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1.1 Background of the study
It is a commonplace fact that Nigeria is a multi-ethnic nation state with socio-cultural differences between its component ethnic groups all of which have resulted into cultural dissimilarity (Okafor, 2007). This cultural dissimilarity has been manifested by, for instance, the differences in language, diet, dress and types of social system. Shrewd observers have noticed that the recent event such as globalization have not significantly diminished these differences. This static situation has been due to a number of reasons.
The indigenous languages, which help to identify the various ethnic groups, are still spoken by almost the entire population of Nigeria.
The style of life has not, for the majority people, changed to such a degree as to produce appreciably greater uniformity. Against this diverse background, many ethnic problems abound in Nigeria, which arise principally from the hostility that derives from competition between ethnically different peoples for wealth and power (Okafor, 2007).
The establishment of ethno-regionalism had a significant impact in Nigerian political arena. Theoretically, Edlyne (2002) contented that, even the formations of political parties, their manifestos, system of leadership and campaign strategies were originated from ethnic and geographical dimensions. An ethnic nationality refers to people who agree to share a common language, their cultural ideology and self identity.
While Okafor (2007) observed that since the beginning of democratic system of government during the first republic Nigerian political parties were forms into regional position supporting the three major ethnic groups the Hausa/Fulani, Igbo and Yoruba. In similar vein, the third republic of Nigerian democracy follows the same train. Furthermore, the model indicates clearly that Nigerians are more loyal to their ethnic background than their state.
The phenomenon of ethnicity becomes the most essential aspect of national identity in Nigerian politics, because people are more prone to their identity than being a Nigerian (Ogundiya, (2010). Gilley (2009) observed that, majority of Nigerians in their survey prepare to be label by their ethnic background. However, Nigerians tend to cluster more readily around the cultural solidarities of kinship, traditional entity than the class solidarities of the workplace. They also opined that what is more, “religious and ethnic identities are more fully formed, more holistic and more strongly felt than class identities” as evidenced in the fact that “whereas those who identify with religious and ethnic communities are almost universally proud of their group identities…those who see themselves as members of a social class are somewhat more equivocal about their pride”. Edlyne (2002) concludes that looking at the historical antecedent of Nigeria and the effect of colonialism the challenges is not a point of surprise but to adhere into unity in diversity.
According to Ogundiya, (2010) Nigeria has witnessed the transition from the military regime for a quite long time to a democratic system of government since the year 1999, Nigeria failed to resolve its ethno-religious and political violence which contributed to the weakening of democratic governance and national integration. As a multi-ethnic nation, with diverse religious and cultural background the political system is expected to cope with and control both human and natural resources effectively, but in contrast this diversity becomes the source of ethno-religious and political violence. About five decades after Nigeria gained independence, the Nigerian diverse social structure in terms of her heterogeneity has not changed significantly.
Gilley B (2009) opined that the diversity nature of the society has made identification with the ‘nation’ a difficult task. Today, identification is easier at both family and ethnic levels. A consequence of this is that many of the citizens may never develop a proper concept of nation. This kind of ethnic group relations signifies a negative dimension and which may mean much for the Nigerian political system. Therefore, a discussion of the effects of ethnic politics on the survival of democracy is or seems to be highly desirable. It even becomes necessary given the cry of political marginalisation coming from various ethnic groups in the new democracy. In all political activities in Nigeria, the factor of ethnicity is reflected. It is particularly obvious in areas like voting, distribution of political offices, employment and government general patronage of the citizens. It is against this background that this research work discusses ethic affiliation and resource challenges in Nigeria with particular reference to Igbo Etiti Local Government Area of Enugu State (Gilley, 2009).
According to Levitsky, (2010) in a federal system of government, revenue allocation involves two schemes. The first is the vertical sharing between the federal or inclusive government and the other tiers of governments. The subject of these sharing schemes is the federally collected revenues. This is because the revenues generated within the jurisdictional areas of the units – states and local governments are not subject to the national sharing formula.
Omitola, (2005) is of the view that in the annals of federal countries’ revenue sharing arrangements, the sources of the federally collected revenue that form the subject of the sharing formula have remained largely unchanged. These sources which are not amenable to other units include import duties, mining rents, excise units, export duties and royalties (Ovwasa, 1995:102-117). The implication of this is that, since these sources of revenue are not amenable to the jurisdiction of the other units of government, the problem of revenue allocation has focused on not who should raise the taxes, but on how to share the proceeds that is, the actual revenue collected by the federal government. The imbalance between functions and resources base, calls for higher level government to transfer revenue to the lower level. Graham in a perceptive work, described such transfer as “deficiency transfer or balancing” (Graham, 1964). It is so described because the transfer seeks to make up for the differences in the levels of functions devolved to the lower government and the resources available to it. Another principle of revenue transfer which is horizontal revenue sharing arises out of the variations in revenue generation capacities of the component units. Where the revenue raising capacities are low, heavier tax burden is imposed relative to higher revenue raising capacities area. This transfer is called “equalization transfer”. This transfer is necessary because higher taxation will scare away businesses and the economy of the unit will become more depressed. To avoid this, the higher the federal level of government has to transfer to the lower unit, the better, to enable it make up for the differences between its internally generated revenue and those required for maintaining the minimum standard of services.
