Revenue Allocation, Insecurity & Poverty in Northern Nigeria



March 13, 2012 / Olufemi AWOYEMI, FCA
From the equality of rights springs identity of our highest interests; you cannot subvert your neighbor's rights without striking a dangerous blow at your own.” – Carl Schurz
I'm sure if Sanusi Lamido Sanusi were stuck between a rock and a hard place, that would be preferable to the spot he currently finds himself in over pronouncements made in interviews, speeches and off-the-cuff responses on Boko Haram, revenue distribution and poverty in the country, especially Northern Nigeria.
Consider this: Most Nigerians agree that the current insecurity is worsened or aided by the high level of poverty in the country and ignores any attempt to discredit the allusions made by SLS and economic experts. However, no one is able to establish a link between accountability in governance with revenue allocation or its distribution – the root cause. In this delicate exchange, the CBN Governors’ growing band of critics are having a field day, employing the first rule of politics: characterize everything he says and does as wrong. That is fair game. There are three clear groups that have emerged from this exchanges – the battle tested political class who would pick on any issue if it furthers their cause, the well trained, disciplined and professional class, the aggrieved and excluded majority and public officials of which SLS is the most visible.
If the information, reasoning and exchanges shaping the debate were premised on facts and reflect a thorough understanding of our dire socio-economic realities, the level of discourse would be elevated beyond the current cheap political posturing taking place. Yet, there are serious issues being raised in and around the issue that should attract the attention of serious minded persons. Indeed, given the back-drop of the terrorist siege that is taking place in the North, the stakes couldn’t be significantly higher.
For now, it is hard for the public to separate the wheat from the chaff, because of where we have been, the growing distrust of government and the biting reality of the accelerated descent to poverty of a large majority of Nigerians. This debate however is necessary and long-overdue; yet before an opinion is voiced; a rebuttal is released, and soon enough everything becomes muddled up. That is no way to hold an absolutely necessary national discussion on something so critical to our federalism and collective well being.
But in the ‘fear’ driven culture we have created, one would concede this to be an effective way to keep the people distracted whilst the populace pontificates without needing to be right, criticize without having all the facts and loudly call for a redistribution of national wealth without ever having to create one, thus further perpetuating the poverty, unemployment and education malaise.
Statistics appear to grossly under-estimate the immensity of poverty that define Nigeria’s paradox of ‘rich country with poor masses’. More than 90% of Nigerians are poor and exist largely at the mercy of fate. These realities are much more obvious in rural areas and slums. In these places people die because they cannot afford N500 to purchase needed medication or basic public healthcare. Worse still, people around may not be able to help as they too may not be able to collectively raise that amount of money. It is a very obvious reality in today’s Nigeria! As strange as it may sound, this is going on side-by-side with ostentatious living by the 1%! Even the official statistics admit that over 112 million Nigerians live on less than US$1.00 a day.
A factual indicator is the results of the harmonized Nigeria Living Standards Survey (HNLSS) conducted by the non-partisan National Bureau of Statistics (NBS) which puts the Nigerian poverty profile at 69% - this indicates that poverty and income inequality in the country have increased since 2003/2004. Accordingly, the NBS estimated that this trend may rise further if the potential positive impact of several anti-poverty and employment generation intervention programmes of government fall through. The report reveals that 112.47 million Nigerians live below US$1.00 per day and as a result could barely afford the minimal standards of food, clothing, healthcare and shelter!
Since poverty and unemployment in Africa strongly correlate, it will not be surprising to assume that the unemployment rate is in excess of 40%. The official figure is nevertheless about 20% which analysts consider a gross under-estimation.
But be that as it may, what is true is that we have a crisis which historically has been a platform for the creation of, and dynamic sustenance of other crises. We have unresolved issues that seek to emphasize our differences more than our common destiny. We operate a system that exposes the weaknesses in the foundation of our unity which the peoples representatives shy away from confronting. Yet, if the January strikes and related house probe(s) provided any lesson, it must be the fact that the inequalities and fundamental imperfections in the macro-economic structure of Nigeria is unsustainable; and that our politics cannot crowd out the impending reaction to this unaddressed problem.
Karl Marx is popularly known for a truism which emphasizes our current reality: religion is the opium of the poor! Yet, it is not only about religion but our historical cultural practices of deliberately putting people in a state of ignorance. Illiteracy is also both a product of and driver of poverty. Thus the greater the level of poverty, the higher the illiteracy rate and of course more poverty - these dynamically reinforce each other.
Accordingly, when a young man is poor, illiterate and unemployed, he becomes a clean slate for any kind of brainwashing which according to Karl Marx is more potent when it comes from religion and aided by culture. The reason is very simple. First, this category of persons lacks the intellectual power to logically question or critique what they are told. They live in the world of myths. Secondly, the activity component of the brainwashing given to them provides a quasi-equivalent of employment and thus they feel engaged in acting out what they have been brainwashed about. Is this not the kind of situation we find with the Boko Haram phenomenon?
To understand this clearly is to closely examine the coordinates of Boko Haram and that of poverty in Nigeria. Boko Haram at the onset appears to have had its operational bases located in the poorest parts of Northern Nigeria. It is in such places where people have been denied the opportunity to go to school as well as have meaningful economic sources of livelihood that recruitment is the easiest. Boko Haram leaders are aware of it and of course are maximizing the advantages of that obvious truth. It was not any different from the situation that prevailed during the pre-amnesty militancy periods in the Niger Delta. The long and short of it is that with entrenched poverty, illiteracy and unemployment, we cannot eliminate the menace of Boko Haram or similar security threats.
