Restructuring, Economy And History
By Femi Falana SAN
Under the current political dispensation, the national economy is firmly controlled by the federal government. Apart from the management of the mineral resources owned by the Nigerian people, the federal government conducts domestic and foreign affairs on behalf of the country. Although the Constitution has been amended several times since 1999 by the nation’s legislative houses, the members of the political class have resolved to retain the document as the grundnorm of the unitary republic. The revenue allocation formula which gave 52 percent of the resources of the Federation to the federal government as well as 24 percent and 20 percent to states and local governments respectively has been left intact.
The federal government has turned down the demand of state governments for the restoration of the residual powers confiscated from them by the erstwhile military regime. In frustration, the state governments have embarked on restructuring by litigation. Led by Abia, Lagos and Rivers states, the state governments have won a number of legal battles waged against the federal government. Specifically, the states collectively won the legal battle for the control of local government elections and payment of statutory allocation of local government to the joint state/local government accounts.
The federal government lost the battle to monitor local government statutory allocations and collect entertainment levies. The federal government also lost the control of the revenue derived from the continental shelf to the exclusion of the littoral states. The Lagos State Government won the case to control physical planning while it defeated the federal government over the seizure of local government funds. The Rivers state government has won the legal right to collect and control Value Added Tax. The appeal filed against the judgment by the Federal Inland Revenue Service is currently pending at the Supreme Court.
No doubt, the success recorded in the courts has increased the revenue of the state and local governments. In other words, all the states and local governments have benefited from restructuring by litigation. It is however regrettable to note that such success has not had any positive impact on the lives of the Nigerian people. Owing to lack of understanding of the extent of the powers concentrated in the centre, the state and local governments have failed to question the control of crude oil and natural gas by the International Oil Corporations and the Nigerian National Petroleum Corporation Limited. In fact, the federal government has deliberately withheld or diverted funds from the Federation Account without any challenge. At this juncture, it is pertinent to review the diversion of public funds by the federal authorities.
Since 1999, enterprises owned by the Federation have been run like the parastatals belonging to the federal government alone. In Attorney-General of Bauchi vs. Attorney-General of the Federation [1] the plaintiff contended that it was entitled to a share of the proceeds of income or returns derived by the Federal Government from certain federation agencies such as the Federal inland Revenue Service (FIRS), Nigerian Customs Service (NCS), Nigerian National Petroleum Corporation (NNPC), Bureau of Public Enterprise (BPE), Nigerian Liquified Natural Gas (NLNG) and several others. The Plaintiff also argued that the funds ought to be paid into the Federation Account and distributed to the States of the Federation.
In defending the case the defendants filed a preliminary objection to challenge the jurisdiction of the court to entertain the suit. The court upheld the objection and declined to entertain the suit for want of jurisdiction on the ground that it related to the revenue accruing to the Federal Government which falls under section 251(1)(q) of the 1999 Constitution. But contrary to the finding of the apex court, the plaintiff’s suit did not relate to the revenue of the federal government but to the income or returns derived by the Federal Government from the aforementioned federation agencies.
Thus, in striking out the suit, the apex court failed to apply section 232 of the Constitution which empowers it to hear and determine disputes between the federal government and state governments. In the cases of Attorney-General of Abia State v Attorney-General of the Federation[2] and Attorney-Gen eral, Ogun State v Attorney-General of the Federation [3] the Supreme Court rightly exercised its jurisdiction and ruled on the illegality of making deductions from the Federation Account by the Federal Government without the consent of the other federating units.
Under the Fiscal Responsibility Act 2007, all government agencies are expected to compulsorily remit their operating surpluses to the federation account annually. But in utter violation of the law, the government agencies and parastatals including the Central Bank of Nigeria (CBN) and Nigerian Ports Authority, owed about N10 trillion in unremitted operating surplus as of the end of August 2018. This disclosure was made by the Director-General, Budget Office of the Federation, Ben Akabueze at a town hall meeting with Chief Executive Officers (CEOs) of government-owned enterprises (GOEs) held in Abuja on December 19, 2018 [4].Even though Mr. Akabueze listed the enterprises and the amount withheld by each of them, the state and local governments have not deemed it fit to take legal action to ensure the recovery of the huge revenue diverted from the Federation Account.
