ODOH SAMUEL I.
Department Of Political Science
Ebonyi State University, Abakaliki
Domestic policies to a large extent determine foreign policy. A Nation’s economic and political stability; human and material resources as well as the resource redistributive mechanism create the platform for enhanced foreign relations. Apart from determining cohesion or national integration which in turn foster foreign policy making, a nation’s revenue or resource endowment is an important element in its interactions with other states m the global system. The equitable distribution of such revenue resources can ensure stability, peace, security and justice. In present globalized state system, domestic affairs to a very large extent determine a nation’s foreign policy. It is against the background of Nigeria revenue allocation debate, that this paper seeks to appraise the impact of the existing resource Control mechanism and its impact on Nigeria’s foreign policy.
The struggle for political values of what might aptly be termed distributional politics is a critical and pervasive feature of all politics (Onyishi: l995). Politics which popular scholarship see as the authoritative allocation of values or who gets what, when and how, has taken on rather inter-cine shape partly due to the neo-colonial character of the Nigeria State-mercantile and commodified economy (Gavin Williams 1982:45-66; Tevisa Turner 1982:155-168, Claude Ake 1996:4-6) variously described the situation/polity as generation of class relations, privatization of the public realm, rental economy, and gate-keeper and comprador class. Ake “observed that though, politics remains a zero sum game power-sought by all means and maintained by all means; the need for more secure material base drove indigenous elite to increase the sadism of economy”. A. Eteng (1998:120) posits that political struggles have generally been utterly Hobbesian. The negative & politico-philosophical and sociological character of the Nigerian leadership has over time impacted and shaped the policies and programme of wealth distribution and foreign policy objective-Subaru (1999:34-54) lamented that the shift to a non-centric, oil economy has been particularly baneful, as it has intensified and focused distributive conflicts around a single source of revenue, particularly petroleum export rents.
“It is a fact that oil is very central to the Nigerian economy. Revenue from oil provides about 25% of the gross domestic product (Jerome Thomas, 2001). About 95% of budgetary expenditure is provided by the oil sub-sector of the Nigerian economy. For instance, out of a total of N3.619 trillion revenue target aimed at empowering government expenditure in 2005, the sum of N2,902 trillion is expected to be derived from oil, whereas N563 billion is to come from non-oil sub-sector, and N100 billion from independent Revenue (Obasanjo 2004)
The importance of oil as the principal source of revenue and the economic backbone of the nation is further underscored in the same token by the role oil plays in the national economies of other countries such as the U.S.A. and Britain. Hence oil is a major provider or source of revenue available for sharing or allocation to the different State is raising some question of who gets more.
The share of the federal government from the federally collected revenue to such beneficiaries as the Federal Government- Consolidated Revenue Fund (CRF), share of Derivation and Ecology, Stabilization and Development of Natural Resources and FCT Abuja are used to finance both domestic and foreign debt obligation, Education, Agriculture, health and other social-economic sectors of the economy. The joint Venture Cash calls J. V.C. between the Nigerian National Petroleum Cooperation (NNPC) and its subsidiaries and the Oil Multinational Corporations. (OMNCS); counterpart funding obligations, the bilateral and multilateral development projects such as UNDP, World Bank, Water Supplies, FAO Agricultural Programmes are issues that revenue allocation influence. Worthy of note is the funding of the Nation’s Embassies abroad and peace keeping operations in conflict and war zones of the world, ECOMOG peace keeping operation in Liberia, Sierra Leone, United Nations Peace Keeping Operation in the Darfur region of Sudan, Nigeria intervention and restoration of the democratically elected government of Sao Tome and Principe which was toppled by military coup in 2003, are but few examples of International obligations that Nigeria has had to confront.
Against the background of the tripod relationship between politics the economy, national power and international relations, this paper posits that Revenue Allocation, which aptly refer to wealth distribution, is a major determinant of foreign policy objectives.
