Those who romanticized about us going back to the 1954 fiscal federalism, which they erroneously tagged true federalism instigated this engagement. Is their demand possible? Yes, it is probable. The focus of this piece is to intellectualize that probability. I would begin with intellectualizing how and why the 1954 fiscal arrangement was abandoned before laying out the probability of its resuscitation.
For a start, the essential feature of that era, which appeals to those agitating for it, is that each region controlled its resources (which at that time was mainly agricultural produce) and enjoyed 50% of the earnings from such agro-products based on derivation principle. Based on that revenue arrangement, the regional governments elevated agriculture to an enviable height in all ramifications. For example, the relics of the plantation the former Prime Minister of the Eastern Region Michael Okpara instigated still adorn major highways across Southeast and South South geopolitical zones, today. In the Southwest zone, the cocoa plantations initiated under the former Western Region are still available today. But regrettably, the famous groundnut pyramids in the Northern Region had disappeared with no relic of it anyway in the Northwest. This is exactly the arrangement they want us to go back to.
What needs to be emphasized is that during that period oil exploration and exploitation activities were ongoing in the then Eastern region, now South South, but entirely under the purview of the Crown. At the same time, the agitation for the creation of more regions by ethnic nationalities who were oppressed by the major ethnic groups in each region was also ongoing. And that culminated in the establishment of the infamous Willink's Commission in 1958. As expected, its report didn't go down with the minority ethnic nationalities who agitated to be liberated from the tripartite regional governments. Succour came their way, first in 1963, with the creation of the Mid-Westen Region and second, in 1967 with the creation of 12 states on the eve of the civil war. All subsequent state creation followed therefrom. The fundamental difference between pre-independence agitation for more regions and the post-independence agitation for more states, is that, the former was premised on bad governance, hegemonic tendencies of the ruling ethnic groups in each region and the history of the ethnic nationalities, while the latter was premised more on population, landmass, history of the ethnic nationalities and oil revenue. For the purpose of clarity, the focus of those who want us to back to the 1954 arrangement, is on the fiscal federalism of that era. It does not include a return to the hegemonic tripartite regional arrangement of that period of our history. Who whispered, it is better to remain in this wilderness called state than to go back to Egypt?
It is instructive to note that crude oil was the major causative factor of the civil war. This is because without the emerging juicy proceeds from crude oil, one doubts if the ex Biafra leader Chukwuemeka Ojukwu would have contemplated secession. Conversely, if the North would have insisted on retaining the Eastern region in the federation, if the oil resource was located outside the region. It is for that same reason the Western Region that had all along contemplated secession and touted it with intensity reneged when the opportunity presented itself.
Immediately after the war, oil revenue superseded revenues from all other sources put together. The 12 states that emerged from the 4 regions started to receive more revenues from oil resource than the 50% derivation they received from agro-products. Metaphorically speaking, they ghosted agriculture and became Oliver Twists. They started asking the federal government for more money because they thought there was money instead of effectively utilizing what they got for human capital development, infrastructural development and mechanized agriculture. That was how the states started to bicker over revenue allocation formula and criteria for sharing the national cake. In addition, that was how our romance with oil started effectively. Oil became the driver of both personal and national ambition. Our leaders began to think oil and dream oil. At the federal level, they started to conceive of all sorts of grandiose and gigantic projects like the Second World African Festival of Arts and Culture, popularly known as FESTAC and the National Arts Theatre instead of building world class infrastructure across the country. Literally, Nigeria became the Father Christmas of the world as we assisted both the needy nations and those who were more solvent than we were across the globe.
When oil revenue became the mainstay of the economy, the euphoria it provoked threw reason out of the window. Our leaders began to take decision based on their fancy. One of such decision was the reduction in the weight attached to the derivation principle. They slashed the 50% value attached to derivation principle on agro-products, which didn't yield as much revenue as crude oil in the international market instead of assigning a new value specifically to crude oil since it was previously not contemplated. They opted to prune down the value previously assigned to agro-products just to accommodate the sharing formula of oil revenue. The non-oil producing states didn't complain since they had stopped making any significant contributions to national revenue. And the oil producing states only complained because the derivation principle gave them advantage over other states. The consequences of that decision on our economy is what we are still battling to address today.
The ascendency of oil revenue, amplified federally collected revenues and prompted the neglect of all other sources of revenues and turned the country into a monocultural economy by choice. What those advocating we should go back to the 1954 arrangement should understand is this, even if states are allowed 50% derivation on their agro-products today, what they would get from oil revenue, if global demand for fossil fuel improves would still supersede what they would get from those agro products because the world economic system has changed drastically. Other countries like Indonesia, Sierra Leone and Ghana have overtaken us with regards to those agro-products and the balance of trade would surely not be in our favor without value addition. To get substantial revenues out of those agro-products would require processing them into secondary or finished products. For example, exporting cocoa would not bring in much revenue like before, but exporting chocolate bars would, and even exceed our expectation. Therefore, the fortune of the states wouldn't change over night even if the federal government concedes 50% on derivation from agro products. But it would significantly reduce our dependence on oil revenue and stand us in good stead as the value of fossil fuel decreases globally.
However, it is the decrease in the demand for fossil fuel globally that would force a decline in the prominence of oil revenue in our national economy. This explains why the federal government is investing massively in agriculture, ICT, manufacturing, entertainment and other infrastructure to stand us in good stead as the demand and global oil price keep declining. From every indication this trend would not ease off soon. Thus, economic diversification is now a do or die affair for us. A few states are also investing massively in agriculture and other sources of revenue.
The long run implication of the declining oil revenue would be an adjustment in the revenue allocation formula naturally. When states begin to make significant contributions to national revenue reminiscent of the 1954 era, the 50% value that was hitherto assigned to derivation principle on agro-products would revert. Because as the revenue from crude oil decreases what states would get as their share of the revenue would also decrease accordingly. While what they would get from value added agro products would increase exponentially. At that juncture, the non oil producing states would start to agitate for an increase in the value assigned to derivation principle on those value added agro-products. They would collectively begin to push the National Assembly to do the needful. That's in line with how fiscal federalism evolves and changes form over time naturally. It is this natural inclination of federation to reinvent itself overtime that made me say yes, their demand was probable. The ascendency of oil revenue which drove us into a monocultural economy happened naturally. Going back to the 1954 fiscal federalism would also happen naturally if states invest more in what they have comparative advantage, especially now that the funeral ceremony of fossil fuel is on the table.
From my observation, the factors that birthed a federation invariably continues to shape its nature and character overtime without encumbrances. But any attempt by the political actors to galvanize those factors in favour of a particular group to the detriment of others usually lead to disintegration. The former Soviet Union and other collapsed federation in Eastern Europe supply ample evidence in this regard. This should serves as a cautionary lesson for any group who planned to use the call for restructuring to manipulate the Nigeria federation to their advantage.
*Felix Akpan PhD*
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