Cheta Nwanze, Lead Partner, SBM Intelligence
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Subjects of Interest
- Fiscal Policy
- Geopolitical Analysis
The governors can be the catalysts for Nigeria’s economic growth 14 Apr 2023
The 2023 Nigerian presidential election has come and gone. The outcome, subject to the ruling of the Supreme Court's Presidential Election Petition Tribunal on the petitions challenging it, is the emergence of Bola Ahmed Tinubu as the president-elect. The former Governor of Lagos State and candidate of the All Progressives Congress (APC) in the election was declared the winner by the Independent National Electoral Commission (INEC) and subsequently issued a Certificate of Return to him.
There has been a lot of hand-wringing from some quarters who insist that a Tinubu presidency would be incapable of turning the economy around. While arguments can be made as to how concerning some of Tinubu's policy prescriptions and his antecedents are, we must be very clear on how powerful the 36 state governors will be and how much they can do to amplify any competence Tinubu offers or mitigate the effects of whatever mediocrity comes from him.
From a political perspective, we must remember that Tinubu is a president-elect today largely because some governors stood by him even when the Buhari presidency was against his emergence as the APC candidate and subsequently did not seem particularly keen on supporting him to win the election.
President Buhari was overwhelmed by a union of governors from different regions who helped Tinubu enough to overcome the effects of losing his home state in the presidential election, which re-enacts the situation whereby a Southwest presidential candidate won a presidential election even after losing his home state. This first happened in the 1999 presidential election with Olusegun Obasanjo, who won despite losing his Ogun State to the Alliance for Democracy candidate Olu Falae. This shows that, politically, a united group of governors can hold their own to a useful extent.
In the fiscal sphere, we have the revenue allocation formula where the Federal Government takes 52.68 percent of the revenue share; the states get 26.72 percent, and 20.60 percent goes to the local governments. In practice, however, the governors are largely in control of the portion of the revenue that accrues to the local government areas. Therefore, the governors have power over approximately 49 percent of Nigeria's federally-collected revenues and exercise total control over the internally generated revenue in their states.
Nigeria began with a regional government framework that was replaced with a unitary structure by the military regime of General Johnson Aguiyi-Ironsi in 1966. While demands for restructuring the governance model are in order, the governors would help by fully taking care of what's already in their constitutional power to act on.
Nigeria has 36 subnational units that are further divided into 774 local government areas. Despite the geographical fragmentation, the states in Nigeria are not too small to deliver significant productive value. Cape Verde, Luxembourg, Malta, Mauritius, and Trinidad and Tobago are countries that are smaller than some Nigerian local government areas.
And take agriculture, for instance. The Minister of Agriculture and Rural Development, Mohammad Abubakar, has said that Nigeria has 79 million hectares of arable land, and only 44 percent is currently cultivated. This means the country can almost double its food production by fully utilising its arable land even if it maintains its current low yield levels. Brazil uses 40 million hectares for soybean cultivation and sells $27 billion worth of agricultural commodity to China annually.
The Netherlands earned €49.6 billion from agricultural exports in 2022: €44.9 billion came from domestic exports, and €4.7 billion was from re-exporting agricultural goods produced abroad that were channelled through the country. However, the Netherlands can fit into Taraba State conveniently and leave enough space for Belgium also to fit in. But Taraba's budget for 2023 was €219 million. Ergo, if Taraba State alone makes good use of its arable land to make 10 percent of what the Netherlands does from agriculture alone, it would multiply its revenue by almost 20 times. For the record, Taraba is not one of Nigeria's two biggest states based on the landmass. The Land Use Act (which is a hindrance in itself) places the power to get this going in the hands of the governors.
We speak wistfully about the era when Nigeria had a parliamentary system with regional governments. But we overlook that, even then, the states did not have actual mineral resource control. Nevertheless, the scale of development achieved then was impressive, at least in comparison to what was achieved afterwards.