John Stuart Mill had this in mind when he looked upon political -economy “not as a tiling by itself, but as a fragment of greater whole, a branch of social philosophy, so interlinked with all other branches that its conclusion even in its own peculiar province are only true conditionally, subject to interference and counteraction from causes not directly within its scope” (Schumacher 1989:34) The politics of Revenue Allocation can be situated within the political economy approach in the analysis of social issues and as Anifowose (l 999:9) noted,
Political Science and Economics (the study of wealth)
Production, distribution, conservation and consumption of
goods are intimately related as they are jointly concerned with the
fact that economic conditions affect the organisation,
development and activities of states which in turn modify
or even prescribe economic conditions through public
International trade, tax policy, public finance relationship between government and business and international relations underscores the nexus between politics and economics. It is therefore in the light of the foregoing that the paper wants to critically examine the politics that are associated with revenue allocation in Nigeria,
The analysis of the politics of revenue allocation (redistributive policy) and foreign policy is conventionally lodged within the political economy context and the economic capability theory of International Relation or Foreign Policy.
The economy is one of the major determinants of the foreign policy objectives of a state. It constitutes a veritable theoretical framework of analysis. The economic capability of any state determines the living condition and socio economic well-being of its people and inexorably provides it with the material for the formulation of foreign policy objectives. The economy is one of the different factors that correlate with national power. The power/strength of any state is a function of the economic growth and virility of its population. To that extent, national security involves not just physical security but the ability to feed the population. The ideology of the stomach first is therefore critical in national power politics, as a hungry population cannot fight wars as it cannot feed its armed forces, not to talk of equipping them. Somalia and Eth exemplify countries that suffer the dreads of hunger and disease and are scavenging arena for the super powers. The armies of such nations al can be described as Battalion without Batons. The economic facto national power can be divided into national resources and Industrial production (Anifowose 1999:122). According to him,
Natural resources fall into three groups (namely): fuels- coal, oil natural gas. Metal-iron, copper, gold, manganese, uranium, silver, tin, bauxite, etc and also agricultural produce which further subdivided into food an d industrial crops.
Extensive natural resource exploration, allocation transformation of the resources into commercial and military goods vastly to the capability of a state. He further notes that “perpetuation c power potential of a nation depends on the continuous allocation resources (labour and namely) for further technological and Scientific research”. Nigeria’s economic capability-oil resources, virile population strong army has largely given her the enormous power it wields in the Africa sub-region and Africa; and also why it is courted by the member the international community, Britain, USA, Canada and France. In line the political economy theory, the allocation of revenue, and the supra if which Momoh and Taiwo (1999:38) see as the
question of why some people are rich while others are pool problematic and the urge far capital accumulation, the dominant role of capital in society, the control of developing countries b Breton Woods Institutions (World Bank and IMF), Hegemonisation of the Euro-dollar, the social responsibility of state and. the underlying forces and motives behind govern, policies, actions and Programmes, the social relations of produce distribution and exchange in particular social formation ” meaningfully and sententiously studied and understood.
Foreign policy and management of any country’s external relation are not only a function of the domestic factors but also based on a series articulated demands on the international system, a situation over which country has no absolute control. The neoclassical political economy theory shares the same view.
THE POLITICS OF RESOURCE ALLOCATION INNIGERIA.
The establishment of over nine different commissions on revenue allocation in Nigeria since 1946 goes to show the degree of contentiousness, divisiveness and politicization of the issue of resource allocation. Each of the commission was established with specific objective of designing an acceptable or appropriate formula for the sharing of revenue among the tiers of government According to Okoli and Onah (2002:263)
revenue allocation as an aspect of finance, dominated intergovernmental relations scene in Nigeria since (1954), 1946 and there about Fiscal federalism and the machinery appointed to manage it have had to contend with the plurality, ethnic and other particularistic tendencies and also the perennial instability of the Nigeria polity”,
Since 1946, the following commissions have been established: Philopson 1947, Hicks and Philopson 1951, Louis Hicks 1954, Riasman 1958, Dina 1968, Bins 1964, Aboyade1977,,Okigbo 1979/1980 and the 1989 National Revenue Mobilization Allocation and Fiscal Commission. One noticeable trend about the various Revenue Allocation Commission or Committees is the fact that only the National Revenue Mobilization Allocation and Fiscal Commission has endured to date. Others before it were ad-hoc as they were dissolved for failing to meet the objective for their establishment. However, according to Oketa (2000:92), all of them made far-reaching recommendations as far as the issue of revenue allocation is concerned in Nigeria.
