|The Nigerian Flag. Source: self.|
When Nigeria was granted independence from the British colonial administration in 1960, the new independent administration inherited a Unitary System of Government. In a Unitary System of Government, power is concentrated at the centre, with the smaller administrative units being weaker.
In 1979, however, the Nigerian government decided to discard the unitary system, opting for the Federal System of Government, in which the smaller tiers of governments are stronger, while the central government is weaker. The subunits, for instance, have the power to control resources within their geographic boundaries, sending small percentages of their revenues to the Federal government at the centre. Sadly, the Federal System, adopted by the Nigerian government was, and is still, on paper only. This is because, in practice, the Federal Government continues to control resources in the thirty-six states, giving out smaller percentages to them. If we were practising real Federalism, for instance, the states within the Niger Delta, from where the oil and gas come from, should have been responsible for developing the oil resources in their regions, contributing smaller portions of the revenues they make to the Federal Government.
This political distortion is born out of the greed of persons who control the federal government. The sad reality is that even the subventions given out to the second and third tiers of government are done unfairly. There are smaller units that get huge, undeserved portions of the revenue and bigger units getting little, unfair shares of the revenue.
The result of this revenue imbalance is responsible for the agitations that have made the Niger Delta very restive. To calm the restiveness, the idea of derivation came. Derivation funds are percentages of oil revenues that must be given to the state in which the oil came. What is left of the revenue is then shared to all, including the states that have already benefitted from the derivation funds. So the oil-producing states get the regular subventions in addition to the derivation funds.
The virtual federalism has ruined the country in two major ways. First, the agitations for the creation of states refuse to end. Everyone wishes his house was an administrative unit that should get oil revenue directly. The second harm is the fact that the smaller tiers of government do nothing rather than to simply wait for their shares of oil revenues? As a result, non-oil producing states that should have been creative in their desperation to generate revenues have remained lazy. Hence, the Nigerian economy has largely remained an oil-dependent economy.