By Femi Falana

Continued from Saturday, December 19, 2020. To read previous parts of this article, click here and here.

Restructuring and the Economy
UNDER the current political dispensation, the national economy shall be managed by the President with the advice of the National Economic Council constituted by the Vice President, State Governors, Central Bank Governor and Minister of Finance.

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The basis of the constitutional arrangement is that there are certain enterprises that are owned by the federation which are required to be jointly managed by the federal and state governments. But since 1999, the President has managed the economy on the basis of the advice and prescriptions of the International Monetary Fund and the World Bank as well as a team of presidential economic advisers. Apart from campaigning for currency devaluation and advising the federal government to implement neoliberal policies and thereby impose hardship on the people, the local and foreign economic advisers have never questioned the policies designed by imperialism to promote poverty and under-develop the country.

The status quo has been sustained to the disadvantage of state and local governments. Thus, the enterprises jointly owned by all tiers of government are controlled by the federal government alone. For instance, licences for oil blocks and solid minerals are awarded by the President without any input from state and local governments while the state and local governments are not represented in the boards of the NNPC and other 121 revenue generating agencies belonging to the federation. In particular, state and local governments have no representatives in the board of the Bureau of Public Enterprises established by law to privatise and commercialise the enterprises owned by the federation.

In a recent letter dated 15th June 2020 addressed to the Minister of Finance, the Alliance on Surviving Covid-19 and Beyond (ASCAB), a coalition of about 80 labour and other civil society organisations, noted that the appropriation bill that the President presents to the National Assembly each year does not contain the full, gross revenues and expenditures of the 122 federal government-owned enterprises and that it is only the net expenditure (total expenditure less any local income for each organisation) that is included as part of the government’s annual budget.

The ASCAB further stated that after the enactment of the nation’s appropriation act, the individual appropriation bill of each of the agencies of the federal government listed in the schedule to the Fiscal Responsibility Act 2007 is separately considered and passed by the National Assembly. The investigation conducted by ASCAB has revealed that the total gross budget of the said government-owned enterprises is usually higher than the budget of the federal government. For example, whereas the 2020 budget of the federal government was N10 trillion, the budget of the Central Bank of Nigeria alone was N2 trillion. Thus the citizens of Nigeria are not currently able to understand the full economic significance of the government’s annual budget.

The apparent defects in the federal system form the legitimate demand for urgent restructuring in order to liberate our country. It is indisputable that prolonged years of military dictatorship aided the usurpation of residual powers of state governments by the federal government. In many instances, the 36 state governments have had to resort to litigation to challenge the several laws and policies of the federal government which have violated the basic tenets of federalism. In spite of the vehement determination of the federal government to retain powers that were taken vi et armis from state governments, the courts have ruled in favour of federalism.

In addition, at the end of each year, the revenue realised due to surpluses from government-owned enterprises is not fully remitted to the Consolidated Revenue Fund in line with the provisions of section 22 of the Fiscal Responsibility Act. For instance, in a town meeting held at Abuja with the chief executive officers of government-owned enterprise on December 19, 2018, the Director-General of the Budget Office of the Federation, Mr Ben Akabueze, stated that the 122 government-owned enterprises were owing about N10 trillion in unremitted operating surpluses as at the end of August 2018. The Director-General accused the agencies of not remitting up to N1 trillion per annum even though the federation had spent not less than N40 trillion in establishing them.

Based on the outcome of the meeting, our law firm, at the instance of the ASCAB, requested for copies of the 2020 Appropriation Acts of the agencies. The Director-General did not have the copies. Even though he directed our request to the national assembly, the copies had not been made available to us. Meanwhile, the states and local governments have not shown any interest in the disbursement of the huge fund generated by the agencies.

However, in another letter dated September 28, 2020, ASCAB called on the federal government to recover the sum of N94 trillion being money withheld or diverted from the Federation Account by certain public and private corporate bodies. It is hoped that the Nigerian Governors Forum will show interest in the sources of the revenue set out in the letter as well as the reports of the investigation being conducted by the national assembly on the mismanagement of the economy by both houses of the National Assembly. It is interesting to know that the Minister has not replied both letters.

