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Fiscal Federalism

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Federalism as it were, originated during the colonial epoch beginning with the amalgamation of the Northern and Southern Protectorates in 1914. It was introduced into Nigeria precisely by the 1946 Richardson constitution. The constitution introduced regionalism into Nigeria for the first time, establishing regional assemblies in addition to the already existing central legislature. However, the regional houses remained only as deliberative and advisory bodies having no real legislative competence.’ They also served as electoral colleges for the central legislature. The Macpherson constitution of 1951 brought greater federalism to the country. It increased regional autonomy within a united Nigeria. It created larger and more representative regional legislatures with increased powers. It also created a concurrent list with 19 subjects on which both the regional and central legislatures’ could legislate and in the event of conflict the regional law was to prevail. ‘The Lyttleton constitution of 1954 further promoted federalism in the country. The constitution saw the full, romance of Nigeria with federalism, thus making Nigeria a full- fledged federation.

This was imperative because of the ‘Eight point programme passed in May, 1953 by the legislative council of northern region which would have brought about a virtual succession of the northern region if it had not been implemented. Under the constitution, legislative powers were divided between the federal and regional legislature. It was provided that if a regional law is inconsistent with the provisions of the federal law, the provisions of the regional law in question would be rendered void to the extent of such inconsistency. The 1960 independence constitution retained the federal structure with the three legislative lists, to wit: (Exclusive, concurrent and residual). However, in order to safeguard the unity of the country it was provided that the executive authority of the regions should not be exercised in such a way that it would impede or prejudice the exercise of the executive authority of the federation or endanger the continuance of the federal government in the country. The 1963 republication constitution retained the same federal structure and provisions protecting federalism as contained in the 1960 constitution. Then 1979 presidential constitution expressly guaranteed federalism in-section 2(1) and (2). These states;

(1) “Nigeria is one indivisible and indissoluble sovereign state to be known by the name of the Federal Republic of Nigeria (2) Nigeria shall be a federation consisting of states and a federal capital territory”. In me spirit of federalism, the constitution guaranteed three levels of government viz: federal, State and local governments. While the constitution recognised the need for separateness or some degree of autonomy amongst’ the various levels of government, it also recognised the need for interdependence and harmonious and effective government for the Nigerian federalism to be a worthy one. The 1995 Draft constitution extensively tackled once again the question of federalism in Nigeria, drawing its lessons from past experiences.

The fact that a country with such a vast land mass and consisting of ethnic nationalities with diverse backgrounds, could not live under a unitary government for too long was not lost on the British colonial administration, especially from the time of Governor Arthur Richards.

At the various consultative forums, especially the Ibadan General Conference of January 1950, preparatory to the promulgation of the Macpherson Constitution of 1951, the question on the structure of Nigeria was pointedly asked and discussed: “Do we wish to see a fully centralised system with all legislative and executive powers concentrated at the center, or do we wish to develop a federal system under which each region of the country would exercise a measure of internal autonomy?”

But it was not until 1954, following the crises generated by the motion for self-government by Anthony Enahoro in 1953 and the constitutional conferences that resulted from them (London Conference of 1953 and Lagos Conference of 1954), that the inevitability of a federation or federalism finally dawned on everyone.

And so there is no gain saying that the federal arrangement bequeathed to Nigeria both by the Lyttleton Constitution of 1954 and Independence Constitution of 1960 was a compromise between the centrifugal and centripetal forces that inhabited the disparate regions of Nigeria. Our founding fathers like Nnamdi Azikwe, Obafemi Awolowo and Ahmadu Bello settled for a full-fledged federation as the basis of our existence as a nation in 1954. In 1954, the Federal Republic of Nigeria was born Possibly, the greatest challenge facing Nigeria today is the threat to national unity, as centrifugal tensions, resource control and self-determination, ethnicity based identity politics and religious cleavages have enveloped national consciousness. Since independence in 1960, national integration has been a top priority of governments in Nigeria. The National Youth Service Corps (NYSC) Scheme, the Unity Schools, the Federal Character Principle, and State Creation are examples of state policies intended to achieve this goal. (Enegwea &Umoden, 1993; Alapiki, 2005; Ekeh & Osaghae, 1989).

