ABSTRACT
The history of mankind in all generation has been a struggle dominated by the need to enhance his material condition either as an individual or as a collectivity. The struggle for material condition has led to the evolution of different types of political systems, which include federalism. Importantly, each state is endowed with different kinds of natural resources, which has engendered development in some states and underdevelopment in others. While scholars have made substantial contributions on the nature, structure, dynamism and economics of federalism, very little efforts has been directed to a comparative analysis of the impact of the structure of federalism on revenue allocation and the management of natural resources in Nigeria and South Africa. In particular, this study attempts to resolve the following puzzles as delineated: (i) how does the structure of federalism impact on the pattern of revenue allocation among the constituent units in Nigeria and South Africa? (ii) Do the proceeds from natural resources exploitation in Nigeria and South Africa adequately enhance the provision of basic social amenities? (iii) Does the role of the state in Nigeria engender conflict in resource access and management in contradistinction to the role of the state in South Africa? The study adopted the documentation method of data collection. The study also adopted the basic propositions emanating from the Marxian political economy approach, which are applicable to Nigeria and South African social formations as our theoretical framework of analysis. Among other things, the study revealed that the unbalanced structure of the Nigerian federalism impact disproportionately on the revenue allocated to the component units, while the structure of the South African federalism enhances equitability in revenue allocations. The study also observed that the proceeds from the exploitation of natural resources did not adequately impact on the provision of basic social amenities in both Nigeria and South Africa. The study recommend for the restructuring of Nigerian Federalism with a-three-tier government based on the existing 6 geo-political zones as the federating units. Again, the government should enact law that ensures that proceeds from natural resource exploitation are used to provide basic social amenities to the entire political system, but particularly to the region of extraction.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
A very striking feature of every federal state is the existence of diversities. Whether federations are formed by integration of previously independent entities or through differentiation of a single entity into many components, the central motive is usually to enhance political and economic benefits. The nature and dynamism of federal states are usually influenced by the structure of its internal territorial configuration. As a result, the different component units that make up the federation struggle for economic and socio-political dominance. In this struggle, the state is the major mediator and distributor of all the privileges and this role increases the value of the state. As opined by Suberu (1998:277), the line
demarcating politics and economics has been erased as state power equals wealth and wealth is
the pathway to power.
In this connect, Awa (1976:12), contends that one of the aims of federalism is that economic resources in various component units should be used in such a way that the entire political system benefits equitably from the economies of scale. The political system in a federal state is usually a configuration of ethnic, religious and cultural groups. Either in isolation or in combination, these groups’ identities may have some bearing on the political conduct and socioeconomic role in the society. Since most federal states are heterogenous, it should not be surprising that their internal politics are defined and characterized by their pluralities, and these different identities have remained powerful elements in their domestic politics.
Notwithstanding, federalism has had multiple significance for managing diverse societies. It is an approach to governance that may be applicable to certain countries given their pluralism in terms of culture, religion, language and ethnicity. The quest for unity in diversity in a federal state is usually achieved through the framework of rules as enunciated and implemented by the state. Thus, federalism could be conceived as a system of rules for the division of public policy responsibilities among a number of autonomous governmental agencies. These rules define the scope of authority available to the autonomous agencies and provide a framework to govern relationships between and among agencies. In most federal states, particularly in Africa, such as Nigeria, Sudan, South Africa etc, the nature of the division of powers often times constitute the major impediment to the realization of federal objectives. More so, some federal states outside the shores of Africa such as Venezuela, Malaysia and Austria are highly centralized while Switzerland and Canada are highly decentralized . Each federal state is unique and it is this peculiarity that underscores why federal states behave differently.