Payment of Remittances in Naira
In order to ensure the scarcity of dollars in Nigeria, the Central Bank of Nigeria banned the payment of remittances to beneficiaries in foreign currencies. Pursuant to the Regulation of the CBN, remittances were paid in local currency while the dollar component was retained abroad.

Two years ago, it was revealed by the World Bank that the remittances stood at $25 billion per annum. But the CBN questioned the figure and claimed that the remittances were not more than $2.6 billion per annum. Convinced that CBN was deceiving the government and the Nigerian people, I requested for the actual amount under the Freedom of Information Act. When the CBN turned down the request, I filed a suit at the Federal High Court to compel disclosure of the volume of the remittances.

Before then, I had alleged in a petition to the EFCC that the policy which allowed the dollar component of the remittances to be kept abroad was tantamount to economic sabotage. As the dangerous policy could not be defended before the EFCC and the court, the CBN has been compelled to reverse it. While announcing the new policy, a fortnight ago, the governor of the CBN, Mr Godwin Emefiele, said that the forex market would be boosted by not less than $24 billion per annum!

COVID-19 Relief Fund
In order to cushion the debilitating effects of Covid-19 pandemic, the CBN claimed that the sum of N200 billion has been earmarked for housing while N358 billion had been disbursed for agriculture, industries and manufacturing. In response to the #EndSARS protests, the Bank has set aside N75 billion for job creation for young people between 2021 and 2023.

Apart from the fact that the huge fund was not appropriated by the National Assembly, the disbursement is not based on equitable criteria. Hence, our law firm has requested the CBN to furnish us with the names of the beneficiaries of the sum of N358 billion alleged to have been disbursed. More than two months ago, the CBN asked for time to provide the list of the beneficiaries. If our request is not met before the end of the year, we shall approach the Federal High Court for legal redress. Curiously, state governments have not demanded the Covid-19 recovery fund be distributed on equitable basis and not at the discretion of the management of the CBN. It is however hoped that the National Assembly will soon muster the courage to ensure that the CBN does not disburse any public fund without appropriation.

Dual Exchange Rates
The dual exchange rates which turn people into multi-billionaires are solely controlled by the Central Bank. At a public event held in Kano on August 24, 2016, the then Emir of Kano, Mallam Sanusi Lamido Sanusi, accused the federal government of causing economic recession through the operation of the dual exchange rates by the CBN.

According to him; “When the CBN was selling dollars at N197 and people were buying at N300, if I sit in my garden and make calls on the phone, I will have enough people to call in the industry to get me $10 million at official rate. Do you doubt it? As a former MD, former governor of the CBN and what they now call a royal father? Think about it. I sit in my garden and make a few phone calls, and get $10 million at N197 per dollar and sell at N300 to the dollar; I will make a profit of N1.03 billion. If I do that four times in a year, for doing nothing, I would have had N4 billion. And people were telling us that this policy was to help the poor. We are not devaluing the Naira, because if we do, the poor people would suffer. The people that were profiting from this were people that were telling the government that if it devalued the Naira, people would suffer.”

It is submitted that the dangerous policy has continued on a worse scale as many people now buy $10 million at N305 only to trade them at N500 and thereby become instant billionaires to the detriment of the national economy. State and local governments should join the campaign for the abolition of the discriminatory and illegal operation of the dual exchange rates because it is subversive of the national economy.

However, like a fortune teller, the CBN governor has predicted that the second recession will end in the first quarter of 2021. No doubt, the prediction is based on the sale of crude oil whose price has increased from $37 to $50 dollars per barrel. But unless the mismanagement of the economy by the CBN is halted, the country will not recover from recession. In fact, the World Bank has predicted that the recession will last until 2023 unless certain “unpopular measures” are adopted by the federal government. According to the bank; “In the next three years, an average Nigerian could see a reversal of decades of economic growth and the country could enter its deepest recession since the 1980s.”