According to Ovwasa, (1995) The two types of resource transfer discussed above are known as intergovernmental grantsin-aid. The third principle has been given different names by different scholars. Beak (cited in Graham 1964) called it “simulation”, “incentive” or “conditional” grants. This grant is also known as categorical grants because such grants are designed basically to undertake certain projects. This is also known as categorical grants because they are desired for particular purposes. Nevertheless, in view of the fact that no federation has all its component parts equally developed, the transfer of funds within a federation is a potent weapon in the hands of managers of the state more so in a plural society with diverse cleavages to satisfy hegemonic interests. On the other hand it can help in ensuring that all parts of the federation have resources to carry out their functions. The government can thus ensure that the revenue from resources located in a part of the country is used for the benefit of all parts (Nyemutu-Roberts 2005:328). To this extent, revenue allocations can foster national integration. However, when misused, it engenders political altercations and contestations which destabilise the political economy and tend to undermine the efficacy of federalism in fostering political accommodation and economic development. This is why the most common source of friction in a federation is the distribution of fiscal resources (Aluko 1976:1). It is important to add that fiscal relationship in a gamut of intergovernmental relations is no longer only federal-state but also state-federal, federal-local and state-local. This is one of the most significant recent trends in inter-governmental fiscal relationships in federal systems across all regions and climes of the world (Aluko 1976). In developing countries like Nigeria, studies have shown that the state and local governments rely mainly on allocations from the federal government (Ekpo, 1994; Olowononi 1998). The allocation from the federal government usually constitutes about 70 to 90 percent of the state or local government revenues. Some major implications of this dependence are that the situation of the local governments would be worse; the agitation for constant review of revenue allocations in favour of the States and local governments will persist and continue to be a major friction in the political equation of the country. Moreover, the States will remain inefficient in tax collection and consequently remain underdeveloped in tax and general revenue administration. All these will continue to generate unnecessary tension (Tella, 1999) as the case with Nigeria. According to Dunmoye (2002), four interrelated factors can initiate or ruin a viable federation. These are:-
• the issue of political power sharing or representativeness especially at the centre;
• the problem of equitable employment to members of all sectors or all constituent units in the federation;
• location of industries or infrastructures and projects especially those funded by the federal government and
• The sharing of resources or what is known in Nigeria as revenue allocation.
Each of these four is related to the whole gamut of the political economy of federalism. Any lapse in one or more of these factors can mar any federal system especially a fragile federation with a dependent capitalist polity like Nigeria.
The debate on Nigeria’s fiscal federalism and relations hinges on the fundamental question of who gets what of the national cake, when and how. This is fundamental given that Nigeria as a monolithic economy gets over 80% of its revenue from crude oil, by virtue of the constitutional provision, this revenue must be disbursed to the three tiers of government. It also explains why the formula for revenue allocation has continued to be at the heart of public debate and why public office holders are hardly held accountable for the misuse of revenues derived from the national oil wealth. It is obvious that the nature and conditions of the financial relations in any federal system of government is crucial to the survival of such a system. A major source of inter-governmental disputes under a federal system centres on the problems of securing adequate financial resources on the part of the lower levels of government to discharge essential political and constitutional responsibilities (Olaloku, 1979:109). In all federations, there are always constitutional wrangling or how resources should be shared among the constituent units since there are always poor and relatively rich units for instance, in Nigeria, the poor units/regions/states often prefer a re-distributive system of federal resource while the richer or more endowed States are in favour of more financial autonomy and revenue allocation based on the relative contribution of each constituent units to the federal purse. In Nigeria revenue allocation largely implies the allocation of oil revenue, therefore, oil is central to the politics of inter-governmental fiscal relations thus, the contending forces over power and access to oil, extraction and accumulation of resources constitute the major conceptual issues that must be objectively confronted in seeking to understand the political economy of federalism in Nigeria and revenue allocation.
One striking feature of the recommendations of various Revenue Allocation Commissions with respect to the revenue allocation formula adopted from the 1970s is a phenomenon tagged the “concentration process” in Nigeria’s fiscal federalism (Mbanefoh and Egwakihide 1998:22). This refers to situation whereby there is a gradual reduction of State Government Accounts and this is further exacerbated with the establishment of Special Account by the Federal Government (Mbanefoh, Egwakihide 1998). This is because it was used to favour a few selected states/Local Councils more often than not, it provoked inter-state hostility and rivalry, thereby undermining the stability and corporate existence of the country. Suberu (1995:4), observed that the subsequent periodic modifications of the various allocative criteria have achieved three things. First, they have effectively legitimized the criteria of demography and equality as the prominent principles of horizontal revenue sharing in Nigeria. Second, the periodic changes in the horizontal revenue sharing system have largely compounded the schemes intensely political and divisive nature. For instance, in 1990, the Babangida Administration re-introduced, and then assigned a weight of ten percent to the discredited principles of land mass. Ethno-regional opposition to this apparent bias to the North (which with only about half of the nation’s population), encompasses some three quarters of the national territory led some southern members of the National Constitutional Conference to propose the inclusion of the countervailing ‘political’ principle of ‘population density’ in the horizontal revenue sharing scheme. The primary effect of such regional political manoeuvres is to deprive the nation of the development of a coherent revenue sharing scheme that balances ‘efficiency’ and ‘equity’ principles of allocation in a politically healthy and economically productive manner. Third, and finally, Nigeria’s horizontal revenue sharing policies and reforms give insufficient recognition to such largely non-political principles of allocation as the social development factor and internal revenue generation.