It is clear that the outcome of integration policies and programmes in Nigeria have fallen far below expectation, as primordial ethnic loyalties are still deep seated. Ethnic particularism is seen as the major cause of this failure (Naanen, 1995), and consequently, suggestions on policy options are targeted to deal with this issue. This paper will explores the use of fiscal federalism as a strategy for integration. Integration is a process that is anchored on values, and this can better be achieved through fair fiscal federalism. The democratization of fiscal federalism and curriculum reforms to capture the true essence of national unity will enhance multiculturalism, the coexistence among different cultural entities (Kymlicka and Norman, 2000) the process is linked to respect for differences which relate to culture, religion, politics and values, that can be effectively harnessed and managed through revenue. Thus, the specific issue analyzed in this paper is, how can fiscal federalism enhance integration in Nigeria?

Federalism is the decentralization of the administrative system designed to cope with the size, differences, peculiarities of the regions or state and/or ethnic groups. Essentially, federalism connotes a discrete territorial division of the various units so that they are originally related. They are organic in the sense that they are stated in the constitution. In other words, their respective powers originated from the same source as those of the center. The units therefore have equal powers with the center though such equality in not is terms of one to one, but in terms of originality, since the powers they exercise are not the creation of the center. The relationship between the center and the component units is not superior to the units in a federation (Ailoje, 1997). It has been asserted over the years that fiscal federalism or intergovernmental fiscal relation is concretely located within the definitional concept of federalism, though with economic blending. Thus according to Akindele (2009), “federalism could be taken to mean a system of government where revenue and expenditure functions are divided among the tiers/levels of government.

Thus, fiscal federalism is one of the major classical principles upon which true and balanced federalism ought to rest. It shows very clearly that neither the federal nor the state or the local government in a true federation should depend on each other in carrying out the statutory responsibilities and functions, which the nation’s constitution has assigned to it. This will paper examines fiscal federalism as well as the enormous obvious challenges it poses to the Nigerian federation, which have resulted in series of agitations for the review of revenue sharing formula and resource control in recent times. Federalism is the bedrock of democratic edifice for a country of Nigeria’s size and bewildering diversities. Like India, also a federal state which has been rightly described as a land of “million mutinies” (Roy, 2002:2), Nigeria is a deeply divided and plural society. The polity is known to have many ethnic groups, which scholars have put at different figures (Kirk-Green, 1969:4; Attah, 1987:393-401; Otite, 1990:175-183; Suberu, 1993:39/1998:227).

Nigeria is, one of the most ethnically diverse countries in the world with well over 250 ethno-linguistic groups, some of which are bigger than many independent states of contemporary Africa In that wise, “Nigeria has a unique problem not experienced by any state in the world past or present. The problem is that of achieving solidarity in action and purpose in the midst of hundreds of ethnic nationalities each exerting both centrifugal and centripetal forces on the central issue of the nation, bound in freedom, peace and unity where justice reigns” (Ojo, 2002:4-5). This uniqueness creates “unique problems unknown to the experience of other peoples in the world… no Western or Eastern civilization has ever evolved a political system that can cope with this gigantic problem of hyper-ethnic instability syndrome” (Onwujeogwu, 1995). It is not surprising therefore that these ethnic groups are always in conflict and competition for scarce Resources. Indeed, this is not unexpected especially between and among “ethnically defined constituencies” (William,1980:69). The reason is that almost by definition, ethnic groups are in keen competition for the strategic resources of their respective societies.

This is the case in Nigeria and other plural and segmented polities. This is so because ethnic groups are socio-cultural entities, consider themselves culturally, linguistically or socially distinctfrom each other, and most often view their relations in actual or potentially antagonistic terms (Cox, 1970:317). Groups with more effective tactics and strategies normally gain competitive advantages over other groups within their societies (Fried, 1967:71-72). Yet, this success is not without its liability (Elliot, 1975:13). This is why national cohesion is more of a mirage in plural and divided societies than in homogenous ones. It is in this regard that Weiner (Ogunojenite, 1987:224) argues that “developing nations’ central problem that is often more pressing than economic development is the achievement of integration”. It was in an attempt to weld together her disparate ethno-religious and linguistic entities that Nigeria opted for federalism in 1954 (Ojo, 2002:4).

The assumption then was that, federalism is “a half-way house between separate independent states and unification” (Beloff,1953:131). It is a process of seeking unity, without uniformity, more so, where size, cultural and linguistic diversity, historical particularism and considerable decentralization prevails as in Nigeria. However, since 1954 when the foundation of classical federalism for Nigeria was laid, the system is still convoluting. Nigeria’s ethnic make-up still remains what Furnival (1948:304), calls “in the strictest sense a medley (of peoples) for they mix but do not combine” (Joseph, 1991: 32-33). The Nigerian project remains questionable despite years of federal practice. According to The Economist, (June 19-25, 1999), “Nigerians have no common vision of a nation-state called Nigeria, no sense of citizenship. The name and the football team are about the only things that unite them. Even the footballers however, brilliant individual players though they are, do not work as a team. It is the same with the country (Odion-Akhaine, 2002:26).