One of the major challenges of federal states has been the concerted efforts of the central (federal) government to turn the component units into its administrative units. This is necessitated by the fact that federal governments are increasingly becoming involved with the distribution and management of wealth, and these include, the management of proceeds from the exploitation of natural resources while the component units are more or less instrument of this distribution. As a result, the centrifugal and centripetal forces that shape the search for equilibrium between the constituent units and the federal government find its most lucid expression on the nature of balance between centralization and decentralization of the governments. In most federations of the world, particularly, Nigeria as well as South Africa, responsibilities are divided among the governmental institutions like the legislature, executive and the judiciary; and among the various structures of the federation like the federal, state
(province) and local governments. The nature and character of political structure of any federation necessarily impact on the political system. This fear was highlighted thus by Ikejiani and Ikejiani, (1986: vii)i when they argued that:
…It is most important for us to warn that to try under the national political structure is probably to fail. The major task is to reform our present political structures and institutions of government. The difficulties spring not from the qualities of leadership but from the fact that we are trying to solve the problems of Nigerian unity with political structures and institutions that are absolutely inappropriate. Nigeria, we dare say, will not, regardless of who is the head, or which political or military regime
is in power, recover from the general malaise, disunity, instability and all the iniquities which have engulfed her until our political structures and institutions are changed. Until this is done, Nigeria will continue to have little confidence in their governments and will continue to live with policies that are inefficient and ineffective in dealing with the problems, especially the problem of… ‘revenue allocation and management of natural resources’.
Thus, the task facing Nigeria, and indeed, other federal states like South Africa is to reform the political structures and governmental institutions with a view to reducing the degree
of inequity in the system. The debate is on how federalism will be able to create a feeling of
satisfaction and fairness among the component units, without deepening existing conflict lines.
The perception of inequality, marginalization and intimidation of one such group by another as it
concerns the allocation of governmental resources and management of natural resources is
usually measured on the basis of group/regional identity. As a result, the management of natural
resources is a contentious issue, particularly, in federal societies that are characterized by
pluralistic tendncies, fear of marginalization and domination among others.
Therefore, the politics of natural resource management is a very contentious issue
because of the problem associated with different groups and their contributions to the federation
vis-à-vis the distribution of resources. The contentious problems that every federal or plural state
has to contend with include the problem of what should be the institutional form of the
government? How can all sections of the country work in harmony and none feel excluded or
dominated by the others? (Kew and Lewis, 2010: 388-389). And most importantly, how can
economic, political and financial resources, etc be distributed or allocated to eliminate any
perceived feeling of marginalization or domination of one section by the other? In fact, the bane
of every plural society is the national question, particularly as it concerns the distribution of
resources, particularly, revenue allocation between the tiers of government and among the
component units. In this context, it is the state that is the purveyor, enunciator and distributor of
these resources, and hence the struggle to control the apparatus of the state for the authoritative
allocation of these resources adds dynamism to internal politics of federal states.
This is necessary because of low development of the productive forces, which increases
the use of the state power as an instrument in the hands of the dominant class. The peculiarity of
the states in Africa manifest not only in its relative autonomy, but more importantly in its role as
a means of production. This was aptly buttressed by Ake (1985: 3), when he asserted that the
unique feature of the socio-economic formation in post-colonial Africa, and indeed in
contemporary periphery formations generally is that the state has very limited autonomy. The
degree of autonomy of the state is usually a consequence of the level of the development of the
productive forces. As a result of lack of autonomy of the states in Africa, the state became an
instrument in the hands of the dominant class, particularly, the hegemonic dominant class. This
dominant class uses the state and its apparatuses for primitive accumulation of the resources of
the people, particularly, through governmental policies that seek to protect their interest.
Consequently, all policies, including those relating to the access, exploitation and management
of natural resources are formulated to suit the interest of the dominant class. As a result, the state
which is constituted to play a regulatory and mediating role in the allocation and distribution of
power and resources becomes an instrument in the hands of the dominant class, and indeed,
serves as a means of production. But this ought not to be so, particularly in a federal state
because of its inherent devices by which federal qualities of society are articulated and protected
(Livingstone: 1956).