In a report, titled: “Rising to the Challenge: Nigeria’s COVID Response,” Shubham Chaudhuri, World Bank Country Director for Nigeria, said that “Nigeria is at a critical historical juncture, with a choice to make”. The Bank argues “that this path could be avoided if progress in the current reforms is sustained and the right mix of policy measures is implemented.”

The report lauded the measures taken by the government including the efforts to harmonise exchange rates, introduce a market-based pricing mechanism for gasoline, adjust electricity tariffs to more cost-reflective levels, and reduce non-essential expenditures and redirect resources towards the COVID-19 response. The World Bank is asking the federal government to impose more excruciating economic hardship on hapless Nigerian people. Since the federal government is likely going to adopt the “unpopular measures” advocated by the World Bank we call on the Nigerian people to be prepared for a sustained battle against the re-colonisation of the country by imperialism.

Finally, permit me to end this lecture on a note of warning. The warning is that the power devolution to the states from the centre without the democratisation of the said powers will not promote development of the country. In other words, restructuring without the equitable redistribution of the commonwealth will not engender unity as unity is not an abstract phenomenon. In concrete terms, unity means the corporate existence of Nigeria. The fact at the moment is that the unity of the country is based on the ruthless exploitation of the working people, as far as members of the ruling class are concerned. Since the rich are united in exploiting our national resources, the exploited poor and oppressed people should equally unite to free themselves from poverty.

Illegal Substitution of Foreign Currencies in the Federation Account by CBN
The federal, states and local governments are in financial straits partly due to the fluctuation in earnings from the Federation Account, occasioned by oil price volatility and challenges of boosting internally-generated revenue. In a bid to challenge inflation promoted through the manipulation of the foreign exchange market, the Nigeria Governors Forum once demanded that states and local governments be paid their shares of revenue from the Federation Account in dollars. Even though the demand is in consonance with section 162 (1) of the constitution, the governors did not pursue the matter for reasons best known to them. However, in the cases of Attorney-General, Lagos State v Attorney General of the Federation (2004)18 NWLR Pt (904) 1 at 141, the Supreme Court held that “Under the Constitution, the three tiers of government, that is the Federal, States and Local Governments are to share the funds in the Federation Account in line with the guidelines laid down by the National Assembly.”

But in violation of the constitutional mandate, the CBN unilaterally determines the naira exchange rate and thereafter unconstitutionally captures the distributable revenue and prints in replacement as statutory allocations, which are then domiciled in the bank accounts of beneficiaries.

As repeatedly pointed out by the late Henry Boyo, “the ministries and state governments that require imports to enhance social infrastructure become constrained to buy back their earlier captured dollars at a higher regulated rate from commercial banks that strangely become the prime beneficiaries of the CBN’s dollar auctions. Ultimately, naira exchange rate comes under threat as increasingly surplus naira is unleashed by the CBN to chase the dollar rations it regularly auctions. Consequently, the market dynamics of demand and supply become unfavourably skewed against the naira, ironically, despite the CBN’s custody of relatively impressive reserves.”

In 2016, Senator Francis Alimikhena sponsored a bill seeking to direct the CBN to issue dollar certificates to the three tiers of government with respect to revenues earned in foreign currencies. The bill which was anchored on section 162 of the constitution had scaled the second reading before the dissolution of the 8th Session of the National Assembly.

Meanwhile, as Boyo said; “the ministries and state governments that require imports to enhance social infrastructure, become constrained to buy back their earlier dollars at a higher regulated rate from commercial banks that strangely become the prime beneficiaries of the CBN’s dollar auctions. Ultimately, naira exchange rate comes under threat as increasingly surplus naira is unleashed by the CBN to chase the dollar rations it regularly auctions. Consequently, the market dynamics of demand and supply become unfavourably skewed against the naira, ironically, despite the CBN’s custody of relatively impressive reserves.” States and local governments are enjoined to press for the distribution of revenue in the Federation Account in local and foreign currencies.