Forty- nine years after ‘flag independence’, the country still totters on as a toddler, often pulled down by joint identity and integration crisis. To observers consternation, Nigeria’s federalism has remained fragile, almost impossible. This is largely due to the successive administrations aversion to true federalism, equity and good governance. The country is also permanently assailed by a curious and depressing distribution crises triggered by a dubious formula for the sharing of somehow real and somehow elusive national cake (Ojo, 2009:6).

In view of the foregoing, and as will glaringly be analyzed in this paper, friction and tension among the over 250 ethnic groups are recurrent phenomena. Cultivation of national outlook has inadvertently given way to a continued lukewarm attitude to nation-building by the frustrated ‘nations’ whose emotions are stirred by the clandestine tribal organizations coordinating the races in the hot race for relevance within the polity (Oladesu, 2002:14). In a nutshell, the impact of all this is that, from independence in 1960 to the beginning of the civil war on July 1, 1967, Nigeria had a very low degree of national cohesion, its diverse ethnic nationalities are looking inwards to themselves for political succour and survival in an incoherent polity. Socio-political integration was further undermined by the lack of meaningful universal symbols (common heritage and common historical past), for example that could have bound the Nigerian polity together (Faseun, 2002:8). 1.2 STATEMENT OF PROBLEM

Giving the foregoing background of the study it is germane to note that successive government at all levels in Nigeria have tried to find time the best policy of fiscal federalism However despite the laudable an worth while objective and ideologies to a large extent creates an asymmetrical relation among the various government units the necessity the need to find out to what extent the relationship between the tiers of government.

While it is accepted that human being not structure or institution are responsible and in fact they carry out relation between government finance in what it has emerged as the most critical element of these interaction as assumed significant position in Nigeria federal system.

To this end is to understand why critical and content issues of fiscal power and control in Nigeria fiscal federalism has resulted in compounding the question of revenue right and fiscal jurisdiction. The Federal structure of Nigeria is believed to be “a bad marriage that all dislike but dare not leave, and that there are possibilities that could disrupt the precarious equilibrium in Abuja” (Ogbe, et al, 2011:196). The dominant conceptual and legal foundation for Nigerian internal political geography is federalism. A federal arrangement was expected to be instrumental for forging national unity out of the plural society and at the same time in preserving the separate social identities cherished by its component parts. Adoption of federalism not withstanding, Nigeria’s political system has continued to operate with minimum cohesion (Ola, 1995). Rivalry fundamentally instigated by ethnic mutual suspicion increasingly weakens the fabrics of Nigerian Sovereignty. This has culminated in the Nigerian Civil War. It has also dragged the nation-state into the turbulent June 12 political crisis which has completely made Nigerian sovereignty frail and fragile (Ojo, 1989).

Fifty two years after independence, Nigeria still battles with one of the major fall-outs of federalism, the politics of trying to appease all sections of the polity. This has become necessary because success to national positions and resources are limited at the individual level. This is as a result of the multi-ethnic nature of the society. According to Ola, different governments that have governed this country have at one point or the other derived various methods to cope with this ever present problem of power distribution in both the political and economic spheres. Therefore, there have been accusations and counter accusations from all sections of the polity, as to how powers are being distributed or how they ought to be distributed (Ola, 1995). Federalism is a system meant to integrate people in a society who are diverse ethnically, culturally, geographically and evenreligiously.

It therefore becomes imperative that once a government is in place, it must endeavour to adequately and equitably distribute powers, functions and resources among these diverse groups. But in Nigeria, there are instances where governments have openly violated this principles of federalism. Suffice it to say that in theory, Nigeria can be said to be operating the federal system of government, whereas in actual practice, the country is tending towards a unitary system. Therefore, the problem with federalism in Nigeria is the mix-application or non-application of this clause especially as it has to do with power distribution (Awa, 1977). Power distribution is a volatile issue which if not properly handled could lead to various forms of crises which are bound to crop up. Nigeria has not been forthright applying this principle to the letter and the result of this has been the heightening of ethnic tension, mutual mistrust among ethnic groups, minority problem, clamour for an answer to the National question et-cetera. 1.3 RESEARCH QUESTION

The study intend to provide answers to the following questions (i) Could fiscal federalism challenges be responsible for poor national integration in Nigeria? (ii) What are the factors inhibiting or promoting the principles and practice of fiscal federalism in Nigeria?

