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Nigerian central banker calls for end to imbalances -

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January 26, 2012 5:27 pm/ By William Wallis
Attempts to redress historic grievances in Nigeria’s oil-rich south may inadvertently have helped create the conditions for the Islamic insurgency spreading from the impoverished north-east of the country, says Lamido Sanusi, Nigeria’s central bank governor.
In the past year, the Boko Haram sect has been responsible for proliferating attacks on churches, police stations and other state targets. Last week, it claimed responsibility for multiple bomb blasts which claimed nearly 200 lives in t e northern city of Kano. The size and sophistication of the attacks underlined fears that the conflict is spiralling out of control.
“There is clearly a direct link between the very uneven nature of distribution of resources and the rising level of violence,” Mr Sanusi told the Financial Times in an interview, arguing that it was now necessary to focus funds on regenerating other regions if Nigeria wants to secure long-term stability.
Oil-producing areas in the predominantly Christian south benefit from 13 per cent of the revenues generated from oil in their area, on top of the federal allocations they and other states receive. As world oil prices have risen over the past decade, this has led to a widening gulf in income between oil-producing states and those without oil. The commercial capital Lagos, which raises 75 per cent of its own revenue from taxes, is the exception.
This formula was introduced after the military relinquished power in 1999 among a series of measures aimed at redressing historic grievances among those living closest to the oil and quelling a conflict that was jeopardising output.
But by seeking to address one problem, Nigeria may have created another, weakening other states in the federation and fostering resentment in the poorest region which has spawned the Boko Haram sect.
“When you look at the figures and look at the size of the population in the north you can see there is a structural imbalance of enormous proportions,” Mr Sanusi said. “Those states simply do not have enough money to meet basic needs while some states have too much money.”
According to official figures, the leading oil producing state, Rivers, received N1,053bn between 1999 and 2008 in federal allocations. By contrast the north-eastern states of Yobe and Borno, where the Boko Haram sect was created, received N175bn and N213bn respectively. Broken down on a per capita basis, the contrast is even starker. In 2008 the 18.97m people who lived in the six states in the north-east received on average N1,156 per person.
By contrast Rivers state was allocated N3,965 per capita, and on average the oil producing South- South region received on average N3,332 per capita.
This imbalance is compounded when the cost of an amnesty programme for militants in the delta is included together with an additional 1 per cent for a special development body for the Niger delta. To boot, the theft of oil by profiteers in the region diverts tens of millions more weekly from federal coffers.
The imbalance is so stark, he added, because the state still depends on oil for more than 80 per cent of its revenues. Nigeria has made little headway raising taxes for example from agriculture, which accounts for 42 per cent of GDP.
Inhabitants of the delta tend to have little sympathy with complaints about the revenue formula, given that Nigeria was ruled and at times plundered for much of the four decades after independence by northern leaders. Indeed, state governors from the region are now lobbying for an even greater share of oil revenues – in some cases they believe it should be as high as 50 per cent.
Northern Nigeria’s economy has traditionally depended on the government more than the south. Many of the industries set up as part of earlier efforts to promote national balance have gone bust or been sold off during a decade of liberal market reforms, power shortages and infrastructure collapse.
The north’s inhabitants, although more numerous, are also among the poorest in Africa, and therefore represent a less attractive market for the banks, telecoms and retail companies booming in pockets of comparative affluence in Nigeria’s south. “We now need some sort of Marshall plan for these areas so we can begin to regenerate industrialisation,” Mr Sanusi argued.
 
Source: Financial Times


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