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Friday, July 19, 2024

Reno Omokri: Why Nigeria’s Crude Oil Based Economy Is Not Sustainable

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[dropcap]T[/dropcap]he greatest use of irony I have experienced in my life is the term federal as it relates to Nigeria. Elsewhere, I have written copiously on this irony and I do not intend to sound like a broken record in this piece.

The only reason I bring this up here is because of the contradictions introduced by the government and citizens of Nigeria whenever we use the term ‘tax payers’ money to describe monies that keep Nigeria solvent and pay for her upkeep.

I was just reading a paper the other day and I was stunned by the headline I saw. A governor of a state complained that the reason he has not paid workers salaries for the past (wait for it!) thirteen months is because (wait for it yet again) of dwindling allocation from the Federal Government!

Shouldn’t being a governor involve more than just waiting on the Federal Government to share monthly oil money?

So what happens to that state when there is no more oil money to share?

Does it mean that our states only exist because of oil money?

In an ideal federation, under no circumstances should declining federal allocation be an excuse for any state government not to pay salaries.

In fact, it should be the other way around. The Federal Government should depend on the revenues it receives from the states by way of taxes.

The above true life scenario puts to lie the misnomer ‘federal’ as applied to the government of Nigeria. It also makes rubbish of any claim that the various governments in Nigeria are spending tax payers money.

What we have is a unitary system of government that is paid for by oil wealth and not tax payers’ naira.

And therein lies the reason why most Nigerians are onlookers in their country instead of stakeholders.

Study upon study have proven that when people pay taxes, they expect more from their government and this leads to a higher level of vigilance amongst the citizenry.

The opposite is also true. When people do not pay taxes, they are not really concerned about what the government does which leads to complacency on the part of the government.

Go through the annual Transparency International Corruption Perception Index and you will find that the least corrupt nations are those states whose citizens have a tax paying culture such as Sweden, Switzerland, Japan, Australia, New Zealand and the United States.

On the other hand, those states that feature as the most corrupt nations are countries whose citizens are notorious for dodging taxes such as Russia, Somalia, Libya and Myanmar.

It is just as former US Supreme Court Justice, Oliver Wendell Holmes, Jr once said “taxes are the price we pay for a civilized society. I like to pay taxes. With them I buy civilization”.

The truth is that when the government is funded with citizens tax money, citizens own the government, but when the government is funded via a rent collecting culture such as oil royalties, it is then the government that owns the citizens.

I remember as a child Professor Jerry Gana’s Mass Mobilization for Self Reliance, Social Justice, and Economic Recovery (MAMSER) used to run an advertisement warning Nigerians that ‘oil go finish one day o’.

That one day is closer than we think with Goldman Sachs projecting that oil would fall to as low as $20 per barrel. Even more frightening for Nigeria is their prediction that “the oil market is even more oversupplied than we had expected and we now forecast this surplus to persist”.

This is even as Iran is yet to fully enter into the market.

What all these mean is that in sourcing for funds to pay workers salaries, the federal and state governments must think creatively not reactively.

Even in the best of times, Nigeria is not going to grow rich by selling more oil.

The only way Nigeria can grow rich is if she lives up to her name and start behaving like a real federal republic of Nigeria by introducing a true and fiscal federalism that forces states to look inwards to develop their resources and build the capacity of their citizens such that those citizens can in turn pay taxes.

Nigerians will note that not until Lagos was blessed with the leadership of Asiwaju Bola Tinubu, who developed the capacity of the state to sustain itself from taxes, did that state begin to make quantum and geometric progress.

It was also the reason why Bola Tinubu’s Lagos was able to withstand the expansionist onslaught of the Peoples Democratic Party which consumed other Alliance for Democracy governors in 2003.

It is safe to say that but for the financial independence which Tinubu built for Lagos, the then PDP government would have cut the state to size.

Instead, we see how Lagos moved from being the last man standing to being the launch pad of opposition politics from which the opposition was able to recapture the entire Southwest save Ondo and pave the way for the alliance that toppled the PDP as the government in the center.

The oil money that enabled many states develop a large work force, and empower hangers is shrinking. At the same time, our population is exploding. Both of these are a very combustible mix.

All those anti progressive policies that are the hallmark of the oxymoron in our federal system, like quota system, cut off marks and federal character need to be jettisoned if Nigeria is to transition from a unitary system which has made us a country of consumers to a truly federal nation whose citizens produce the goods and services they use.

That is the only system that can bring about the level playing ground that is needed for ideas to flourish in. Nigeria.

And ideas are more powerful than armies in making a country great.

Let me give an example of the power of ideas.

For years, the West has been trying to undermine or even topple despotic regimes in the Arab world. Billions of dollars have gone into this project. Wars have been fought and covert and overt military campaigns have been authorized, including air strikes and drone attacks, yet these administrations held their grounds.

And then Facebook and Twitter sparked the Arab Spring which dethroned some of the most secure despots who hitherto could not be removed by armies.

That is the power of ideas. If a pen is mightier than a sword, an idea is infinitesimally more powerful than an army.

Why am I establishing this premise?

The world is going through some changes and it seems as if Nigeria and Nigerians are unaware of these changes.

Do you remember the Video Cassette Recorder or the VCR? It used to be the way to watch home videos in the 70s, 80s and 90s.

But by the middle of the 90s, VCRs began to fade away as new technologies started gaining ground. The Digital Video Disc, DVD, edged out the VCR as the new medium for home entertainment.

With the advent of the DVD, entertainment companies, electronic manufacturers, and even pirates had to change their whole business models because the technology behind the DVDs came with a whole new set of challenges and opportunities.

Needless to mention, those who could not adapt went out of business.

Now, this is an allegory of what is happening in Nigeria at the moment.