In the course of campaigning for the amendment of the Deep Offshore and Inland Basin Production Sharing Contracts Act, we found that the federal government had deliberately refused to implement section 16 of the Deep Offshore Inland Production Sharing Contracts Act. The section provided for an upward review of royalties whenever crude oil was sold beyond $20 per barrel in the international market. In defence of the position of the federal government, the then Minister of State in the ministry of petroleum resources, Dr. Ibe Kachukwu blamed the non implementation of the law on some unscrupulous officers and proceeded to admit that the country had lost a whopping sum of $60 billion. Our demand for the collection of the huge fund was ignored.
It was at that stage that the governments of Akwa Ibom, Bayelsa and Rivers State filed a suit at the Supreme Court seeking to compel the federal government to collect all outstanding royalties under the Deep Offshore and Inland Basin Production Sharing Contracts Act. See Attorney-General of Rivers State & 2 Ors v Attorney General of the Federation [7]. But the parties to the suit resolved to settle the case amicably. Hence, they entered into some terms of settlement which became the judgment of the Supreme Court delivered on October 20, 2018. Consequently, the Supreme Court ordered the Federal Government to collect the outstanding royalties which had accrued for 18 years under the Deep Offshore Inland Basin Production Sharing Contract Act.
Pursuant to the judgment of the Supreme Court, the Attorney General of the Federation constituted a body to determine the respective liabilities including the amount due to oil producing states as derivation proceeds. The body stated that the amount not collected from the International Oil Companies was $62 billion. The then Minister of Justice, Mr. Malami SAN demanded for payment of the unpaid royalties by the IOCs. But the then Minister of State in the Ministry of Petroleum Resources, Mr. Timipre Sylva assured the IOCs that Nigeria would not recover the huge fund. According to him, “Nigeria knows it cannot recover $62 billion from oil majors despite ongoing cases against the companies for money the government believes it is owed. Nobody can bring out that kind of money. I mean, we can’t get $62 billion. We can maybe get something from them but not $62 billion”.
As the federal government was not prepared to recover the said sum of $62 billion from the IOCs, the governments of Akwa Ibom and Rivers States filed a case at the Federal High Court wherein they sought a declaration that the governments they were entitled to $1,114,551,610.00 and $2,258,411,586 respectively. See Attorney-General of Rivers State & Anor v Attorney General of the Federation [8].
Upon hearing the matter, the Federal High Court presided over by Justice Taiwo Taiwo granted the reliefs sought by the Plaintiffs. In addition, the court also awarded a post-judgment interest of 10% in favour of the Plaintiffs until the final liquidation of the judgment. On the basis of this judgment, the other state governments are advised to file a similar suit at the federal high court to claim their share from the said sum of $62 billion.
A team of Nigerian lawyers engaged by NIMASA discovered that about 60.2 million barrels of of crude oil stolen from Nigeria by the IOCs were discharged in Philadelphia Port in the United States between 2011 and 2014. The value of the stolen crude oil is $12.7 billion. The IOCs and the shipping companies involved in the oil theft are well known to the Federal Government.
Sometime in 2016, the House of Representatives set up and an Ad Hoc Committee to probe on undeclared crude oil and liquefied natural gas exports to global destinations from Nigeria between 2011 and 2014. The Chairman of the Committee, Honorable Johnson Agbonayinma Johnson Agbonayinma confirmed that $17 billion in oil and liquefied natural gas was exported from Nigeria without being properly declared and that the crude oil was discharged in the United States port of Houston and port of Lake Charles [12].
As the EFCC was not allowed to recover the fund and prosecute the companies involved in the criminal enterprise, the NIMASA team of lawyers filed nine cases in Abuja and Lagos against some companies including Chevron, Total, Agip, Adax Petroleum and Brass Oil Services Limited, aimed at ensuring the recovery of stolen hydrocarbon and liquified gas. We are compelled to call on the state and local governments to team up with the federal government for the recovery of the sum of $29 billion. In addition, the Attorneys-General of the States should collaborate with the NIMASA team of lawyers for the recovery of hundreds of billions from the well-known oil companies and shipping companies involved in the large scale oil theft.
On April 27, 2019, the Senate Committee on Public Accounts held a public hearing on revenue generation drive for the 2021-2023 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP). During the hearing, the NLNG General Manager, External Relations and Sustainable Development, Mrs. Eyono Fatai-Williams, disclosed that from 1999 to 2019 the company paid dividends of over $18 billion to Nigeria through the NNPCL from 2004 to 2020. She also revealed that the NLNG paid $9 billion tax to the federal government from 2011 to date while $15 billion had also been remitted for feed gas to the NNPC since the inception of the company.