This study therefore attempts to determine how the practice of federalism impacted on
revenue allocation and natural resource management in Africa’s two most important countries:
Nigeria, Africa’s most populous state, and South Africa, Africa’s wealthiest and most developed
state (Sodaro, 2001: 810). Both Nigeria and South Africa share a lot of similarities, yet, they are
radically different in many ways. Accordingly, Kan-Onwordi (2007:56) avers that in 1991, South
Africa contributed just 4% of Africa’s global export trade, but by 2007 it had become the
continent’s largest economy while Nigeria because of its huge population remains the continent’s
biggest consumer nation. Politically, both Nigeria and South Africa are sub-regional powers in
West Africa and Southern African respectively, and continentally, both are powerful countries.
Both have also experienced different types of dictatorship, typified in Nigeria by over thirty
years of military dictatorship and in South Africa, by over thirty-three years of apartheid regime.
Notwithstanding these similarities, both Nigeria and South Africa are significantly
different from one another in many other ways. While Nigeria has a population of 140 million
according to 2006 estimates, South Africa has a population of 44 million. The difference also
manifested at the economic level. While the GDP and Per Capita Income of South Africa are put
at S187.3 billion and S12, 200 respectively, Nigeria’s GDP and Per Capita Income are put at
S77.33 billion and S1, 400 respectively (Kan-Onwordi, 2007: 57). However, according to 2009
estimate, the Per Capita Income in South Africa was S10, 000, while that of Nigeria is S2, 400.
https://photius.com/error.html. It is equally important to observe that while
Nigeria is a mono-product economy with agriculture and oil contributing over 70% of GDP with
services contributing a meager 27%, the South African economy is grossly dependent on
services, which contributes almost 70% to GDP while other sectors contribute the remainder.
The economies of the two countries are further defined by the fact that Nigeria’s economy has a
huge informal sector; that of South Africa has a large formal sector.
Nigeria is endowed with vast and largely untapped natural resources including such
minerals as oil, limestone, tin, columbite, silver, coal, gypsum, shale, zircon, zinc, iron-ore, and
natural gas to mention but a few (Anyanwu, 1997: 3). Nigeria has long possessed a high potential
for developing into a regional and global superpower with its abundant human and natural
resources. However, the Nigerian economy is heavily dependent on crude petroleum export as
the main source of foreign exchange earnings and government revenue. For decades, revenue
from oil accounted for over 90 percent of export earnings. The over dependence of the Nigerian
economy on oil has had its own effects. For instance, by 1980, the oil sector which accounted for
22 percent of GDP provided 80 percent of government revenue and over 96 percent of export
earnings (Anyanwu, 1997: 5). Even with the oil boom of the 1970s, the government could not
properly harness the enormous revenue into productive use. As a result, starting from the mid
1981, when the world oil market began to collapse due mainly to oil glut, the Nigerian economy
witnessed a very serious crisis. This crisis resulted in the adoption of the Structural Adjustment
Programme (SAP) in 1986. Even more important is that the year 2008 witnessed yet another
boom in the oil sector as the world oil market experienced the highest ever increases in the prices
of crude oil. In all these, the centrality of the role of the state is never in doubt.
On the other hand, South Africa is abundantly endowed with gold, coal, platinum and
diamond etc. She has the strongest economy in Africa. As a result of the lifting of sanctions and
the good will generated by the transition from apartheid to non-racial democracy in 1994, the
South African economy turned around and grew by an average of 3 percent in 1994 and 1995
with a Per Capita GNP in the 1990s of about S3, 500. Much of South Africa’s infrastructure and
economic development were built on mining, especially gold and diamond (Sodaro, 2001: 840).
Meanwhile, it is important to state that revenues from mining alone are insufficient to carry
South Africa in the twenty-first century, which necessitated a reform agenda by the government
that brought about diversification of the economy.
It is in fact these similarities and differences as noted above that necessitated a
comparative study of federalism and the management of natural resources in both countries with
a view to ascertaining how the two states employ the proceeds from natural resource exploitation
to impact on the standard of living of its citizens defined within the context of provision of basic
social amenities. The study situates the discourse within the context of the centrality of the state
in understanding how federal states manage their natural resources.
