Saving Nigeria Through Resource Control

Of all the myriad issues that have plagued Nigeria since its independence in 1960, resource control is one of the biggest, arguably resent-laced issues that straddles everything from equity, political control, to plain expropriation. Nigeria is currently in the process of another piecemeal constitutional amendment, with resource control being a recurring demand from the oil producing region, while an affiliated demand seems to have contributed to delaying the Petroleum Industry Bill. Is there a way to redefine the pie and allow all stakeholders to go home happy?

What began as a loose federation after amalgamation in 1914, evolved over the following decades until the 1960s – 1970s when Nigeria effectively became a unitary state while maintaining the façade of a territory of federating states. A key driver of this unitary transition was the discovery of crude oil that allowed the fledgling country gain access to seemingly free-flowing “black gold”, with succeeding military dictators feeling the obligation to make the Federal Government the supreme distributor of revenues from the new resource. Suddenly, Nigeria moved from an arrangement where the federating units made contributions to the centre, to a structure where the centre owned everything and made allocations to the federating units that accordingly became more functionally incompetent given the guaranteed monthly revenues in return for doing absolutely nothing!

The oil producing states have pleaded, cried, threatened and executed violence in a bid to get the scales moved up from 13% “derivation” to at least 50% of revenues accruing from oil and gas production. This demand has been rebuffed by the Federal Government and other states whose allocations would be correspondingly reduced if the oil producers were allowed any equitable control of resources. In fairness, the opposition have a real concern given that years of oil dependence have obliterated “real” economic activities in many states, hence, any attempt to permit “resource control” to the southern producers would spell economic doom for others. I think there can be a political solution that attains equity while addressing the concerns of both sides, provided all parties actually want a solution and are willing to work for the greater good.

Can a sliding scale for revenue retention help Nigeria achieve resource control?

The resource structure proposed above is hinged on three considerations.

  1. Being Pragmatic: Achieving resource control by fiat with immediate implementation is highly unlikely to occur in Nigeria. This proposal would address concerns by some states about drastic revenue reduction by throttling the increase in “derivation” in a way that allows other states time to progressively ramp up internally generated revenues to offset reduction in allocations from oil revenues. This would allow resource control to be attained without significant socio-political chaos given the idealised assumption that it would be easier to sell this sliding arrangement to a state like Sokoto, than to tell them that the next year’s revenues would hit rock bottom because Rivers State is suddenly jumping from 13% to 50%.
  2. Having an Incentive: The proposal provides an incentive for both oil producers and non-producers to seek investments that would exploit other resources available within their domains. The Nigerian Geological Survey Agency has listed more than 80 mineral resources interspersed across Nigeria. State Governments can choose to exploit their resources knowing that they would get 100% of new revenues in the first year, and while this gradually reduces to 70% over 15 years, the expected maturity of such endeavours would yield increasingly greater inflows such that 92% of accrued revenues in Year 5 would likely be larger than the 100% retained in Year 1. Wise states would also look to refining and processing extracted resources as a means of unlocking greater value from their resources. For the Federal Government, while its percentage of revenues would reduce over 15 years, the total amount it receives each year would increase as more states unlock wealth that has stayed dormant underground. That is a win for everyone!
  3. Being Equitable: It is fair for federating units to gain more benefit from economic activities carried out within their domains. The lack of equity is one of the issues triggering demands for creation of more states and even calls for secession. With more of the wealth gradually going to endowed states, indigenes and residents of such states would no longer have the Federal Government as an excuse for their state’s underdevelopment, but would have no other recourse but to hold their State Government accountable for any continued mismanagement of resources.

Considering the existing narratives and bitterness that has plagued this issue, it seems counterintuitive, but allowing resource control would actually save Nigeria politically and economically. One reason everyone wants to be in control of Abuja is because the centre is “too rich”. If states did not have to depend too much on hand-outs from Abuja, there would be political will to develop and compete with peers for economic influence. Economically, providing a structure that encourages exploitation of more resources would greatly grow the economy, especially if secondary (processing) and tertiary (services) sectors of state economies are simultaneously developed. State Governments would also have an incentive to develop and implement sound policies that would attract businesses to their states, rather than the existing situation where several states seem to run a system that discourages credible businesses from thriving in them. Imagine the employment opportunities that would be unlocked, which is even more critical as Nigeria is rapidly growing its population and would need real work opportunities to engage youths before they turn to violence.

As a last word, it should be clear that while this proposal is about solving the problem of resource control, Federal and State Governments should be smart to recognise the changing global landscape and its implications for economies that depend on natural resources for economic growth. While we should exploit our mineral resources with our full chest, we should note that the richest countries drive their wealth by harnessing their human resources. A word, they say, is enough for those that seek to be wise.

Cover Image Credit: Ikon | equatex.com


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