In the 1963 Constitution, Item 25 of Part I under Section 69 of the Schedule of the constitution puts “mines and minerals, including oilfields, oil mining, geological surveys and natural gas” on the Exclusive Legislative List under the federal government. This means that any constitutional amendments that give the states ownership of the mineral resources in their land would be a novelty rather than a return to the old order. But it would be a welcome development, regardless.
The governors can take up the issue of mineral resource ownership with the federal government. The states can use the process and systems developed around the exploitation of mineral resources to further economic diversification. The country has a lot of uranium, gold, iron ore, coal, bitumen, baryte, lead–zinc, limestone, copper, lithium, and many other minerals and metals that are unexploited.
For Nigeria to get its mining systems going in an orderly and formal manner, it has to develop a cohesive mining resource corridor (MRC) to achieve fluid linkage of the processes related to mineral extraction, processing, transportation, and infrastructural development. A cohesive MRC would help to enhance infrastructural development, connecting the different parts of the country and promoting the supply of goods and services as inputs to the mining sector. This would help even states with less of mineral resources to also diversify and grow their subnational economies.
States must play a prominent role and look to have interstate partnerships that improve the quality of information gathering, analysis, and investment. They must take ownership of the productive processes within their territories. The federal government has a limited role in developing mining systems and resource corridors.
The federal government has controlled the mineral resources since 1966 and has done precious little with them while preferring to focus on crude oil revenue. A new regime for the solid mineral value chain championed by the governors would also help in developing the rural areas, not just those with mineral resources but also those lying along the MRCs. These areas would become much more accessible, economically liveable, and attract investments that will further improves them.
Nigeria is in dire need of infrastructural development to reduce the number of ungoverned spaces. Resource corridors are usually the infrastructural foundation that secondary layers can be placed on to deepen development and economic diversification through the development of towns, rail networks, ports (where applicable), rails, and roads.
Outside of MRCs, another topic that should be discussed in the corridors of power is how the governors can make optimal use of the emerging local and international economic corridors to help facilitate national trade. This initiative facilitates easier access to the interiors of countries. Opening up more access to productive assets helps in scaling up continental trade and commerce within regional economic communities (RECs). In this regard, Nigeria is a member country of the Economic Community of West African States (ECOWAS) and a signatory to the African Continental Free Trade Area (AfCFTA).
From a national standpoint, Nigeria has two major local economic corridors: the Western Economic Corridor (LAKAJI) and the Eastern Economic Corridor (2NEC). The LAKAJI corridor got its name from the first two letters of the names of its major points in Lagos, Kano, and Jibiya in Katsina State. The Eastern corridor, which goes from Port Harcourt, through Enugu, to Maiduguri, has been largely abandoned. Nevertheless, the governors whose states are along this corridor would do well to unite and work on developing it.
The LAKAJI corridor is 1,225 km long and goes from Katsina and ends at Lagos while passing through Ogun, Oyo, Osun, Kwara, Kogi, Niger, Kaduna, Kano, and Jigawa – an area which had a combined GDP of $119.7 billion in 2010. The 2NEC covers a zone with a GDP more than double the LAKAJI zone’s (GDP: $249.3 billion in 2010) and deserves to be prioritised by the governors of the states in its path along the South-South, Southeast, Northcentral, and Northeast regions.
Both these corridors provide international access to subcontinental RECs that help with inter-regional and intra-regional economic integration between members of the individual regions. Nigeria shares borders with some members of the Economic Community of Central African States (ECCAS): Cameroon and Chad. It is a member of the Community of Sahel–Saharan States (CEN-SAD) and shares borders with Niger, Chad, and Benin Republic, who are members.
If Nigeria's governors commit to using the national economic corridors to develop their states and maximise exports, they would have it within their power to deliver enough value to turn around the Nigerian economy. In addition, they are also largely in control of the quality of education and healthcare in their states.
Nigerians should be much more demanding of the state governors.
Cheta Nwanze is Lead Partner at SBM Intelligence.