By MA Iliasu
The chart showing the performance of Nigerian State governments in internal revenue generation has done its part in unveiling the mixed performances of the state economies. As expected, the public reactions, which to me are warranted, carry both the weight of reason and emotion. And maybe for the first time in the history of the Nigerian political economy debates aren’t taken over by regionalism and ethnic jingoism. Instead, it seems that consciousness has succumbed after realising how laziness and incompetence have been fairly distributed among both the northern and southern ruling classes, governors mainly.
Having learnt the flow of sentiments from the day the revenue rankings were released to date, I conclude that the discussions around Internally Generated Revenue (IGR) and Value Added Tax (VAT) are more skewed toward the search for self-actualisation rather than exclusive state independence. For which I’m hoping to be correct. Because if I’m wrong, that’ll mean most of the commentaries are not more than unwarranted emotional outbursts on how the economy really works.
Critical observation will tell that states like Kano are painfully underachieving. Possibly because the government ignores countless taxable entities and many other revenue streams, or it doesn’t care to investigate the conduct of the revenue agencies, it’s very self inclusive. For it’s a fact that the government source massive revenue not only from taxation but from the sales of valuable assets, among others.
On the other hand, without even mentioning Lagos that no economy has come close to compete with, you’ve Kaduna and Rivers states. The economies that can quickly be agreed to be of similar strength if not inferior to Kano’s. Yet with the astronomical difference in IGR. The defining factor in that dilemma lies in their respective self-actualisation and economic competence. The same can be said on the other high-earning states against their low-earning counterparts. And where that’s concerned, questions are right to be asked on why should a state enjoy a sizable share of other state’s hard work when in itself it’s in a unique position to contribute as much if not more.
The way I see it, that’s where the conversation becomes critical. The high-earners think every state should enjoy as it earns. While the low-earners think the economic union should not be dissolved because they’re geographically and industrially rigged by nature. The indigenes of high-earners agree with their state’s notion. As do that of low-earners who think isolating their state expenditure with its earned revenue will awake them from the shameless slumber and make them more creative. The important of all is, does the economy work that way?
To begin with, governors who believe nature hinders their income stream must know that geography in an economic context is either an advantage or a symbol of unique opportunity. For example, it’s a fact that Lagos and Rivers, as the custodians of Nigerian ports, have found it easy, therefore, advantageous to source revenue. But it’s the same with Jigawa, that’s strategically positioned to be a massive tech-hub and schooling environment across Sahara, Yobe that’s agriculturally equipped to grow the most unique seeds and Delta that’s attracted to the non-fossils industry. Therefore, using nature as an excuse is beyond lazy.
Nevertheless, no matter what any state does to achieve economic supremacy, one state must earn more than another. Thus, one state must record a deficit in trade with another. It’s a simple law of nature that’s very sensitive in economic policy, especially in accounting internal trade.
For instance, it makes sense that Kano, the largest textiles market and importer in Africa, pays more to Lagos and Rivers, who are the custodians of ports than it receives. Likewise, if Kano, as the distributor of the shipment, receives more from Bauchi, a retailer, than it pays. The same line of argument can be asserted to the states that own what other states need more than it needs from them. And so, recording deficit by the paying state is inevitable because needs and economies of scale can never be the same.
Due to that vivid notion, the famous British economist John Maynard Keynes argued that economies must be bound together to solve the inevitable rigidities that’ll be caused by the unavoidable deficit bred by such economic interdependence. According to Keynes, crises can be redemptive and non-redemptive crises. The redemptive crisis is the type of crisis that’s capable of becoming its own medicine. In short, any problem that can paradoxically become its own solution qualifies as redemptive. While the non-redemptive crisis is the type of crisis that can’t solve itself.
For example, the ever prophetic General Theory explained how a trade-off exists between inflation and unemployment. That’s to say, by compromising inflation, unemployment often rises, which give rise to another wave of cyclical negativity. Meanwhile, inflation can be risked to reduce the level of unemployment. And the lower level of unemployment means higher employment which can help eliminate inflation. That way, inflation has laid the very foundation of its demise. The very redemptive crisis that Keynes had explained concisely.
