Two different, yet somewhat related, reports in the national media struck me in the last week of November. The first report quoted the Benue State governor, Gabriel Suswan, as confessing that, like most governments in Nigeria, his government, already in arrears of salary payment, would not be able to meet basic obligations if crude oil prices remained at less than $90 per barrel. By the time the report was published, the Nigerian variant of crude oil was selling at well over $70 per barrel. As I write this piece, it is selling at less than $60 a barrel, with a high prospect of the price sliding further.

This means that both the Nigerian people and the government are in for a rough time. But the national government, because of the forthcoming election, is creating the impression that all is well. There are no austerity or belt-tightening measures yet, like doing away with humungous amounts spent by ministries, departments and agencies on Christmas and New Year gifts. But all cannot possibly be well with an economy which depends on crude oil for over 90% of its foreign exchange earnings. Business should not be as usual.

The second report had to do with the 2015 budget presentation by the Lagos State governor, Babatunde Fashola, on November 24.  The budget is N489.69 billion, the same size as that of 2014. In other words, the government is convinced that the sharp drops in oil prices would not have “a significant” impact on its revenue base.

Hardly surprising. Over 87% of the state’s resources has, in the last few years, come from internally generated revenue (IGR), as opposed to the monthly allocations from the federation account which professional economists call transfers. Practically every state and the Federal Capital Territory of Abuja depend on the federation account for survival.

This dependency syndrome is at the root of the crisis of our federalism. There are too many states, and there is all manner of campaigns to create more states, including the preposterous recommendation of additional 18 states at the National Conference, even when it is clear that the centre, which is already too powerful, becomes stronger with each new state. Each campaign for a new state is driven by the mentality of grabbing more and more from the centre. Everyone is eager to share in the so-called national cake, but not in the baking.

As I have had cause to tell an audience sometime ago, one of my saddest days was to watch Adebayo Adedeji, a respected professor of public administration and erstwhile executive secretary of the Economic Commission for Africa (ECA), lead a delegation of people to submit a request to the National Assembly for the creation of Ijebu State. I can understand the shenanigan of professional politicians like Senate president David Mark who would hoodwink ignorant elements into believing that new states like Apa could be created, but can never understand why such a refined, urbane and learned person as Adedeji could engage in an enterprise that is clearly injurious to the health of the nation. We hope that the cascading oil prices and the growing inability of most of the existing state governments will drive home the point that the multiplication of the number and recurrent expenditures of the states is a particularly bad and unproductive idea.

In contrast, Fashola’s Lagos has demonstrated the need for Nigeria to have states or component groups of the federation which will be self-sustaining. Many new businesses are emerging in Lagos daily. Almost every new foreign direct investment (FDI) in Nigeria ends up in Lagos. The worsening security across the country has led to more businesses migrating to Lagos. Is it surprising that every bank in Nigeria has its headquarters in Lagos? Lagos State offers the most friendly investment and business climate in the country. Lagos is a liberal, dynamic, open, cosmopolitan and sophisticated environment. At a time many politicians are becoming increasingly parochial and clannish for immediate self-serving purposes, Governor Fashola rather acknowledges the preeminent contribution of non-indigenes to the growth of the state, which is striving to become a world-class mega city by 2035. There is an important expression the governor uses in recognition of the enormous contributions of non-indigenes in the state: migrant capital. It is migrant capital that built New York, Los Angeles, etc. This is a story for another day.

Let us face it: an increasing rate of business growth does not necessarily translate to huge internal revenues for any state government. Among factors required for a reflection of the business growth in the internally generated revenue of every state is personal discipline. I have seen a number of state governors in recent times who have asked their officials in charge of markets and tax collection to bring only cash (no drafts or cheques) to their homes! This is why in many of the states where there has been increased economic activity and increased tax or levy payment, the increase in IGR has been minimal. In other words, the fact that Lagos generates well over 85% of its revenue from IGR shows a high-level discipline among its top government officials.

One question which should be agitating the minds of policymakers and analysts in Nigeria, all the more so in the light of the declining oil revenues and the attendant severe consequences for governments at all levels, is how to make the states become viable economic units. The states, as currently constituted, are too many and too weak. The corollary is that there is a profound lack of seriousness in their governance. Governors are like emperors; they have pocketed the state legislatures, thus making a mockery of the doctrine of separation of powers and the concept of checks and balances.

This is one of the reasons the venerable former vice president, Dr Alex Ekwueme, has, right from the Constitutional Conference in 1994/5, been calling for the collapse of the 36 states into six federating units. The federating units must be brought to scratch, a far cry from the present arrangement where the states, which are the federating units, are like fiefdoms. Indeed, the challenge before us now is to turn each of the nation’s six geopolitical zones into a Lagos, that is, a viable economic zone. Right now, Lagos is the only economic centre which does not depend directly on crude oil for survival. One viable economic centre is not enough for a nation of 170 million people with a population growth rate of 2.3% per annum.

The robust 2015 Lagos State budget in the midst of dwindling oil revenues, which could make Nigeria appear increasingly like a failed state when  basic obligations are not met, should serve as a wake-up call to all Nigerians.


Dr Udeaja, an economist, is an executive director with a leading private sector firm in Lagos.


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