Diversion of $22 Billion from Federation Account by NNPC
The House of Representatives is currently probing the refusal of the Nigerian National Petroleum Corporation (NNPC) to remit the $22 billion dividends paid by the NLNG into the Federation Account. In justifying the illegal diversion of the fund, the Group Managing Director of the NNPC, Mr Mele Kyari, has said that the fund belongs to the federal government alone.

According to him; “All withdrawals (from NLNG dividends fund) were based on approved mandates of the relevant authorities. As far as NNPC is concerned, investments in NLNG, were done on behalf of the federal government. I was the treasurer of NLNG, so I was aware of the federal government’s investment in the project. The same matter came at the Federal Executive Council (FEC) and was referred to a committee, headed by the Governor of Kaduna State, but the fact is that the federal government, through the NNPC, is the true owner of the investment (the sum withdrawn). It is accrued to the federal government, not the Federation Account.”

It is submitted that Nigeria Liquefied Natural Gas Limited was incorporated as a limited liability company on 17 May 1989, to produce LNG and natural gas liquids (NGL) for export. Nigeria LNG Limited is jointly owned in the following proportions: Nigerian National Petroleum Corporation (NNPC) owns 49%, Shell Gas B.V. owns 25.6%, Total LNG Nigeria Ltd owns 15% and Eni International owns 10.4%. It is submitted that the NNPC is holding the shares on behalf of the Federation and not on behalf of the Federal Government. To that extent, the sum of $22 billion dividends paid by the NLNG belong to the Federation and ought to be recovered and paid into the Federation Account.

Refusal to collect outstanding $62 billion Royalties from OICS
In July 2015, our law firm questioned the deliberate refusal of the relevant authorities to collect the revenue which ought to have accrued to the Federation Account under the Deep Offshore Inland Production Contract and called for a review of the law. The campaign which was vigorously waged for four years culminated in the amendment of the Deep Offshore Inland Production Contracts Act last year. It has been said that the amendment will increase the revenue in the Federation Account by not less than $1.5 billion per annum.

Before the amendment of the Act, the governments of Akwa Ibom, Bayelsa and Rivers states had sued the federal government over the non-implementation of the Act which led to the loss of several billions of dollars. The consent agreement between the parties to the suit was adopted as the judgment of the Supreme Court in October 2018. The firm of accountants engaged by the federal government to inquire into the revenue lost by Nigeria for a period of 18 years put the figure at $62 billion. The efforts of the Attorney-General and Minister of Justice, Mr Abubakar Malami SAN, to recover the fund have been frustrated by the Ministry of Petroleum Resources. The Nigeria Governors Forum ought to ensure that the lost revenue is recovered and paid into the Federation Account in line with the judgment of the apex court.

Nigeria’s Rising Debt
Notwithstanding the so-called debt relief and the payment of $12.4 billion to the London/Paris Club by the federal government, the people of Nigeria are worried that the federal and state governments have been plunging the country into another debt trap. It is common knowledge that members of the national assembly have not been subjecting the terms of foreign loans to critical analysis before approving them. It has been confirmed that Nigeria’s total debt stock (foreign & domestic), as at June 2020, stood at N31.01 trillion ($85.9 billion) – 8.31% increase when compared with N28.63 trillion ($79.3 billion) recorded in March 2020. This was disclosed in the Nigeria public debt report, recently released by the Debt Management Office (DMO).

The breakdown shows that total external debt stood at N11.36 trillion ($31.47 billion), accounting for 36.65% of the total debt stock, while domestic debt represented 63.35% of the total debt. Domestic debts stood at N19.65 trillion ($54.42 billion) as at June 2020. The report also reveals that N921.9 billion was used to service domestic debts between January and June 2020, while N288.6 billion ($759.6 million) was used on foreign debts, making a total of N1.21 trillion. Compared to N1.06 trillion spent in the same period of 2019, debt service increased by 14.6%. The federal government has earmarked 25% for payment and service of debts; 30% for capital and 45% for recurrent in the 2021 budget. It is indubitably clear that the development of the country cannot be guaranteed with 30% for capital projects in the budget.