Subaru (1999:34-54) succinctly posits that revenue allocation policies in Nigeria have been aimed at the resolution of the following four questions.
- what formulae should govern the division of national, centrally collected revenue among the federal state and local authorities (vertical revenue sharing)?
- What criteria should guide the sharing of national revenue among states and among the localities (horizontal revenue sharing)?
- What proportion of federally collected revenue should be reserved exclusively for the oil-bearing areas on the basis of derivation and/or compensation for the ecological risks of oil production?
- What administrative arrangements should regulate the management and disbursement of the federation account in general and special funds (monies not designated as belonging to any three tiers) in particular)?
How the Nigeria’s revenue allocation system should be handled has always been the bone of contention and acrimony. Resource Control and who gets what between the centres, the regions (states) and the localities (LGAS) has proved intractable over the years. These have led to series of constitutional changes, changes in revenue allocation formula to outright crisis as is on-going in the Niger Delta. This has resulted to the killing of the Ogoni human right activitist Ken SaroWiwa and eight others which, attracted reaction from the international community-(the commonwealth, the UN and Canada.) The issue of Derivation and Resource Control pitched the federal government and the oil producing states in the avalanche of litigations since 1999 till late 2003 on one hand and the 19 northern states (non-oil producing) which argued against resource control on the ground that it will engender inequality in development.
In time, the Philipson Commission recommended the principle of Derivation-which ensured that all revenue derive from a particular region be allocated to it relative to its contributions to central accounts. The principle of derivation in addition to the needs and national interest was equally recommended by the Hicks Commission of 1953. The principle favoured the Northern and Eastern Region given their relative or comparative strength in agricultural resources like palm produce and groundnut. However, the constitutional crisis of 1953 and the accusation of interregional fiscal and economic disparity and strained intergovernmental relationship brought a reversal of the principle of derivation and consequent truncation of the commissions. The Riasman-Tress Commission of 1958 with hindsight of the preceding problems recommended the principle of Distributive Pool Account (DPA) which was based on four major factors namely, population, government services, minimum responsibilities of a state government and balanced national development. Again, the onset of independence in 1960 and the need to craft a truly nationalistic Revenue Allocation policy prompted the setting up of the Bins Commission. The Bins Commission Report lasted till the beginning of military Rule in Nigeria. Based on the report, the DPA was shared in the ratio of 42% 30% 20% and 8% for the North, East, West and Midwest respectively.
The Dina Committee in its recommendation came up with t following for onshore operations, 15% to the federal government, 10% state of derivation (40% less than what obtained before) and 79% to DP-For offshore operations, it recommended that 60% , 30% AND 10% go the federal government, DPA and special account respectively.
All these changed with the promulgation of Decree No 13 of 19″ which came up with the following changes in revenue allocation,
- 100% export duties that went to state of origin was reduced to 60% while 40% went to the federal government.
- 100% duty on fuel paid to states of consumption was reduced to 5 0% with the rest going to the federal government
- 50% mining rents and royalties paid to states of origin was reduced to 45% and 5% to DPA.
- Excise duties to be shared between the federal government and the DPA.
- The DPA to distribute 50% on equality of states and 50% proportionately to the population of each state.
Rents and royalties of offshore petroleum were transferred totally to the federal government through Decree No 9 of 1971.
Following the change of government in 1975 and the apparent centralization posture of the regime of the time, fundamental changes in the revenue allocation policy took place namely.
- 45% mining rents and royalties paid to state of origin was reduced to 20%, the balance went to the DPA.
- Federal government retained 65% of import duties of all goods except motor Spirit, diesel oil, tobacco, wine, potable spirit and beer. Duties on motor spirit and tobacco and the rest went to DPA.
- 50% excise duties to DPA and 50% to federal government
- DPA was shared on the basis of 50% population and 50% on equality of states.
- Personal income tax standardized throughout the federation.
According to Oketa (2000), Tax was excluded from revenue allocation which makes the federal government to pile surplus to the detriment of the component units. And between 1951-1975, Equalization transfer otherwise known as the principle of even development dominated revenue allocation in Nigeria while the major sources of income within the period were the various taxes on import duties, motor spirit, mining rents and royalties, tobacco and alcohol consumption and individuals.
