NIGERIA HAS NO BUSINESS WITH POVERTY
By Engr. Hamman Adama Tukur mni, OFR
(An Excerpt from Seminar Paper on Diversification April 2004)
The Revenue Mobilisation Allocation and Fiscal Commission is mandated by Section 32(c) of the Third schedule of the 1999 Constitution of the Federal Republic of Nigeria to amongst others “advise Federal and State Governments on fiscal efficiency and ways by which their revenue can be increased”. This constitutional responsibility, has in a way, compelled the Commission to constantly examine the country’s current economic realities and the future of the country. Each time we have had to do this in our various Plenary sessions, we have been faced with a lot of apprehension about the fate of the in-coming generations, and what would become of our children when we are all gone.
The Commission has for sometime been worried over the state of the Nigerian economy, particularly its over-dependence on one resource for its sustenance. The Commission has, therefore, come to the inevitable conclusion that Nigeria needs to reposition its economy as quickly as possible if we are to survive as a nation. This is why the Commission had, in its first Report of the Review of the Revenue Allocation Formula submitted in December 2002, attempted to create special funds directly from the Federation Account to facilitate the rapid development of the agricultural and solid minerals sub-sectors together with the associated science and technology research to enable the country diversify from its present mono-product status. Unfortunately, the Supreme Court in April 2002 ruled against such direct funding from the Federation Account. In spite of this, the Commission is still of the view that other means of funding the special sectors have to be found by inviting the attention of the Government and people of this country to the urgent need to diversify the economy as a way of moving the country forward.
Against this background, the Commission organized a seminar with the theme “Guaranteeing Nigeria’s Economic Future” to sensitize governments at all levels and other stakeholders in the Nigerian economy on the urgent need to diversify its economic base and consequently increase the country’s revenue generating capacity. It is our belief that a forum made up of top government functionaries, economic experts, policy makers, distinguished industrialists, members of the organized private sector, the academia, etc, should provide the opportunity for participants to rub minds, exchange ideas and produce implementable programmes of action on the best way forward.
Before coming up with the idea of the seminar, the Commission carried out some preliminary activities. Firstly, it held interactive discussions with agencies including the World Bank; the Nigerian Institute for Social and Economic Research; the Nigeria Export Promotion Council, Raw Materials Research Development Council, NACCIMA, etc to carefully review the Nigerian economic situation. Our discussion and appraisal of the economy dovetailed into the conclusion that the economy requires urgent diversification. Furthermore, the Commission carried out studies on Federal and State budgetary allocation trends (2002 – 2003) and performance of the key productive sectors, such as agriculture, solid minerals, Science and Technology which are considered critical to the diversification of the economy. This was done with the understanding that such budgetary allocations are measures of government priority and commitment towards the sectors. In the final analysis, it was observed that budgetary provisions to sectoral programmes/projects of these important sectors were not only grossly inadequate but also highly unrealistic for purposes of diversifying the economy. For instance, four core sectors of Agricultural/Rural Development, Solid Minerals Development, Industry and Science/Technology got a total of 6.46% and 6.57% of the approved capital budgets for 2002 and 2003 respectively. Worse still, as if this was not enough indication of our neglect of the sectors, their paltry allocations were either not released or were only partially released.
It is common knowledge that most nations that are doing well economically today are not single resource and oil-producing economies. Rather, they are mostly non-oil sector producers who manipulate their budgets to the advantage of the sector. It is interesting to note also that even those with oil-based resources like Nigeria, have successfully utilized earnings and windfalls from these sources to broaden the base of the sector itself by expanding into Gas exploration and other petrochemicals and develop other viable/sustainable areas to effect diversification of their economies.
I would like to re-assert that Nigeria is potentially and undoubtedly a very rich country and we really have no business with poverty. Nigeria is endowed with vast human and material resources. We have large unquantifiable hectares of arable agricultural land. We have the population capable of sustaining any industrial venture. There are no hurricanes, no tornadoes and no earthquakes. Nigerians are not known to be lazy, unproductive, dull or uninovative. What else do we want the Supreme God to endow us with? In spite of all its resources, the Nigerian economy continues to be cited as one of the most striking examples in the world today of a mono-product economy depending on oil as its major source of foreign exchange earnings.
As pointed out in the Commission’s Report of the Review of the Revenue Allocation Formula submitted to Government in December, 2002, there has been a tremendous growth in government revenue and a corresponding expansion in government activities. Population and the number of States in the country have grown beyond what could have been imagined in 1960. Expansion in economic activities has however, not resulted in a corresponding increase in the standard of living of the citizenry. Rather, what we have witnessed is increased environmental pollution and ecological degradation. Besides, over the years, our nation has faced tremendous deterioration of our educational system, particularly, at the foundation stage.
It would recall that in the past, agriculture formed the backbone of the Nigerian economy. Apart from providing employment opportunities for the people, it was the major source of income and foreign exchange before the discovery of crude oil. Indeed, Nigeria relied on resources from the production and exportation of agricultural products and solid minerals such as cocoa, palm produce, groundnuts, tin, coal, etc to provide infrastructures, pay for the cost of administration and other development projects. But today, the agricultural products for which Nigeria was once noted as the greatest world supplier have disappeared from the list of our foreign exchange earners while the solid minerals sector remains largely untapped or at best victims of illegal mining. Indeed, the tin mines in Jos, Plateau State and coal mines in Enugu have all been abandoned not because they are exhausted but because oil has moved them to oblivion.