Diversion of CERPAC Fund from Federation Account
Sometime in 2019, I found that through the Combined Expatriate Residence Permit and Aliens Card (CERPAC), the Nigeria Immigration Service generated N20,358,233,000 billion in 2018. Following the increase of the CERPAC fee from $1,000 to $2,000 per expatriate, the revenue increased to N40,786,437,950 billion in 2019.

We found that the Ministry of Interior and the company reviewed the sharing formula for the collected revenues: 55% to the company, 33% to the federal government, 5% to the Ministry of Interior and 7% to the NIS. Since the revenue was earned by Nigeria, the entire revenue ought to have been remitted to the Federation Account.

We requested the Federal Ministry of Finance to cancel the illegal contract and direct the Nigeria Immigration Service to collect the revenue as stipulated by the Immigration Act, 2015. My request was ignored. In a suit filed at the Federal High Court, the legality of the contract and the sharing of the revenue were challenged.

In the ruling delivered in November, but just obtained by PREMIUM TIMES, the judge, Rilwanu Aikawa of the Lagos Division of the Federal High Court, also declared as unconstitutional the contract between the Ministry of Interior and Continental Transfert Technique Ltd, or Contec, for the collection of the CERPAC fee. Justice Aikawa ruled that only the Nigeria Immigration Service is lawfully empowered to collect such fees. The federal government filed an appeal against the judgment and obtained a stay of execution of the judgment. The states and local governments which are entitled to 48% of the revenue from CERPAC fees have left me alone to wage the legal battle.

Conclusion
The apparent defects in the federal system form the legitimate demand for urgent restructuring in order to liberate our country. It is indisputable that prolonged years of military dictatorship aided the usurpation of residual powers of state governments by the federal government. In many instances, the 36 state governments have had to resort to litigation to challenge the several laws and policies of the federal government which have violated the basic tenets of federalism. In spite of the vehement determination of the federal government to retain powers that were taken vi et armis from state governments, the courts have ruled in favour of federalism.

Apart from litigation, a few state governments have dared the federal government by enacting laws in areas not covered by the exclusive and concurrent legislative lists in the Constitution. Thus, the legal and political struggle waged by state governments has altered the national economy to the advantage of all state governments. This must continue in many other areas that were exclusively reserved for regional governments before January 1966.

The National Assembly has continued to consolidate and expand the powers of the federal government to the detriment of federalism while the courts have interpreted the constitution to justify the control of the judiciary by the federal government through the National Judicial Council.

The crisis of federalism has also been compounded by some decisions of the courts that have upheld the powers of the federal government to encroach in the areas of state offences. The way forward is that the struggle for restructuring and the liberation of the poor people of Nigeria from the bondage of poverty and inequality require the adoption of vertical and horizontal measures to build a peaceful and united Nigeria rooted in social justice, equity and genuine freedom.

Notwithstanding the shortcomings of the 1999 Constitution, there are some residual powers reserved for state governments which have not been explored to promote the development of the country. We have identified specific areas where state governments have refused to jointly exercise powers with the federal government as stipulated by the constitution.

In view of the strident opposition of the ruling party to power devolution, the Nigerian people are not deceived by the campaign for restructuring which is being championed, in recent times, by politicians who are interested in the 2023 presidential race. Instead of dismissing the campaign, state governors who are genuinely interested in restructuring should democratise the powers that have devolved to state governments from the centre through litigation. They are also advised to insist on power sharing with the federal government with respect to the management of the economy and security of the nation as stipulated by the constitution.

Finally, permit me to end this lecture on a note of warning. The warning is that the power devolution to the states from the centre without the democratisation of the said powers will not promote development of the country. In other words, restructuring without the equitable redistribution of the commonwealth will not engender unity as unity is not an abstract phenomenon. In concrete terms, unity means the corporate existence of Nigeria. The fact at the moment is that the unity of the country is based on the ruthless exploitation of the working people, as far as members of the ruling class are concerned. Since the rich are united in exploiting our national resources, the exploited poor and oppressed people should equally unite to free themselves from poverty.

Concluded.

Falana SAN, delivered this as the 20th Convocation Lecture of the Ekiti State University on Wednesday, December 16, 2020.

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