The overall objective of this study is to investigate the relationship between fiscal decentralization and national integration in Nigeria. The specific objectives are to:

(i)Examine the evolution, structure and practices of fiscal federalism in Nigeria; (ii)Investigate the underlying factors promoting or inhibiting the true practice of fiscal federalism in Nigeria; (iii)Determine the extent of fiscal decentralization in Nigeria (iv)To examine the issue of study intergovernmental fiscal relation in Nigeria (v)To establish the imperctive of fiscal federalism as a mean to development. (vi)To identify the function that affects the smooth operation of fiscal federalism in democratic governance Nigeria (vii)To proffer measure that could be put in place as possible solution to Nigeria inter governmental fiscal problems.

This study will be of great benefit to Nigeria, This is because it will be exposed to the challenges it is facing on integrating each geo-political zone of the federation. It would also be of great significance to researchers by way of making them aware of problems that have been uncovered by these researchers, so that they would know where to start from in their subsequent research work in the area of fiscal federalism and national integration in Nigeria. It would also be useful to university students like students of Fountain University when doing a likely research. The study would be significant to policy makers and policy implementers, as they would make use of the findings and recommendations of this study


The study is on fiscal federalism and national integration in Nigeria. But due to the fact that the history of fiscal federalism is large and wide, the researcher decided to center the research on the two term civilian administration of former president Olusegun Obasanjo between the year 1999-2007


The research will be conducted using secondary materials/sources such as textbooks, journals, newspapers articles, magazines, and the internet.

There has been a resurgence of interest in many parts of the world in problems of multi-level government finance. While there are several reasons that fiscal decentralization has been adopted around the world, the common reason motivating much of the research on fiscal decentralization is its potential to improve the performance of the public sector and thereby enhance prospects for higher growth. Established federations in developed countries have been the traditional focus of political research on fiscal federalism. Theoretically, fiscal decentralization is expected to foster growth by transferring spending power to develop each region of the federation that are best equipped to meet local demand adequately. However the role of fiscal federalism as a means to foster growth and development has been questioned in recent literature. Much of the new literature points out that decentralization can be dangerous, especially in developing countries. This study is therefore, important for a number of reasons. First, though the literature on fiscal federalism has blossomed over the years, yet these studies have focused more on developed countries (Agiobenebo, 1999; Olowonini, 1999; Anyanwu, 1999). Secondly, the study establishes a foundation for policy-makers for sequencing reforms of government in developing countries.

Federalism in Nigeria refers to the devolution of federated self-governance by the West African nation of Nigeria to its first-level subdivisions, currently known as states. This is the decentralization of the administrative system designed to cope with the size, differences, peculiarities of the regions or state and/or ethnic groups. Fiscal Federalism:

The division of the taxing and expenditure functions among levels of government National Development:
The step by step method and process of defining, developing and outlining various possible courses of actions to meet existing or future needs, goals and objectives for a country or a large body of people associated with a particular territory, often sharing similar ethnic backgrounds, customs and languag Independence:

Freedom from control or influence of another or others

National integration:
National integration is the awareness of a common identity amongst the citizens of a country. It means that though we belong to different castes, religions and regions and speak different languages we recognize the fact that we are all one. This kind of integration is very important in the building of a strong and prosperous nation.

An undivided or unbroken completeness or totality with nothing wanting to break off.

Central Goverment:
This is not only the first but the mega-government which exercise exclusive powers and its superior to both the State and Local Governments.

This is the agency of the ruling class which is charged with the responsibility of exercising the state powers on behalf of the people.

This is the end-result to which an organization or government’s activity is to be directed. Objectives are hierarchical in nature and are determined or formulated after economic social and political forces affecting the organization have been appraised.

It is the qualitative and qualities, self-improvement of man that applies to whole societies and people. It means the removal of obstacles to the progressive or qualitative transformation of man and such obstacles include hunger, poverty, ignorance, disease, mal-nutrition, unemployment, to mention but a few.

Administration is determined action taken in pursuit of conscious purpose. It is the systematic ordering of affairs and the calculated use of resources, aimed at making those things happen which we want to happen and simultaneously preventing developments that fail to square with our intentions. It is the marshalling of available labour and materials in order to gain that which is desired at the lowest cost in energy, time and money.

The interactions that exist among various levels/tiers of government within a state and eventually the state in question has to be associated with a Federal system.


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Federalism and quest for regional integration
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