Subsidy pains: States must become self-reliant — The PUNCH Editorial

Posted by News Express | 12 May 2022 | 194 times

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The non-viability of the country’s funding arrangements is becoming more glaring by the day. For the 36 states especially, their finances are precarious. The Nigerian National Petroleum Company underscored the situation when it withheld N671.88 billion from the Federation Account from the April 2022 oil proceeds. Already broke, indebted and low on internally generated revenue, most states face a harsh, uncertain future.

Reality beckons, and unless the states wean themselves off their over-reliance on allocations from the central pool and transform to productive, self-reliant economic units, the country is doomed to perpetual economic adversity and mass poverty.

Following revenue shortfalls from oil takings and a massive petrol subsidy budget, remittances from the NNPC to the Federation Account will fall short by a mammoth N4 trillion to cover the subvention, the federal, state and local governments will jointly suffer N671.88 billion less in the funds to be shared for May 2022.

NNPC’s latest data show that the subsidy paid for petrol rose between January and March 2022 and the N671.88 billion was a value shortfall incurred by the NNPC, which remains the sole importer of petrol in Nigeria.

Unashamedly, the state governors have stridently opposed the subsidy deductions and the NNPC’s subsequent reduced remittances to the Federation Account. This is simply because it denies them of revenue they never laboured for, mostly oil and gas receipts and taxes. Unsustainably, save for a few, it is the allocations from the Federation Account that enable the three tiers of government to maintain their respective workforces and fund their budgets and over-bloated bureaucracies.

This quirky situation largely exposes all that is wrong with Nigeria’s unitary-style federalism. It also demonstrates the governors’ lazy, visionless approach to governance and their irritating addiction to monthly handouts. The states’ internally generated revenues remain pitiable.  A report, ‘States of States in 2019,’ by BudgiT, a civic tech-based advocacy group, revealed that out of 36 states in the country, only three – Lagos, Rivers and Akwa Ibom – could finance their recurrent expenditure independently without depending on federal allocations. In 2019, said the National Bureau of Statistics, Lagos State’s N398.7 billion IGR dwarfed the combined N375.2 billion of 26 other states. The annual revenues of many could hardly meet one month’s salary bill.

Despite struggling to pay salaries and other needs, they nevertheless refuse to cut down needless expenditure; they retain armies of appointees, embark on profligate trips and splash money on white elephants that have no positive impact on the populace. They donate public funds to frivolous causes without parliamentary approval and live in obscene luxury. They major in minor and disdain legacy projects. Majority of them cannot pay the N30,000 national minimum wage but approve generous pension packages for themselves.

The overdependence on oil has reached an alarming rate. It is hurting development and stunting revenue diversification in most states. As such, governors must begin to think outside the box and grow their states’ non-oil economy to attract earnings from non-oil revenue. The governors should each explore the comparative advantage of their states to turn around their fortunes.

Nigeria’s “feeding-bottle” model of federalism must quickly be discontinued; it has failed and produced poverty. Nigeria is a federation and should operate as such to survive. The states must intentionally wean themselves off allocations from crude oil money because it is no longer sustainable.

In other federations, the federating units fend for themselves. Between 1992 and 2010, only 18 per cent of states’ total revenues in the United States was received from the Federal Government; 82 per cent was internally generated by the states and LGs, according to the US Census Bureau/Rockefeller Institute of Government data. A report by the Tax Policy Centre, a joint programme of the Brookings Institution and the Urban Institute, said just 33.3 per cent of revenues accruing to India’s 28 states came from intergovernmental transfers (the federal pool) and the rest from IGR. States/provinces or regions in other federations run autonomous, productive economies, and compete for investment, markets and human capital.

Nigeria’s states too should therefore nurture independent economic programmes to complement federal initiatives. Every Nigerian state is well endowed with agricultural, mining and human potential. They should exploit them even within the current restrictive basic law. They should spend more on providing basic rural infrastructure, education, health, transportation and sanitation. Liberalising their environment through creative, sincere use of the Land Use Act, taxes, fees and charges, they should make the states attractive for domestic and foreign investors. Fresh initiatives such as creating local security agencies to complement the federal police should take priority to make the states and regions safe for economic and social activities.

The states need visionaries. Kogi State Governor, Yahaya Bello, admitted to borrowing N10 billion to clear four months of salary arrears in 2017: for a state rich in diverse mineral deposits and sitting at the confluence of two of West Africa’s major rivers, Niger and Benue, that provide huge potential in fishing, power generation and tourism. In addition to ample gold deposits, Zamfara has nine other minerals in commercial quantity but hosts the country’s largest number of poor and vulnerable people with 3.83 million there living in abject poverty.

Nigeria should operate as a true federation. In the exercise of their autonomy, 26 of America’s 50 states announced plans to end federal pandemic-era benefits in May 2021 to persuade out-of-work residents to find a job. Everywhere, governments, central and sub-national, measure success by the quantum of investments, jobs and revenue they generate. Nigerian governors absurdly tout borrowing to pay salaries an achievement! It is a template for poverty. They compound all this by unbridled corruption.

The World Data Lab’s Poverty Clock estimates that about 90 million people in Nigeria live in extreme poverty. This is indicative that the states are unproductive. To place states on the pedestal of robust productivity, the governors should embark on bold reforms, drastically prune the cost of governance and expand economic opportunities.

•Logo of NNPC


Source: News Express

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