Memo to Senate Committee on Constitution (2)

Senate, Revenue

Revenue: I STARTED this series last week with a plea to the Constitution Review Committee to consider the 2014 National Conference reports as the solutions to the myriad of problems confronting Nigeria are contained therein.

We have made some progress between last week and now as the committee has openly declared that it would look at the report as well as that of el-Rufai.

Once the committee studied the 2014 confab report, it can as well take that of el-Rufai as well since most of the pages are so similar. The only difference is that of 2014 is much more detailed.

A fundamental issue the committee will be confronted with is the issue of productivity in a country bogged down by the problem of reaping without sowing.

It is all the reason we have Revenue Mobilisation and Fiscal Allocation Committee whose only job is sharing money to all tiers of government. All it mobilises for is oil resources and VAT.

Its sharing indices kills productivity and promotes idle living.

Elementary economics

It is taught in elementary economics that there are factors of production. Instead of using these factors to generate wealth and build prosperity, Nigeria uses them to share available few proceeds of natural resources which inevitably lead to poverty, while we are deceiving ourselves because elites have frivolous cash to blow around the world.

A large population is massive labour. You can see what China is doing with its 1.4 billion people. Most of them are skilled and are spread all over the world generating wealth. A large chunk of our 200 million population is made up of out-of-school children, almajiris, untrained and untraceable, predatory elite whose only contribution to the society is marrying wives and bearing children like rats.

The numbers are only useful for sharing revenue in Abuja as population is one of the indices for harvesting free booty monthly at the Federation Account Committee instead of putting those citizens to work.

Land is another factor of production globally, but it is a sharing formula in Nigeria. Niger State is bigger than a country called Netherlands. But while Netherlands is the fourth largest exporter of agricultural produce in the world, the land in Niger is a factor of sharing more cash in Abuja, Nigeria’s capital.

Outside the majority threshold for voting which almost brought the conference to an end at the beginning, resource issue was one that also threatened the conference. But eventually, we arrived at far-reaching consensus, except on how do we continue to share while we embark on productivity. The President was asked to set up a technical committee on it.

5.4.3 Resolutions on fiscal federalism

  1. After extensive deliberations, Conference decided as follows:
  2. The creation of the Office of the Accountant-General (Director-General) of the Federation as a distinct and separate office from the Office of the Accountant General of the Federal Government.

READ ALSO: Memo to Senate Committee on Constitution (1)

The Committee recommends that the functions of both offices shall be clearly outlined and demarcated. The Committee, however, noted that any name could be designated to the offices provided that their functions are clearly spelt out.

Accruals of revenue

The Office of Accountant General (Director-General) of the Federation shall oversee the accruals of revenue into and disbursement from the Federation Account as and when due; and shall administer these funds as required by the Constitution, while the Office of the Accountant General of the Federal Government shall oversee the accounts of the Federal Government; and

  1. That the power of the Federal Government under section 162(3) of the 1999 Constitution (as amended) to prescribe the terms and manner of sharing national revenue (Federation Account) shall be exercised through the Revenue Mobilisation Allocation and Fiscal Commission and state governments before presenting a draft bill on the matter to the National Assembly for enactment into law.

5.4.4 Revenue sharing (vertical allocation)

Conference accordingly decided as follows:  That the sharing of the funds accruing to the Federation Account, among the three tiers of government, should be done in the following manner:

  1. Federal Government- 42.5% ii. State Governments- 35% iii. Local Governments- 22.5%

To replace the existing formulae of:

  1. Federal Government-52.68%
  2. StateGovernments-26.72%
  3. Local Governments-20.60%

Conference agreed that Local Government Areas should be stripped of their status as the third tier of public administration. However, Conference did not make any specific decision to delete LGAs from the sharing formula.

5.4.5 Sharing formula (horizontal allocation)

Conference decided as follows:

  1. That the percentages given to population and equality of states in the existing sharing formula be reduced while that assigned to social development factor be increased to a much higher percentage so as to ensure accelerated development of all parts of the country;
  2. That three new principles listed hereunder be added to the existing sharing formula to enhance economic, infrastructural and human development in the country:
  3. Inverse Primary School Enrolment
  4. Federal Presence, and
  5. Unemployment
  6. That the “technical” aspects and details of revenue sharing formula shall be referred to the Revenue Mobilisation, Allocation and Fiscal Commission and the National Assembly for final determination. The proposed sharing formula by Conference is based on;
  7. Diminished emphasis on principles of equality of states and population;
  8. Increased emphasis on Social Development Factor; and iii. Internally Generated Revenue effort.

5.4.6 Resource control

  1. Having critically examined the issues in contention, Conference recognizes the need to:
  2. Review the percentage of revenue allocation to States producing oil (and other resources);
  3. Reconstruct and rehabilitate areas affected by problems of insurgency and internal conflicts; and

iii. Diversify the Nigerian economy by fast-tracking the development of the solid minerals sector.

  1. The Conference also notes that assigning percentages for the increase in derivation principle, and setting up special intervention funds to address issues of reconstruction and rehabilitation of areas ravaged by insurgency and internal conflicts as well as solid minerals development, require some technical details and considerations; and

Appropriate percentages

  1. Conference, therefore, recommends that government should set up a technical committee to determine the appropriate percentages on the three (3) issues and advise government accordingly.

5.4.7 Establishment of a special fund for the development of mineral resources

Conference decided as follows:

  1. That there should be a constitutional provision for the establishment of a special fund for the development of mineral resources in the country;
  2. That a competent body be established to administer the Fund according to guidelines that shall be specified by the National Assembly.

5.4.8 Sovereign wealth fund

The Sovereign Wealth Fund as is currently operating as Nigeria Sovereign Investment Authority, NSIA, 2011, be enshrined in the Constitution of the Federal Republic of Nigeria.

5.4.7 is key for a productive Nigeria.

…To be concluded 


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