Based on the disclosure, the Senate Committee on Public Accounts asked the suspended Accountant-General of the Federation, Mr. Ahmed Idris who was in attendance, to confirm if the said sum of $33 billion was actually remitted to the Nigeria National Petroleum Corporation Limited that represents the interest of Nigeria in the NLNG. Mr. Idris said that the funds paid by the NLNG were not remitted to the Federation Account but warehoused by the NNPCL.
Consequently, the Public Accounts Committee of the Senate directed the Accountant-General to determine how much was actually remitted to the Federation Account, and if there was any deduction by NNPC; how much was deducted and who authorized the deductions and the exchange rates applied for the amount that was remitted over the years under review.
Furthermore, on 29th March 2021, while speaking at the virtual Nigeria International Petroleum Summit (NIPS) 2021 Pre-Summit Conference and the official launch of the Decade of Gas in Abuja, former President Muhammadu Buhari disclosed that the Nigerian Liquefied Natural Gas Limited (NLNG) had generated $114 Billion in revenues over the years with $9 Billion in taxes remitted to the Federal Inland Revenue Service (FIRS). Apart from the tax remittance, the former President said that NLNG paid $18 Billion as dividends and $15 Billion in Feed Gas Purchases (FGP) to the Federal Government through the Nigerian National Petroleum Commission Limited (NNPC).
In 2020 and 2021, the NNPCL equally received the sums of $545.13m and $722.44m respectively as dividends from the NLNG. The total sum for the two years is $1.267 billion. From the information at our disposal, the said sum of $1.267 billion was not remitted to the Federation Account by the NNPCL. For reasons best known to him, the Minister of Finance has ignored our request to direct the NNPCL to remit to the Federation Account the dividends of $34.2 billion received on behalf of the Government of Nigeria from the NLNG from 2004-2021.
After our letter, it was reported that the dividend paid to the NNPCL in 2022 jumped by 52 percent to $1.10 billion from $722.44 million in 2021. Thus, the NNPCL has diverted the total sum of $35.4 billion which ought to have been remitted to the Federation Account. Instead of asking the NNPCL to account for the entire dividends, the Federation Account Allocation Committee was reported to have queried the NNPCL over the $55 million deducted from the dividend of $275 million paid by the NLNG in August 2023 [10].Since the NNPCL continues to insist that it has the authority of the federal government to keep the dividends from NLNG, the states and local governments are advised to sue for the recovery of the said sum of $35.5 billion.
N10 trillion withheld from Federation Account
Under the Fiscal Responsibility Act 2007, all government agencies are expected to compulsorily remit their operating surpluses to the federation account annually. But in utter violation of the law, the government agencies and parastatals including the Central Bank of Nigeria (CBN) and Nigerian Ports Authority, owed about N10 trillion in unremitted operating surplus as of the end of August 2018. This disclosure was made by the Director-General, Budget Office of the Federation, Ben Akabueze at a town hall meeting with Chief Executive Officers (CEOs) of government–owned enterprises (GOEs) held in Abuja on December 19, 2018 [11].
Even though Mr. Akabueze listed the enterprises and the amount withheld by each of them, the fund has not been recovered. In fact, the annual reports of the Auditor-General of the Federation have revealed more diversion of public funds by the Ministries, Departments and Agencies of the Federal Government. It is high time the state and local governments adopted political and legal measures to recover the public funds that have been diverted from the Federation Account
Sometime in 2018, we found that a private company called Continental Transfert Technique (hereinafter called “the company”) had been hired by the Ministry of Interior to collect the Combined Expatriate Residence Permit and Alien Card (CERPAC) Fee of $1000 per annum from every expatriate in Nigeria. The said CERPAC Fee of $1000 was increased to $2,000 in December 2018 without the approval of the national assembly. The Nigeria Bureau of Statistics has said that the CERPAC Fee generated a revenue of N20.35 billion in 2018 and N19.03 billion in 2017. At the time the revenue was N20 billion in 2018 the CERPAC Fee payable by every expatriate was $1,000. Since the Fee has been increased to $2,000 the revenue would have increased to N40 billion per annum.
Out of the said annual revenue realised from the CERPAC Fee, the Federal Government, Ministry of Interior and Nigeria Immigration Service are illegally paid 30%, 7% and 5% respectively while the company retains 58% from the revenue belonging to the Nigerian people in violation of Section 162 of the Constitution. We petitioned the Minister of Finance to stop the illegal diversion of the revenue that ought to be paid into the Federation Account. When the Finance Minister refused to accede to our request we approached the Federal High Court to challenge the constitutional validity of the increase, collection and distribution of the CERPAC Fee by the company.