The federal military government on account of its centralistic, messianic posture and the arrival of the oil boom and huge revenue, abrogated derivation principle while all rents and royalties from mining and petroleum was extrapolated by the federal government, only a paltry 1,5% of the federal revenue was given to the oil producing area, this was not sufficient and it led to the neglect of the oil producing states. The advent of a democratically elected government and the democratic environment spawned by it informed the empanelling of the Pius Okigbo presidential commission on Revenue Allocation in 1980. The Commission recommended 53%, 30%, 10% and 7% for the federal, state, local government and special funds respectively. However, the government in its
own altruistic wisdom in a white paper on the report increased the federal government share to 55% by reducing that of the local government by 2%, On the other hand, the Commission recommended a horizontal allocation to the states as follows: 45%, 50%, 15% and 5% based on population national minimum standard for national integration, social development and Internally Generated Revenue effort (1GR) respectively. Even though the 1981 Revenue Act did not tamper with the horizontal allocation, it did tamper with the vertical allocation to 55%, 30%, 10% and 5% for the federal, state, local governments, and special funds respectively. The Revenue Allocation Policy still met with complaints and political opposition from the states. For instance, the then Bendel state government went to court following which the 1981 Revenue Act was adjusted in favour of the states, particularly oil producing ones. This was a pointer to the excessive centralization and overbearing of the federal government which was not acceptable to Nigerians.
Over the years since 1983, Revenue Allocation has been the center of high-level politicking. Asobie (1998:14-56) argues that the centralizing trends in Nigerian federalism have manifested in changes in the patterns of control over power resource, changes in the balance and the distribution of functions and competencies.
The return of the military in 1983, in line with Professor A. Asobie argument, marked the recentralization of vertical revenue sharing and as Subaru (1999) pointed out, the reversal of the modest decentralized achievements of the second Republic. Hence the federal government’s share of government expenditure increased from 52.1% in 1983 to 78.0 in 1993, while the state government’s share decline from 47.8% during the same period.
The Buhari regime introduced a new formula for vertical sharing which allocated 55%, 32%, 10%, and 8% to the Federal, State, local Government and special finds respectively. The horizontal allocation formula was untouched.
The Babangida administration constituted the NRMAFC and following its report of 1989 introduced changes in the vertical sharing scheme. The amendments were announced in January 1990, January 1992 and June 1992. The administration later established the following sharing formular. Federal Government 48.5%, States 24%, Local government 20%, special finds (including Derivation, FCT, Mineral producing areas, General Ecology and Stabilization 7.5% (Suberu 1999). Another major area of contention is the sales Tax. The Abacha regime introduced the value added Tax (VAT) in 1994 in place of Sales Tax* The Sales Tax used to be the major source of revenue to the states, the VAT yielded N21 Billion in 1995 alone and were originally statutorily designed to be shared 80% to the States, and 20% to Federal Government to offset administrative costs but the Federal Government in January 1995, scrumptiously increased its shares on VAT to 50% and reduce that of the States to 25% assigned the remaining 25% to the localities. There were still changes in 1996 and in 1998. In 1996, VAT proceeds were divided in the ratio of 40/35/25 among the State, Federal and Local Government respectively. In 1998, the Federal Government share was reduced to 25% (Suberu 1999).
In terms of Horizontal Revenue Sharing, the formular has been as follows: Equality 40%, population 30%, Social Development sector-Health, Education and Water needs 10%, Land Mass and terrain 10% Internal Revenue Effort 10%. The fact is that the indices or bases are not explicable, nebulous and particularistic, all calculated to favour the geographically expensive,, highly populated and political dominant sections of the country to the neglect of the minorities and oil producing Delta region. The combined effects of the centralizing policies have brought about the diminution of the derivation principle and the staking of fire of secession and call for true federalism even though successive government responded with the establishment of redressive institutions such as OMPADEC and NDDC, but these agencies have not adequately addressed the problems and this has led to series of unrest, attack on oil installation which have reverberated at the international oil market thus drawing the attention of the International Communities. The DokuboAsari Militia, Warri and Ogoni crisis are all typical arid topical cases.
