FISCAL FEDERALISM IN NIGERIA: THEORY AND DIMENSIONS
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FISCAL FEDERALISM IN NIGERIA: THEORY AND DIMENSIONS
ABSTRACT
The dynamism and complexity of Nigeria’s federalism have piqued academic interest. This is because it has caused so many difficulties that threaten the Nigerian state’s corporate existence and continuation. As a result, this article investigated the sources of dissatisfaction and violent agitation caused by fiscal federalism and the selected distribution formula.
In order to accomplish this, the paper used both descriptive and analytical methods, relying on secondary sources for data collection. It also used primary sources by interviewing important persons involved in the resource allocation process.
However, the report stated that centralism and the federal government’s age-long hegemony, as well as the military’s extended period of interregnum rule, are some of the elements that contribute to the continual tensions related with fiscal federalism in Nigeria.
Agitation, Allocation, Centralism, Conflicts, Continuity, Dynamism, Hegemony, Interregnum, Military are some of the key terms.
Introduction
Regardless of a society’s degree of development or culture, fiscal decentralisation has become fashionable. Nations are resorting to decentralisation to improve the effectiveness of their institutions.
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Their public sectors. In the United States, the federal government has delegated considerable sections of federal jurisdiction to states for a variety of major programmes such as welfare, Medicaid, legal services, housing, and job training.
The aim is that because state and local governments are closer to the people, they will be more responsive to their constituents’ specific preferences and will be able to identify new and better ways to provide these services (Sharma, 2005:169).
budgetary federalism is a framework that involves intergovernmental budgetary interactions, most commonly in modern federations. However, it is not exclusive to federal states; its elements can be found in the majority of unitary states as well.
Fiscal federalism is not only associated with fiscal decentralisation in officially declared federations; it is also applicable to non-federal states (with no formal federal constitutional arrangement) in the sense that they include different levels of government with de facto decision-making authority (Adamolekun, 1983).
This, however, does not mean that all forms of governments are ‘fiscally’ federal; it only means that ‘fiscal federalism’ is a set of ideas that may be applied to any countries trying ‘fiscal decentralization’.
Indeed, fiscal federalism is a general normative framework for delegating functions to different levels of government and allocating suitable fiscal instruments to carry out these functions (Oates, 1999: 1120).
Nigeria is a pluralistic country that is best described as a federal state. The formation of the Nigerian federal system may be traced back to the 1946 approval of Richard’s constitution,
which provided internal autonomy to Nigeria’s then-existing provinces. Furthermore, the approval of the Littleton constitution in 1954 added weight to Nigeria’s federal system (Nwosu, 1980).
Even in non-federal states, there has been a growing tendency in recent years towards greater fiscal decentralisation. Some commentators ascribe this to globalisation and greater democratisation on the one hand, and rising earnings on the other.
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different (Tanzi, 1996). Other specific causes for the growing demand for decentralisation are as follows:
Central governments are increasingly finding it impossible to accommodate all of their constituents’ competing interests, and are striving to enhance local capacities by delegating responsibilities downstream to their regional governments.
Local and regional governments are seeking to central governments for assistance with national economic development policies.
Regional and municipal political leaders seek increased autonomy and the taxation powers that come with spending responsibility (Ozo-Eson, 2005:1).
The subject of fiscal federalism has remained prevalent and divisive in Nigeria’s democracy over the years. This is due to its multifaceted perspectives. Nigeria’s fiscal federalism has crystallised and remained dynamic throughout time as a result of its diversity in terms of ethnic composition and pluralism in terms of socio-cultural elements.
As a result, it is normal to expect interactions in fiscal relations to be marked by hostile competition, never-ending conflict, and the survival of the fittest mentality.
The centralised nature of the military hierarchical organisation, combined with the colonial authority’s exploitative inclinations, gave the federal government an edge in postcolonial Nigeria.
The Federal Government’s financial control over the thirty-six (36) states and seven hundred and seventy-four (774) local governments has invariably produced discontent in the Nigerian federation. It exacerbates the structural fragility of the component units while also increasing pressure for improved federal economic patronage.
A Conceptual Clarity on Federalism
comprehending federalism as a broader idea will aid in comprehending fiscal federalism. This is because federalism is the operational setting in which fiscal policy is implemented.
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The location of federalism. As a result, it is an essential component of federalism. Federalism is a political system that has at least two tiers of government. In such instances, there is a clash of power between a central government known as the federal government and other states known variously as states, regions, republics, cantons, or unions (Ajayi, 1997:150).
Federalism is derived from the Latin word “foedus” which means “covenant.” It is a political idea in which a group of individuals form a covenant with a governing representative head.
The phrase is also used to describe a government structure in which sovereignty is split between a central governing authority and constitutional political subdivisions (such as states or provinces).
Federalism is a system in which authority is divided among national state governments, resulting in what is commonly referred to as a federation (Akindele and Olaopa, 2002).
It is a political philosophy with a diverging notion, a diverse ecology, and a dynamic practice. It is concerned with how power is distributed or shared territorially and functionally among the many federation units.
Furthermore, Itse Sagay (2008, A11) defined federalism as follows:
an arrangement in which powers within a multi-national country are shared between a federal government and component units in such a way that each unit, including the central authority,
exists as a government separately and independently from others, operating directly on persons and properties with its own territorial area and will for the conduct of affairs and with authority in some matters exclusive of others.
When this scope is examined, it becomes clear that each unit of government within a federation exists not as an appendage of another government, but as an autonomous entity capable of acting independently of any other government.
Asobie’s (1985, 26) viewpoint emphasises the complexities of federalism. In federalism, he highlighted two broad areas of cooperation.
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The first refers to citizens’ ability to relate to one other nationally, that is, as partners who respect each other’s integrity while cooperating for the common good in all aspects of life, not just politics.
The second area considers federalism to be a social phenomena characterised by the existence of fundamentally permanent religious, ethnic, cultural, or social groupings, camps, or pillars around which a polity is formed.
Fiscal federalism is concerned with “understanding which functions and instruments are best centralised and which are best placed within the sphere of decentralised levels of government” (Oates, 1999:1120).
In other words, it is the study of how skills (expenditure side) and fiscal instruments (income side) are distributed among distinct (vertical) administration tiers.
The system of transfer payments or grants by which a central government shares its revenues with subordinate levels of government is an essential aspect of its subject matter.
Fiscal Federalism is defined by the fiscal relationships that exist between the central and subordinate levels of government. That is, it can be seen in the financial aspects of authority devolution from the national to the regional and municipal levels. Fiscal federalism addresses two interconnected issues.
The first is the division of decision-making authority over public expenditures and revenue among several levels of government (national, regional, and local).
The second factor is the degree of decision-making autonomy enjoyed by regional and local governments in assessing local taxes and determining their expenditures (Kesner-Skreb, 2009:235).
In truth, fiscal federalism is a broad normative framework for delegating functions to different levels of government and allocating suitable fiscal instruments to carry them out.
According to Sharma (2005:38), fiscal federalism is a set of guiding principles, a guiding notion that aids in the design of financial interactions between the national and sub-national levels of government, whereas fiscal decentralisation is a process of adopting such principles.
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