Nigeria’s natural resources can be classified into four main categories, namely, oil mineral resources, solid mineral resources, water resources and biotic resources. It is doubtful if there is any country in the world today that is blessed with the abundance and variety of these natural resources as are available in Nigeria. Furthermore, the two main vegetation belts, namely, tropical rain forest and the savannah grass land of the south and north respectively make themselves naturally conducive to all forms of biotic resources which have remained unexploited.
Because of the above climatic differences, cocoa, oil palm, rubber and timber which require humid tropical conditions for effective growth are restricted to the southern States of the country. Conversely, cotton, groundnut and gum Arabic which thrive well with little rainfall are the major agricultural products of the Northern States. Additionally, the savannah grassland in the north provides excellent grazing lands to support animal husbandry and facilitate hides and skins production on which the leather industry should thrive.
Nigeria has abundant oil mineral reserves. From an initial output of 5,000 barrels of oil per day (bpd) in 1958 when production first began, Nigeria’s crude oil production rose rapidly in subsequent years reaching a maximum of 2.4 million barrels per day in 1979. The Nigerian Government through the Nigerian National Petroleum Corporation (NNPC) is also encouraging exploration in other areas.
To put Nigeria’s dependence on oil proceeds in its correct perspective, an analysis carried out to determine the contributions of the Oil and non-oil sectors to the Federation Account showed that the contributions of the oil sector to the total revenue accruable to the Federation Account were 83.5%, 76.5% and 71.1% for years 2000, 2001 and 2002 respectively. Comparatively, those of the non-oil sector were 16.5%, 23.5% and 28.9% respectively for the same period. Yet, unknown to the generality of the Nigerian polity, the actual contribution of petroleum resources to the Gross Domestic Product (GDP) of this country, up to the end of the 1990s is in the region of 34% - 35% according to a Federal Office of Statistics source. This development is worrisome when you consider it against the background that oil, as a commodity, is exhaustible, non-renewable and worse still, easily prone to the effects of international politics and market forces.
It is also worthy of note that our near absolute dependence on oil as a source of budget funding by various tiers of government in the country largely affects their implementation negatively. To this extent, Nigeria experiences budget failure whenever there is a price crash in the international oil market. Worse still, our situation is compounded by the problems of lack of accountability and transparency in the oil-sector. With payment for the Joint Venture Cash Calls (JVC) taking at times more than 65% of the country’s oil revenues, the adverse effects of our dependence on a one product economy are better left to the imagination.
The Commission has also observed that our dependence on crude oil has had other negative effects on the psyche of our leaders. Oil, rather than be a blessing, has been a curse to the nation. Our dependence on it seems to be increasingly threatening not only the security of the nation but also its very existence as a corporate entity. The restiveness of the youths in the oil producing areas and the urge for resource control by the political class are all syndromes and complications arising from this dependence on a mono-product economy. That Nigeria is one of the highest producers of crude oil in the world today makes it a beneficiary of windfalls occasioned by sharp price increases. However, the uses of such windfalls have continued to be a source of concern to our economists and not the least, the Central Bank of Nigeria. Rather than use such earnings to deliberately plan and manage a diversification process that would sustain a higher rate of economic growth, they are spent as if they are a mere part of recurrent income. We overlook the fact that countries such as Malaysia, Indonesia, Botswana have succeeded in using their windfalls to the benefit of their economies. Why not Nigeria? Why can we not learn from the experiences of other countries? If Nigeria must enjoy dividends such as generation of employment opportunities, national security in terms of reduction of armed attacks not only on ordinary citizens but top Government functionaries, poverty reduction, increase in foreign exchange earnings and foreign reserves, then the clarion call for urgent diversification of the productive base of the economy should not be ignored or treated half-heartedly.
Most acclaimed economies like those of Japan, Malaysia, Indonesia, Denmark, South Korea, Botswana, etc with high rates of growth and which consequently dominate the export markets today, are not oil-driven. Rather, they derive their earnings from the non-oil sectors. Yet, these countries are not comparable in terms of potentials with which Nigeria is endowed. If this is the case, then what is the problem with Nigeria?
Nigeria has abundant solid minerals for a wide range of industries. These include barite, clay/kaolin coal/lignite, diatomite, gold, gypsum, iron-ore, marble limestone, phosphate, salt, tin, columbine cassiterite and quite a variety of other solid mineral resources cutting across State boundaries and geographical zones. It is common knowledge in the mining industry that oil mineral exploration and exploitation cost much more than prospecting for, and mining of solid minerals.
Similarly Nigeria has been divided into eight hydrological areas or provinces, each area covered by a variety of land area. In our drive towards diversification of the economy, there would be need for a comprehensive development of both surface and underground water resources for multi-purpose uses such as power generation, irrigation, fishing and livestock development. Yet, Nigeria has continued to ignore the potentials of these sectors. The questions we have to ask ourselves is why are Nigerians so visionless or is it that we will want to continue to meet in Abuja every month to collect cheap cheques from the multinationals who do all the work in exploiting our crude oil resources and giving us the change?
Based on the outcome of the Seminar, the Commission will produce comprehensive step-by-step plans with events and time scales with which to achieve a realistic programme of diversification of our economy. Failure to achieve this would have meant that the Seminar is reduced to yet another talking shop which is not intended.
Engr. Hamman Adama Tukur, mni, OFR
Chairman, Revenue Mobilisation Allocation and Fiscal Commission
Abuja
yashuaib@yahoo.com