Fiscal federalism: States must act like sovereign nations – Osinbajo


By Uthman Salami

The Vice President of Nigeria, Professor Yemi Osinbajo has charged all the federating states to begin to behave like as though they were sovereign nations.

He said the state governments should as a matter of urgency begin to think out of the box in acting out the fiscal federalism by working on modalities in which their respective Internally Generated Revenues would be increased, based on their resources.

The Vice President, made this call while delivering a key note address at the Fountain Summit 2021: Economic Development and Investment Summit, tagged “Investment Attractiveness and Economic Development: Lessons for Sub-Nationals” held at the newly constructed Civic Center at the state capital.

According to the Vice President, “Thinking differently, there is a need for a sub-national to think like a sovereign State.

“You have a bigger GDP and even more revenue than many nations. There is a different mindset when you are sure of a monthly allocation of cash at least enough to pay salaries, whether you generate income or not. This is the challenge. The so-called Dutch Disease, one becomes complacent.

“But what if you had to take responsibility for all those who reside within your borders, pay all salaries, from internally generated revenue?”

While citing his experience during his stead in the Lagos State administration in the late 90s and early year 2000, Osinbajo said the State government was able to improve her revenue from N600million monthly to about N45billion today.

Noting the high-handedness of the then President, Olusegun Obasanjo who had illegally seized the State’s share of Federal allocations despite court order spirited the Lagos to “think outside the box.”

While explaining his earlier assertion that States should begin to think like a Sovereign Nation, Osinbajo elucidated further that although a state within a Federation is not a nation, State must behave like one, in order to spike up their economic fortune.

While speaking Osinbajo said, “The economy of the sub-national is a peculiar animal.”

“The state within the Federation is not a nation, but it must behave like one, it derives some resources from the Federal pool, and generates some income, the overall sum will provide infrastructure and services to the community.

“The size of the sum and the quantum of opportunity available to provide livelihoods for the populace will depend on how the State enables local and external investors, small and large to put their resources into business and commercial activity business in the State,” he added.

The Vice President added that, “The funded portion of the state’s budget is after all a mere fraction of the sum total of economic activity or income-generating activity, formal or informal within the State. So, the attractiveness of a state to commerce is a radical issue.”

Osinbajo believes “the very lives and livelihoods of the people within the borders of the State, whether the people will live prosperous and happy lives, be educated, have access to affordable medical care, depends on it.”

On leading the states through private sector drive, he said the “business is the business of the private sector, while governments should as much as possible facilitate, or at best, collaborate.

“An excellent example is the formerly State-owned, Ikun Dairy Farms at Ikun Ekiti. After 40 years of inactivity, the State Government divested 76% of its shareholding to a private dairy company, Promasidor, resulting in a company that is now producing over 80,000 litres of milk per month from a herd of about 500 cows.

“There is also the recent concessioning of hospitality facilities such as the iconic Ikogosi Warm Springs, affirming the same principle (of collaboration). This is a very important principle, the idea that it is the private sector that really should lead the economy,” he said.