The phenomenon with our state economies is that the internal trade between those respective states records deficit in the books of payers and surplus in the books of the receivers. The receivers are often the highest-earning in the ranking of VAT, while the payers are mostly the low ranking. And the intriguing dilemma is that where deficit and surplus are concerned, a serious tension occurs to the market flexibility that’ll need cohesive effort by those states to be released. And if they’re isolated from one another by warranting each state only to enjoy as it earns, it won’t be possible.
It’s like two siblings in a family of three. The older is a farmer who therefore is discharged with buying food and consumables. While the younger is an engineer, who’s charged with water and electricity bills. It was agreed that none should interfere with any’s responsibility. Interestingly a period of bumper harvest keeps taking place for the older. But sadly, the younger hasn’t been able to secure a job. Food has been available. But no water and electricity. The family eats, but it reaches the level where there’s neither the water to boil the food nor the electricity to power the oven. The bathrooms are inept too. Their mother becomes worried. Things begin to fall apart because the house has gone insane, and a family meeting gets summoned. A tension of similar magnitude will happen if state economies are left to their own mercy.
Firstly, in an economic context, Nigeria is a single-family because the states are bound by a single currency and enjoy free trade with one another. Secondly, the states must collectively pay for one another’s incapabilities like beloved siblings because they live within the same family. The flaw of one can devastate the situation of the other. Just like what happened when the above younger sibling couldn’t secure a job while the older enjoyed bumper harvests. Thirdly, all that has been mentioned doesn’t need to be accepted or agreed upon but must be complied with, whether one side is lazy or hardworking because it poses a direct threat to the economic stability of Nigeria. Moreover, it’s compensation for inflicting deficit in the event of a trade, which was why the US and its dollar have been more stable than Europe and its Euro; all because the same currency binds them.
It’s from that, therefore, that I learnt when Gov. Wike of Rivers suggested exclusive state supremacy on VAT, he was totally ignoring or ignorant of how the remittances among those states become what enables the highest-ranking states to record the surplus that they’re boasting about. It’s simple logic. As the lowest in the ranking, Bayelsa State is isolated with its small Internally Generated Revenue (IGR), its purchasing power would decline severely. And state’s purchasing power is the consumer’s purchasing power. If it drops, it’ll mean no buyers for the available commodities in the Bayelsa market, which will hinder restocking from the industries in Lagos and Anambra. When it persists, the commodity market will die. Deflation will strike, and consequently, the investment will disappear. Small enterprises will become bankrupt.
Trade deficit goes hand in hand with governments that are also in deficit. If an economic crisis occurs within any among the economies that are bound by the same currency, the fall in demand will trickle down to the deficit economies. Once the crisis began, whether in a surplus state or not, it would inevitably soon reach both the surplus and deficit states. Even if it arrived in the form of a slight downturn, some debtors would be made to feel that they were carrying too much debt. Keen to reduce their exposure, they would cut spending. But since, at the level of the national economy, society’s overall demand is the sum of private and public expenditure, when a large segment of the business community tries to reduce debt (by cutting expenditure), overall demand declines, sales drop, businesses close their doors, unemployment rises, and prices fall. As prices fall, consumers decide to wait for them to fall further before buying costly items. A vicious debt-deflation cycle thus takes hold.
Now that’s the question the Nigerian state economies must sit down and ask themselves; is this where we want to go?
From what we’ve learnt, recycling mechanisms are necessary to avoid the bubble from bursting. Likewise, it’ll be absurd to allow lazy economies to keep enjoying off the hard work of others. The best response, in my opinion, is to set a minimum threshold, one that each state must abide by. An evaluation of the state’s income streams must be made so that no state should source less than it should. Gubernatorial candidates must adequately explain henceforth how they intend to fund ambitious capital and recurrent projects. Both to the voters and intellectuals. Because the days of off-head projections are over. The truth is Nigeria is broke. And most states are lazy. While cutting them off will destroy the economy as a whole. The room for politicians who dreamt of becoming governors when they’re young is no longer there. What’s there is a capacity for difference makers. Policymaking bodies can no longer be filled with empty-headed pot-belly carrying nepotists. Trained economists must be engaged. For now, everything is up to the central authority; we shall see if it’ll tame the situation or sink the economy further.
MA Iliasu writes from Kano State. He can be reached via his email email@example.com.
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