1.2 STATEMENT OF THE PROBLEM
There is a plethora of literature on the nature, structure and dynamics of federalism.
Particularly of note in this regard are the works of Dietze (1960), Wheare (1964), Awa (1976),
Amuwo et al (1998), Agbese (2003) and Elaigwu (2007) among others. Notwithstanding these
avalanche of scholarly works in this regard, the concept appears to be shrouded in controversy.
Essentially, federalism is a device by which plural societies can best be governed, yet, the
controversy that it generates as a result of its nature, structure and dynamics are better imagined.
Federal states are formed either by a process of differentiation of a unit into component units, or
through integration of various independent units into one federal polity.
One of the principles of federalism is that economic resources in various component units
should be used in such a way that the entire political system benefits equitably from the
economies of scale (Awa, 1976: 12). And since federalism is the method of dividing power so
that the central and the component units are both coordinate and independent; the manner of this
division and the structure of a federal state has very serious implications on allocation of the
benefits from the economies of scale. Accordingly, Bryce (1997:1) contended that the problem
confronting federal states is how to secure an efficient central government and preserve national
unity, allowing independence of the various component units.
Nevertheless, Hanson and Perloff (1965) argue for centralization of fiscal responsibilities,
alluding that unless the state fiscal systems are centrally planned, the quest for economic
development would be undermined. On the other hand, Bauer (1961) and Scot (1965) argue for
decentralization of fiscal responsibilities believing that it would accelerate the pace of economic
development more than is anticipated. Also there is the problem of vertical fiscal imbalance
among the three tiers of government, which is due to minimal revenue-raising abilities of the
sub-national units’ vis-à-vis their expenditure responsibility. For Ibeanu (2005:53), the issue of
practicing unbalance federalism has led ethnic minorities to organize stiff opposition against the
militarist state and petrobusiness.
Generally, scholars like Mbanefoh and Egwaikhide (2003: 213), Enyi (2005:295) among
others believe that the equitable allocation of resources between the central government and that
of the various tiers of government, together with the allocations among the various component
units is the hallmark of every federal state. The gap that appears to emerge from the above is the
revenue generation capacity of the different tiers of government. This however was aptly
articulated by Elaigwu (2007:5) when he opined that fiscal federalism deals with the generation
and distribution of scarce but allocatable resources, as federations attempt to create equality
among its citizens and component units.
Deriving from the above is that there is a substantial amount of scholarly work done on
the nature, structure and dynamics of federalism in Nigeria and South Africa, yet, surprinsingly,
very little efforts have been directed at the impact of structures of federalism on revenue
allocation, particularly, to the component units. But more importantly, no serious effort has been
made by scholars to empirically demonstrate with quantifiable evidence the nexus between
unbalanced federal structure and inequitable revenue allocations.
On issues relating to natural resource management in federal states in Africa,
contemporary literature like the works of Roberts and Oladeji (2005), Etekpe (2007), Ikein
(2010) among others, are replete with plethora of evidence that countries with abundance of
natural resources, particularly, non-renewable resources like oil, gold, diamond, platinum, etc,
have had low economic growth and are incapable of providing basic social amenities to its
citizens in comparison with countries without the abundance of these resources. Among other
countries with abundance of natural resources are Nigeria, Sudan, Zimbabwe etc, and they tend
to have more internal conflicts, lack adequate tax mechanism, are affected by dutch disease, that
is, an economic phenomenon in which the revenue from natural resource export damage a
nation’s productive economic sector by causing an increase of the real exchange rate and wage
increase, engage in excessive borrowing, with revenue volatility, lack the capacity of
diversification among other undermining variables https://en.wikipedia.org/wiki/Resource_curse.
