have to rush back to Abuja. I left the details concerning the project and subsequent follow up with the State House budget office to my staff and I forgot about it. But several months later, in May 2008, I received a visitor in my office who turned out to be a contractor. His mission was simple: to see how he could handle the building of the presidential media centre in Katsina that was already in the 2008 Appropriation Act under my department!

My discussion with the contractor was as interesting as it was sad for it revealed a lot; not only about the (mis)management of public expenditure, but also about what we call budgets in our country. However, by then, it had dawned on me that for some inexplicable reasons, the late president preferred returning back to Abuja same day whenever we went to Katsina. Only on rare occasions did we spend more than a day. Besides, I was dealing with a principal who actually hated making any broadcast because, as he would say rather cynically, “this is not America”. So I had decided not to build what would amount to a wasteful monument in Katsina even though there was monetary provision for it in the budget.

Perhaps because of that experience, I paid more attention to the “envelope system” on which our annual national budget revolves; and I learned several lessons about the culture of waste that we have institutionalized. That experience also made me to realize that all this talk about percentages of budget performance (or implementation) is utterly meaningless. For instance, that I didn’t undertake to build a media centre in Katsina quite naturally necessitated returning the money to the treasury by December 2008 but that could only have reflected negatively on “budget performance” that is predicated essentially on the amount of money spent from the entire sum appropriated for the fiscal year.

But what is even more interesting is that with the way our budget works, I could easily have proposed hosting “the first annual conference of African presidential spokesmen” (you find many of such conferences in the budget) so I could spend hundreds of millions of Naira buying vehicles. Or I could have located the presidential media centre in my village in Kwara State and say it would be for the training of journalists who cover State House! In Nigeria, you can rationalise anything and that explains how public officials locate projects in their villages even when such decisions make no real sense…

ENDNOTE: I wrote the foregoing 13 years ago and nothing seems to have changed since then. But we cannot continue to run our country this way. To restore the integrity of the Nigerian State and its institutions, as I argued last week, we need structural reforms that include strengthening budget scrutiny and ensuring that no individual or office is too big to escape accountability. But last Thursday, as he does almost every week, founder and chairman of Proshare, (a leading financial information hub in Nigeria), Olufemi Awoyemi, mni, sent the message below, which I believe sums up everything I was saying in that column: “Dear Segun, here is my take on your column of this morning and I will keep it short: The first scam often does no more than open the way. The greater danger lies in the second and third level deception that normally follows. But none is worse than a cover-up by any party involved. Someone is always going to snitch or get greedy. Responsible institutions carry a duty to understand the weaknesses that allowed the first deception and to take deliberate steps to close them. Every system has gaps, and some people will exploit them for as long as those gaps remain. They must be identified and their advantage taken away. In the end, greed and fear tend to deliver only a temporary advantage, and they often lead those who rely on them to their own undoing.”

 Let those who have ears…

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