In a landmark judgment delivered in the matter on November 20, 2019 the presiding judge, Aikawa J. upheld our submissions and granted the reliefs. Consequently, the court set aside the contract between the Ministry of Interior and the company and directed the Nigeria Immigration Service to collect the CERPAC Fee from all expatriates in Nigeria pursuant to the provisions of the Immigration Act, 2015. The court further directed that the entire revenue from the CERPAC Fee be paid into the Federation Account at the Central Bank of Nigeria in line with the Treasury Single Account Policy of the Federal Government. Since the federal government and the company have appealed against the judgment it is hoped that the state and local governments will seek the leave of the Court of Appeal to be joined as interested parties in the appeal.
Before the revenue in the Federation Account is shared among the three tiers of government, the Federal Inland Revenue Service, Nigeria Customs Service and National Upstream Commission are allowed to deduct the costs of collection. The data from the National Bureau of Statistics revealed that the Nigerian Customs Service, Federal Inland Revenue Service, and Department of Petroleum Resources received an aggregate of N220.39bn as cost of collections in 2019 while it rose to N329.37 billion in 2021 [1].
The figure is much higher because not less than 62 other agencies collect taxes and levies on behalf of the Federation. However, based on protests by state governments coupled with the decision of the Bola Tinubu administration to centralise the collection of all taxes, the Presidential Committee on Tax Policy and Fiscal Reforms has proposed the reduction of revenue collection costs to one per cent or below. The Committee has also suggested that revenue collection by the over 60 agencies of the federal government be taken over by the Federal Inland Revenue Service. According to the Council, the merger will aid the collection of all direct and indirect taxes and levies on behalf of the federal government[2]. In addition to these suggestions, tax collection should no longer be carried out by the federal government alone but by all the federating units.
As part of the legacy of military rule, the President allocates oil blocks and grant licences to selected members of the ruling class to mine and control the nation’s mineral resources in utter violation of section 44(3) of the Constitution which prescribes that “the entire property in and control of all minerals, mineral oils and natural gas in under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria shall vest in the Government of the Federation”. Even though the resources are joint properties, state governments have allowed the Federal government alone to control them to the exclusion of other federating units. Hence, the ministries of petroleum resources and solid minerals created by the President are controlled exclusively by the Federal Government.
It has been confirmed that the majority of the owners of the oil blocks usually sub-lease them to offshore companies as they lack the fund and the technical expertise to develop the oil and gas industry. Such owners are paid huge sums of money for the sub-lease of the oil blocks. Thus, by merely collecting the rents the oil block owners become stupendously rich while the federal, state and local governments depend on loans and bailout to pay salaries and carry out basic infrastructural development of the country.
It is submitted that the allocation of oil blocks to a few individuals and corporate bodies that lack the capacity to develop them the Federal Government has violated Section 16(2)(c) of the Constitution which provides that “the economic system is not operated in such a manner as to permit the concentration of wealth or the means of production and exchange in the hands of few individuals or of a group.” Furthermore, such allocation constitutes a gross violation of the fundamental rights of the Nigerian people to freedom from discrimination, equal right of access to public property and the equal enjoyment of the common heritage of mankind as well as the right to social, economic and cultural development guaranteed by articles 2, 13, 22 of the African Charter on Human and Peoples Rights (Ratification and Enforcement) Act.
In accordance with article 22 thereof which has imposed a duty on the Federal Government to freely dispose of the wealth and national resources of the nation in the exclusive interests of the Nigerian people, the allocation of oil blocks including marginal fields should henceforth be restricted to the Federal Government and the governments of the 36 states of the Federation. This request is in line with Section 16 (1) (b) of the Constitution which has mandated the Nigerian State to “control the national economy in such manner as to secure the maximum welfare, freedom and happiness of every citizen on the basis of social justice and equality of status and opportunity.”
The National Economic Council (NEC) is one of the Federal Executive Bodies established pursuant to section 153 of the Constitution of the Federal Republic of Nigeria, 1999, as amended. The NEC is constituted by the Vice President, Governor of the Central Bank of Nigeria, Minister of Finance, and the 36 State Governors. The NEC is headed by the Vice President. The NEC which meets monthly, has the constitutional mandate to “advise the President concerning the economic affairs of the Federation, and in particular on measures necessary for the coordination of the economic planning efforts or economic programmes of the various Governments of the Federation.”