As a result, these resources, instead of being a blessing have become a curse. Scholars like Obi
(1998), Bannon and Collier (2003), Omoweh (2005), have also contended that the reasons for
this paradox of plenty are not unrelated to corruption of the leaders, government mismanagement
of resources, volatility of revenue from the natural resource sector due to exposure to global
commodity market swing and a decline in the competitiveness of other economic sectors,
https://en.wikipedia.org/wiki/Resource_curse. Moreover, the World Bank has argued as it did
during SAP in 1986, that good governance defined in the context of sound economic policies
will provide resource-rich countries the road to growth and development
https://en.wikipedia.org/wiki/Resource_curse.
Notwithstanding the above proposition, it should be expected that if a unitary state
becomes a victim of natural resource mismanagement because of its over-centralization of power
and authority, a federal state is more suitable to turning its natural resources to blessing because
of inherent devices by which federal qualities of society are articulated and protected
(Livingston: 1956).
Essentially, revenue from oil and gas come from royalties, licence fees, profits from state
oil companies, and export taxes, etc. Royalties and licence fees are associated with ownership of
the resource and are typically the major source of revenue from oil and gas
(http://webcache.googleusercontent.com/search?q=cache:bIsm5u6ubIE). In most federations of
the world, particularly, USA, Canada and Australia, onshore resource ownership is normally
with the component states, but in Nigeria, it is owned and controlled by the federal government,
while in South Africa, the federal government guarantees access to private ownership of natural
resources. Again, every government requires funds to embark on developmental programmes. In
all countries of the world, whether there is the abundance of natural resources or not,
development is usually engendered by the level of financial resources available in such country.
Nigeria and South Africa do not only rely on taxes to generate its revenue; they relied heavily on
proceeds from natural resources, which provide substantial revenue to the government of the two
states.
Scholars are unanimous that revenue from natural resources is the mainstay of Nigeria
but not South African economy. Particularly of note are the works of Obi (1998: 261),
Adegbulugbe and Akinbami (2006: 190), and Anyanwu (2007: 176) among others who contend
that over 80% of all federal revenue and 90% of all foreign exchange earnings come from oil. On
the other hand, South African economy is grossly dependent on services, which contributes
almost 70% to GDP while other sectors contribute about 30%. The economies of the two
countries are further defined by the fact that Nigeria’s economy has a huge informal sector; that
of South Africa has a large formal sector.
Notwithstanding these scholarly contributions, there is little emphasis on quantification
and systematic analysis of existing divergences in revenue allocation and natural resource
management in both Nigeria and South Africa. In fact, no serious effort has been directed on the
impact of the proceeds from natural resources on the provision of basic social amenities in both
Nigeria and South Africa. Again, scholars have not adequately established the implications of
the role of the state in resource access and management vis-à-vis conflicts.
It is therefore consequent upon these apparent lacunas that we pose the following
research questions:
1. How does the structure of federalism impact on the pattern of revenue allocation
among the constituent units in Nigeria and South Africa?
2. Do the proceeds from natural resource exploitation in Nigeria and South Africa
adequately enhance on the provision of basic social amenities?
3. Does the role of the state in Nigeria engender conflict in resource access and
management in contradistinction to the role of the state in South Africa?
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study was to comparatively determine how the practice of
federalism impact on revenue allocation and natural resource management in Africa’s two most
important federal states, Nigeria and South Africa. However, our specific objectives are as
follows:
1. to determine how the structure of federalism impact on the pattern of revenue
allocation among the constituent units in Nigeria and South Africa;
2. to ascertain whether the proceeds from natural resource exploitation in Nigeria and
South Africa adequately enhance the provision of basic social amenities;
3. to explore whether the role of the state in Nigeria engender conflict in resource
access and management in contradistinction to the role of the state in South Africa.
1.4 SIGNIFICANCE OF THE STUDY
It is contended that countries with abundance of natural resources are characterized by
low economic growth, lack the capacity to diversify its economy and are prone to internal
conflicts, hence, the resource curse thesis. Yet, the two most important countries in Africa,
Nigeria and South Africa, with abundance of natural resources show varied indices of the
consequences of this abundance. It is therefore on this premise that this study becomes very
significant both for its theoretical relevance and practical utility.