All over the world nations are introducing policies that encourage their citizens to not just compete with each other but to compete with the best of other nations because the world has become a truly global village where the largest companies are setting up factories and providing jobs in countries where they can find the most skilled workers at the cheapest rate.

This the reason why IBM opened a research laboratory in Kenya, why Apple Inc, through its iPhone manufacturer Foxconn, has announced that it would build 12 factories in India to employ 1 million people, why the outsourcing industry has boomed in Ghana to the extent that the fear is that Ghana is not producing enough graduates to fill available outsourcing jobs (true!) and why Armani, Hugo Boss, Ralph Lauren, Gap and H&M prefer to make clothes in Bangladesh than in the good old US of A!

But no one is coming to Nigeria. The only companies that seem to be coming are companies offering exploitative investments like telecommunication firms and breweries.

The reason no one is coming is because of the contradictions that we gloss over when we pretend that we are a federal state when in fact we are a unitary state that cannot provide a level playing field to its citizens talk less of to foreign investors.

And Nigeria does not have to wait until oil goes the way of the VCR before making adjustments in her body politics.

The world has given us enough notice of the coming changes in the air, from electric cars to shale oil to Green Energy. We now have to help ourselves by weaning our economy from its dependency on oil.

Nigeria has to face reality. Oil is a diminishing resource. We must make plans for a life without oil by cutting down on all non essential government expenditures and by dismantling all those policies that provide unequal access to her citizens.

Finally, Nigeria has to turn her citizens from onlookers to stakeholders by developing an equitable tax system which should be the main source of government revenue.

Look at Britain, a nation whose Gross Domestic Product is tied to the production of its people and not to the exploitation of a mineral resource that destroys the environment as it comes out.

Yet, Jon Snow, one of the most influential broadcasters in Britain, has begun a campaign to reduce the number of Members of Parliament in order to cut costs. This is all the more pertinent when you consider that in Britain, the Executive and Legislature are fused meaning that they already spend less than Nigeria to maintain their three arms of government.

Governments at all levels must begin to tighten their belts, cut costs and shed excess weight while exploring other means of generating revenues besides oil dependency.

Corruption thrives in Nigeria because our governments are funded by oil revenues instead of tax revenues. No one can be moved enough to confront governmental corruption when the money comes from oil not from your sweat by way of taxes.

While the Boston Tea Party of 1773 was held to protest against taxation without representation, what we are practicing in Nigeria is representation without taxation. How ironic!

And it is because of this representation without taxation that a governor can say ‘I cannot pay my workers and it is your fault’!

If an executive made that type of admission anywhere else in the world he would cease being an executive. But in Nigeria he is still allowed to grandstand.

If you are not creative enough to run your state without a handout, you have no business being a governor!

I guess we need our own Nigerian Tea Party!

So, what is the solution? What is the way out for Nigeria? How can we wean our economy of its dependency on oil?

I have an idea.

I live in American and in the mid 2000s I witnessed seeing signs in large electronic stores asking people to bring in their old VCRs and trade them in for a DVD player. It was a way to get people to buy into the new technology and dump the old. It was a good idea that finally finished off the age of the VCR.

We must do the same thing in Nigeria.

The National Assembly should not wait for other arms of government to act before she reforms our revenue allocation system.

Instead of states just coming cap in hand to collect free monthly allocation every month, the National Assembly must use legislation to change the situation.

I propose that the National Assembly should encourage states to become self sufficient by enacting legislation that compels the Federal Government to give states matching grants in addition to their regular monthly allocation.

What this means is that the states which source their own Internally Generated Revenue and prove it to the National Assembly will have the amount generated matched by the Federal Government from the monthly oil sales.

States that do not generate any IGR will simply get their monthly allocation and nothing else.

For example, if Lagos state generates 400 billion Naira IGR, then the Federal Government must match that amount by giving Lagos state an additional 400 billion whether or not the President likes the governor of Lagos state or not.

This will spur states to explore alternative sources of income and wean them off their current dependency on oil.

States will then struggle to out do each other in their IGR which they can now exchange with the FG for a matching grant after proving the amount to the National Assembly.

They will raise this money by taxing their citizens and businesses within their territory which will cause those citizens and businesses to sit up and monitor them to see what their government is doing with their tax Naira and this watchfulness will reduce avenues and opportunities for corruption.

Do you see the positive cycle that can come out of this idea?

In addition to this, why should states each have a State House of Assembly complete with a Speaker and other officers like Majority and Minority leaders etc each with convoys and a retinue of aides and ridiculously high budgets?

Does Nigeria really need such multiplicity of Legislators and can we afford it?

Why don’t we reform the system such that instead of having State House of Assemblies we simply have one Regional House of Assembly for the six geo-political zones?

I confess that this idea was first floated by President Olusegun Obasanjo in 2005 but it is an idea whose time has come in 2015 in view of the plummeting prices of our major foreign exchange earner.

Currently, states are spending an average of about 10 billion Naira on their Houses of Assemblies. That 10 billion or even a fraction of that can service one Regional House of Assembly.

And we already have too many unviable states and Local Government Areas. Yet many people are agitating for more states.

Nigeria does not need more states or LGAs

If we do not reform our revenue allocation system, we will continue borrowing to pay salaries and entitlements in this age of falling crude prices while the elite who constitute less than 1% of the population continue to squander our resources living an ostentatious and pretentious life that is legally supported by the current order.

We must reform Nigeria to the point where wealth comes from work and not from being in government.

Reno Omokri is the founder of the Mind of Christ Christian Center in California, author of Shunpiking: No Shortcuts to God and Why Jesus Wept and the host of Transformation with Reno Omokri (Monday at 12am on San Francisco’s KTLN, Chanel 25 on Comcast). He tweets from @RenoOmokri.

The opinions expressed in this article are solely those of the author

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