Not much has changed as have been pointed with the advent of the Obasanjo Democratic Government. For instance, the November, 2004 federal collected revenue was shared based on the following ratio:
- Federal Government 52,68%
- Oil producing State 1 % (13 derivation proceeds from VAT were shared among the tiers of government in the following order:
- Federal Government 15%
- State Government 50%
- (c) Local Government 35% (Source, Office of the AGF, Abuja), The only appreciable change is horizontal allocation particularly VAT and the abrogation of the offshore-onshore dichotomy and restoration of 13% derivation to oil producing States.
RESOURCE ALLOCATION AND FOREIGN POLICY
As early as 1967, the Dina Revenue Allocation Committee had framed its work in the context of what it called “a spirit of unity”. According to (Onyobaire 198d5:l&4-195 cited in Subaru 1999), the Dina Committee said “we believe that fiscal arrangements in this country should reflect new spirit of unity to which the nation is dedicated. It is in the spirit c new-found unity that we have viewed all the sources of revenue ii country as the common funds of the country to be used for executive kinds of programme which can maintain this unity”. In the same section 16 (a and b) of the 1999 constitution states the Economic Objet of (which revenue Allocation share a substantial part): the State shall
- Harness the resources of the nation and promote national prosperity and an efficient; a dynamic and self reliant economy.
- Control the national economy in such a manner as to secure’ maximum welfare, freedom and happiness of every citizen o basis of social justice, equality of status and opportunity.
The economic system is therefore a capitalistic economy heavy dose of state control. Secondly, the unity of Nigeria is guarantee not meant to be compromised. Obasanjo (1999:187) underscored crucibles when he charged the NRMAFC (National Revenue Mobilization and Fiscal Commission) among other things, to get right most crucial of relationships between constituent units of the federation so as to tensions and achieve mutual understanding. On the other hand, the foreign Policy Objectives of the Federal Government according to section 19(£ the Constitution shall be
- The promotion and protection of national interest;
- Promotion of African Integration and support for African Unity;
- Promotion of International Cooperation for the consolidation universal peace and mutual respects among all nations elimination of discrimination in all manifestation;
- Respect for International Law and Treaty, and Obligations as well as the seeking of settlement of International disputes negotiation, mediation, conciliation, arbitration and adjudication and
- Promotion of just world economic order.
The foregoing objectives as can be seen influence and shape Economic Objectives and explain the enormous allocations made peace-keeping obligation, debt servicing, regional economic venture institution such as the ECOWAS, GULF of Guinea Commission and A.U
Much as this paper is not interested in polemics, suffice it to say national interest is at the core of Foreign Policy Objectives of any state. Adesola (2004;6) notes that national interest is that goal, idea, concern or value around which Foreign Policy makers situate their action. For instance, territorial integrity, unity of the country, collective security, economic self-reliance and food security, all constitute vital national interests of the federal Government, by which the system of revenue allocation seeks to guarantee.
There is no clear distinction between Foreign Policies and domestic Policies. This is because issues that are purely in the domestic usually have international implications. For instance, the Economic Recession of 1986, which brought the IMF/World Bank harsh policies to Nigeria and the prescription of Structural Adjustment Programme (SAP), unleashed serious hardship and demonstration by the citizens of the country.
The Revenue Allocation Policies of the regimes of the 80s and 90s and the current regime (in power) which arc purely domestic issues reverberated in the international arena as the policies provoked conflicts, crisis and wars in the Niger Delta, resulting in the vandalisation of oil installations; insecurity of the foreign investments and personnel in the area. Similarly, such crisis caused increase in oil prices in the international market. It is not without reasons that IMF and World Bank have been monitoring Nigerian fiscal policies just to ensure that the interest of the super-powers (America, France, Britain) are protected
We have attempted examination of the underlying politics associated with Revenue Allocation in Nigeria as shown by the frequent changes over the years since 1946. The central and dominant theme running through the two policies are of national interest, unity, territorial integrity, economic self-reliance and food security, which have influenced foreign policy in the country.
Indeed, the paper posits that foreign-policy is inseparable from domestic policy as issues perceived in the domestic realm actually impinge on the international realm. Revenue Allocation in .Nigeria therefore influences Foreign Policy Objectives. The economic power shapes national Power, which in turn derives International power. It is therefore our opinion that equitable allocation of resource can foster good foreign policy and relations in Nigeria.
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