At the theoretical level, the study has increased the general storehouse of knowledge. In
particular, it has discovered the impediments that have constituted a clog in the wheel of progress
in Nigeria’s struggle for equitable resource management formulae. More so, it has contributed
immensely to a better understanding of why the abundance of natural resources in South Africa
has not led to the type of mayhem being experienced in Nigeria. In fact, the major theoretical
significance of this study is its contribution in filling the academic gap that was identified in the
existing body of knowledge. Above all, this study also serves as a reference material for future
researchers who may be interested in extending the frontiers of human knowledge as it concerns
the management of natural resources.
The practical significance of this study cannot be over-emphasized as it serves as a
reference material to help solve the predicaments that abundance of natural resources has
brought to Nigeria, and help South Africa to consolidate and improve on its present conflict-free
management of its natural resources. Specifically, the study serves as a guide to politicians,
administrators and policy makers towards discovering the undermining variables in resource
access, exploitation and management with a view to formulating policies that can resolve
permanently the problems associated with natural resource management.
1.5 THEORETICAL FRAMEWORK
Various theories would have captured the essence of this study, particularly, a
comparative model of analysis like the systems theory, structural-functional theory, etc, but we
considered the basic propositions emanating from the Marxian Political Economy Approach to
be more apt than a comparative model. This is essentially because the Marxian Political
Economy Approach focuses on the reciprocity of politics and economy, derived ofcourse from
the primacy of material conditions. Since the study is on issues relating to resource (revenue)
allocation by the state, and the management of natural resources; the nexus between the state and
its role of authoritatively allocating values can best be captured by the Marxian Political
Economy Approach. Again, though a comparative model would adequately compare both
Nigeria and South Africa within the context of the study, but, the difference in the behaviour of
the two states may not be better captured using the comparative model. The differences in the
two states, is a function of economic condition, which reproduced itself at the political realm.
Therefore, the centrality of the role of the state in the allocation and management of natural
resources can best be captured using the Marxian Political Economy Approach, hence, its
adoption in this study.
Therefore, deriving from our literature review and the thrust of the study, we anchor our
investigation on the basic propositions of the Marxist Political Economy approach which are
applicable to the Nigerian and South African social formations. Accordingly, four essential
elements characterize the Marxist Political Economy approach as follows:
1. The first element is the materialist approach to history; that is, the development of the
productive forces, which is central to historical change.
2. The dialectical approach to knowledge and society that defines the nature of reality as
dynamic and conflictual.
3. The third is a general view of capitalist development; that is, the capitalist mode of
production and its destiny are governed by a set of economic laws of motion of
modern society.
4. The fourth is a normative commitment to socialism; that is, all Marxists believe that a
socialist society is both the necessary and desirable end of historical development.
Out of the four elements, we adopt the first two propositions of Marxist Political Economy
approach in the investigation of this study. These are:
1. The materialist approach to history or what Ake (1981: 1) called the primacy of
material condition.
2. The dialectical approach to knowledge and society that defines the nature of reality as
dynamic and conflictual; or again, what Ake (1981: 3) refers to as the dynamic
character of reality.
First, political economy is a method which gives primacy to material conditions,
particularly economic factors in the explanation and understanding of socio-economic and
political realities. For example, economic condition is the most determining factor why the
European colonialists came to Africa; it also determines why they established the types of
political systems that they did in Africa, etc. The economic condition is equally important in
understanding why the nationalist struggle emerged and the type of political system that was
adopted at independence, etc. In fact, in every society, those who are economically privileged
tend to reproduce themselves as the politically dominant groups, and are always interested in
maintaining the existing social order. To be sure, an understanding of the economic condition is
a pre-condition for understanding how a particular state emerges, transforms and behaves.
In this context, we can align ourselves with Engels as quoted in Lenin (1976) that the:
state is a product of society at a certain stage of development;
it is the admission