But since the NEC has abdicated its constitutional responsibility, the President of the Federal Republic of Nigeria is now advised by the Presidential Economic Advisers as well as the International Monetary Fund and the World Bank. In order to continue the underdevelopment of Nigeria, both Bretton Woods institutions have put pressure on the federal government to implement neoliberal policies, including removal of fuel and electricity subsidy, merger of exchange rates and floating of the Naira. Not too long ago, the same imperialist institutions had convinced the Ibrahim Babangida military junta to implement the Structural Adjustment Programme, which led to substantial ruination of the national economy and accentuated poverty in the land.
Even though Nigeria has not recovered from the deleterious effects of the Structural Adjustment Programme, the forces which imposed it on Nigeria are mounting pressure on the federal government to continue the implementation of neoliberal policies including mass retrenchment of workers, withdrawal from funding public services, floating of the local currency, dollarisation of the economy as well as sale of the remaining public enterprises and assets. The implementation of such policies will further enrich a few people and further pauperise the people of Nigeria. We call on the Nigerian people who are victims of the crisis of the peripheral capitalist mode of development to unite and compel the Government to reverse the inimical economic policies.
The removal of fuel subsidy and floating of the Naira-the twin economic policies of the Bola Tinubu administration have inflicted excruciating economic pains on the Nigerian people. Prices of goods have gone beyond the reach of the majority of citizens in a country where 133 million people are said to be dimensionally poor. The Naira has continued to deprecate against the United States Dollar and other currencies.
The initial plan to allow market forces to determine the exchange rate of the Naira vis-a-vis other currencies has been jettisoned as the Central Bank of Nigeria has announced a rash of policies to stabilise the exchange rate. It is my submission that the BRICS challenge provides an opportunity for Nigeria to reduce the overbearing dominance of the Dollar in the national economy.
But without adducing any reason, the federal government has failed to join the economic block of BRICS (Brazil, Russia, India, China and South Africa) whose members are prepared to trade among themselves in their national currencies. In view of the fact that the BRICS has already overtaken the G7 bloc terms of share of the total global Gross Domestic Products (GDP), Nigeria cannot afford not to join the new international economic system.
The Vice President, Kashim Shettima, who represented Nigeria at the bloc’s 15th summit in Johannesburg last year, said the country had not applied to join the economic bloc because “There are so many variables that need to be taken into cognizance. We have to evaluate so many tendencies and issues that require engagements with the economic advisory council, the Federal Executive Council, and even the National Assembly before an informed decision towards joining the BRICS would be taken.”
However, the Nigerian Minister of Foreign Affairs, Amb. Yusuf Tuggar has explained that “Nigeria will seek to become a member of the BRICS group of nations within the next two years as part of a new foreign policy push to have its voice heard in important global organizations. We intend to do it. As I said before, Nigeria runs a deliberative democratic system. So there tends to be a lot of engagement with different interest groups, different internal bodies before such an action is taken.”[9]
Apart from the assurance of the Minister, Nigeria entered into a currency swap agreement with China in July 2018. I am aware of the efforts of the central bank of Nigeria to renew the agreement. I am also aware that the federal government has commenced deliberations with India for the purpose of having a similar bilateral currency swap agreement. In view of the planned currency swap arrangement with the two largest members of the BRICS, Nigeria should join the economic bloc without any further delay. In view of growing calls for decoupling international trade from the United States Dollar hegemony and ensuring nations across the world trade among themselves in their own currencies, Nigeria should urgently apply for the membership of the BRICS.
Conclusion
In conclusion, the demand of the members of the ruling class for restructuring or devolution of powers is essentially designed to maintain the status quo without changing power equation in favour of the majority of the people. Hence, I have had cause to condemn the demand for mere vertical restructuring of the federating units. It is submitted that the nation cannot be seriously restructured without equitable redistribution of its wealth. In other words, those who have cornered the commonwealth should not be allowed to talk of restructuring in vacuo.
Therefore, the campaign for restructuring should encompass the decentralization and democratization of political and economic powers, which have been privatized by all factions of the ruling class. In particular, the struggle for federalism has to confront the control of the national economy by imperialism and the comprador bourgeoisie in Nigeria.
Permit me to conclude with the observation of the late jurist, Dr. Akinola Aguda:
“In a developing country like ours, as long as a small minority of the citizens commands an over-whelming proportion of the wealth and the means for the acquisition of the capital of the country so long as any hope of justice for the teeming millions will continue to elude us. It appears clear that whilst millions of our people are living either below or just near starvation level and thousands are jobless, justice can only be the preserve of those few who have the surplus capital to pursue the same.”
