So a quick question….
Why are states not paid their share of the oil and gas earnings in the currency its earned ie United States Dollars (USD)?
The crude oil in Nigeria is owned by the Federation i.e. the Federal, State and Local Governments. Its shared as follows; First 13% is deducted and paid to the oil and gas producing States, then the Federal Government gets 52.68%, the States get 26.72% and the Local Governments get 20.60%.
When Nigerian crude oil is sold, the proceeds of that sale in USD is paid to the NNPC/CBN/JPMorgan Account in the United States. The Oil and Gas taxes eg Petroleum Profit taxes are also charged in USD and are collected by the Federal Inland Revenue Service FIRS and paid to the Central Bank of Nigeria CBN, same for Royalty bonus collected by Department of Petroleum Resources and paid to CBN.
The CBN and Ministry of Finance then funds Federal agencies like NEMA and the Consolidated Revenue Fund (aka FAAC) in Naira, even the 13% derivation is paid in Naira. The CBN retains the USD, while States and LGA gets Naira. The CBN thus becomes the biggest player in the Foreign Exchange (Forex) markets, with Forex “earned” from the Federation….Why? Is it their money?
Why not simply give Abia State its share of oil sales earned in USD? Abia State can decide to sell or save its Forex as she desires on the Interbank Foreign exchange market? Why is CBN and FGN deciding what exchange to use in remitting state their share of Forex earned? is Nigeria not a Federation. Abia State could sell or save its USD in its State Sovereign Wealth Fund. Ultimately the States as part of the Federation should get to choose what to do with their Forex earnings. If CBN wants Forex, let them also bid for Forex from the States.
The reality is Nigeria is a Federation on paper, but a Unitary state in practice, the Federal Government may receive 56% of the share of fiscal revenues but it collects above 95% of the major fiscal taxes on behalf of the States including the Value Added Tax and redistributes according to the revenue distribution template. This leaves the states as mere appendages of the Federal Government, running back and forth for bailouts, unable to build railroads to export, unable to build power plants and sell power, unable to mine solid minerals in their states, or even issue driving license without the consent of the Federal Government.
Nigeria has no business with 35 states, if those states become mere spenders of FAAC allocations, unable to generate their own wealth.
The States must hold a nonpolitical summit and confront the Federal Government, pass a constitutional amendment to force fiscal devolution of powers. There is gold and iron ore sprinkled across Nigeria, yet States cant touch it…why? Its Federal property. If States owned those assets, it would be reasonable to assume they would protect them, but gold mining goes on illegally across the nation because, the Federal Government owns the assets on the land but the States own the land without the assets, a mismatch of revenues and responsibilities.
All States are broke, APC, APGA, and PDP States are broke, the States should sponsors laws to allow devolved power eg allow States own mineral deposit in their States and retain income of 65% via derivation on Company Income Tax and Mineral Tax. States have to stop begging for bailouts.
In summary, we need to devolution of fiscal powers, we need to empower the States, then hold them accountable, as we seek to diversify the earning sources of the Federation it’s also important we devolve power to the States…
Its our problem, we can fix it.
That is the point made….States to sponsor Constitutional review
My brother K,
The answers to the questions and issues raised here lie in the provisions of our Constitution. The exclusive and concurrent legislative lists contained in the 1999 Constitution restricts what the states can get involved in and to what extent. These provisions include handling of the accounts of the Government of the Federation (No. 1 in the exclusive legislative list). The CBN or FMF cannot take this decision. It requires an Act of the National Assembly to do otherwise. There are numerous issues of that nature in the Constitution such as the registration of companies, fingerprints, and keeping of criminal records, etc. If these things were to change then, we would need a full constitutional review. These were some of the critical issues contained in the Confab report.