This draws attention to the mismatch between our recorded national economic growth of 7% and the growth of poverty. In 2011, while the non-oil sector grew with major contributions to growth coming from agriculture, wholesale/retail trade, telecommunications, hotel/restaurants and business/other services sectors, the oil sector output also grew arising from increased oil production made possible by paying off militants. It is only reasonable therefore to assume that if national real output is growing at such a strong rate, poverty should also be declining rapidly. That is however not the case - our unemployment rate (and by obvious extensions: illiteracy and poverty) is over 20%. So who benefits from this growth? Who or which sectors grow or will grow as a result of the enhanced aggregate output? Is it not time Government realizes that it cannot be the largest employer in the economy but rather the creator of enabling environments for people to thrive.
It seems clear that until we deliberately orchestrate growth beyond oil (which has limited employment generating and mass poverty reducing capacities) and effectively liberalize the participation in the economic growth process we shall continue to suffer these consequences and devote more attention to ‘equitable redistribution or expansion of the derivation principle’, increased budgets for security and personality based squabbles – rather than demand for accountability in leadership that would create economically viable states.
Promoting maximum value-creating activities in virtually all stages in the value chain for such sectors as agriculture and solid minerals side-by-side an aggressive war against corruption and bad governance, are the only conditions that can make us see meaningful positive economic changes. Agriculture is what virtually every Nigerian participates in! Solid minerals are everywhere in Nigeria but most dominant in Northern Nigeria; yet no one is devoting as much energy to ask why nothing has ever been done or focus attention on same.  
Can a more aggressive development of agriculture and solid minerals save the North as well as free us from the evil and negative yielding actions of Boko Haram? Perhaps yes! It would sound like a much better proposition than the feeling one gets of living in a state of an undeclared civil war that envelopes the psyche.
There are many reasons for this but before going into that argument; it suffices to state that aside Lagos State, no other Nigerian State government can survive without oil revenue receipts. Why has Lagos State scaled the hurdle? It would appear that over the years, and mostly because of its progressive outlook, it has made its environment amenable for industrial and other economic activities. Accordingly, the more the inflow of value-creating entrepreneurs that the State is able to attract, the more the tax and other income that the government earns. Attracting entrepreneurs in turn requires the presence of stable socio-political environment, the market for the final output as well as other input factor resources particularly, employable labour. These factors aside oil has accounted for the differences in the prosperity of various States, a position supported by data from the Federal Board of Inland Revenue (FBIR).
Neither has Lagos prospered or is prospering on account of the derivation principle! Yet many of the Northern States can orchestrate the economic conditions that will lead to their earning ‘the same level of the derivation bonuses’ as well as more funds to banish poverty.
The question however is: what are these State Governments doing with the resources at their disposal? The Niger Delta as we know it today, like other regions is not a monolithic entity and the oil appears to be a poisoned chalice – rich yet economically structurally deficient. Do the Northern states therefore foresee a situation where there is no oil and possibly no revenue allocation?
Derivation may have taken valuable resources away from many States by concentrating a whopping 13% of the national earnings from oil in the hands of the Niger Delta States, but the onus is really on all State Governments to develop the natural resources within their own State and equally earn a ‘derivation’! But beyond derivation is the tax incomes, and the economic empowerment of the citizens of those states which are natural consequences of good economic development strategies.
In effect therefore, it can be concluded that derivation has not, in any meaningful way, disproportionately orchestrated poverty in Northern or any other part of Nigeria. What on the contrary has driven poverty is the short-sighted fiscal management of resources by many of the State Governments. Recent developments in some northern states provide affirmation to this position and highlight how purposeful leadership can alter the fortunes of citizens in the state – Taraba, Bauchi, Jigawa comes to mind.
At a country level, we are predominantly import dependent, and by implication, have been exporting employment opportunities to other parts of the world that we patronize. The sad truth is that while we are sustaining productive activities in other parts of the world, major manufacturing companies in our own country have either shut down or are operating below capacity. This does not seem would abate in the immediate future as the domestic business environment is becoming increasingly worrisome for interested investors. The obvious consequences are massive job loses, under-utilization of productive resources and poor living conditions.
What this discussion in effect points at is the fact that political freedom has not yet in a significant way, resulted in the much desired economic freedom. It also means that there is an urgent need to recalibrate the discussion around the issues of Boko Haram and overall insecurity in the country. Although not clearly articulated as such, it is inferred from the ongoing exegesis that the Boko Haram phenomenon has a deep economic root more than any other perspectives from which the investigating intelligence can suggest. 
While steps be taken to prevent further loss of lives, the damage to the human psyche, our way of life and investors outlook; it should be very clear to all and sundry that we cannot banish unemployment, illiteracy and poverty – the three strongholds sustaining Boko Haram – by focusing on oil revenue except to the extent that it helps in making needed investments in the key sectors of agriculture, solid minerals and gas. State governments have a huge responsibility to save their youths from these three plagues by re-aligning the way they allocate the scarce resources in their possession. Of course the federal government has its own share of this blame based on our brand of ‘unitary federalism’ – independent states dependent on the center.
The question now is: what should be the focus of contemporary debates on this issue. Very simply, the discussions should be couched within the context of a high economic security alert.
State Governments particularly in Northern Nigeria should introspect and (a) begin to realign their spending more towards attracting, protecting and retaining investors in the Solid Mineral and agricultural sectors of their States or any key competence that justified the creation of the state, (b) embark on enhanced social investment in and enforcement of mass education. These will have more enduring positive impacts in curtailing the menace of Boko Haram or its variants, which now includes kidnapping and outright criminality. The federal government has almost same work to do. Otherwise we will persevere in the conspicuous consumption and greed that threatens to ruin us all.
Olufemi AWOYEMI, FCA, ACIT is a thought-led analyst/consultant.
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