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Ibadan : Safari Books Ltd

An underlying assumption of fiscal federalism is that it should create incentives for both the central and constituent governments to efficiently and effectively deliver services to their citizens. Recent discontents with Nigeria’s federal practice, especially since 1999 when the country returned to civil rule, are mostly associated with issues of fiscal federalism. Disputes and conflicts now occur more frequently between the federal and state governments that have to do with resource allocations and intergovernmental finance especially the intergovernmental fiscal transfers. The perceived vertical and horizontal inequalities engendered by the extant revenue sharing formula and the strident demands in several quarters for “true federalism” have become one of the critical sources of threat to Nigerian nationhood.  These trends point to contradictions in the conceptualization and implementation of the Nigerian federalism including its fiscal components. This chapter discusses the challenges of fiscal federalism in Nigeria within the context of the principle of decentralisation, which is understood generally as the devolution by a central government of political, administrative and fiscal powers to local-level government. It also assesses the effects of decentralisation on government performance and the implications for good governance especially since 1999 when the country returned to civil rule. In order to understand decentralisation it is essential for one to study how government is working at the sub-national levels. Fiscal federalism is treated in this chapter from a broad perspective, which is not limited by either the discipline of Economics especially its classical notion of “fiscal federalism” or the discourse in Political Science on “federalism and democracy”. The approach adopted here is the historical perspective; one that presents a holistic analysis of the challenges of Nigeria’s fiscal federalism in relation to their origins as well as current phases. Therefore, the task here is undertaken  guided by the wisdom in  Adiele Afigbo’s counsel  that “the best way to know anything is to know how it began, what factors dictated its origins and what factors dictate its development, as well as where it is heading.” Thus, while it is necessary to pay attention to contemporary trends and developments in the practice of federal system in Nigeria, and factor these into explanatory frameworks for understanding fiscal federalism in the country, it is important that the historical context be incorporated into the discourse. In this regard, historical realities and social conditions such as the colonial origins of the Nigerian federalism, and the overwhelming influence and domination of the federal polity by the military for a period of over three decades need to be recognized as important background or contextualizing variables. Structural and institutional problems in the Nigeria political economy such as over dependence on income from oil and its associated problems, the nature and character of the Nigerian state, and the orientation of the power elites that exhibit greed and lack of patriotism constitute essential part of the intervening variables. Also of importance is the emerging democratic environment in the country that is providing an enabling milieu for the expression of dissatisfaction with the status and role of the centre in the federation’s fiscal system.


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