I thank Penpushing Media for this kind invitation and for their unwavering commitment to promoting credible journalism and combating misinformation. I also wish to acknowledge the distinguished presence of our Chairman, Ambassador Sarafa Tunji Isola, OFR, and the revered Royal Father of the Day, HRM Oba Abdul-Razaq Adenugba. Distinguished audience, thank you for being a part of this vital conversation.
I commend Penpushing Media for the timeliness and urgency of their choice of theme: “Reworking Nigeria’s Federalism: Perspectives to Restructuring; The Future of Fiscal Federalism in Nigeria” to mark the platform’s seventh anniversary. This highly critical national conversation, and not the unlawful commencement of campaigning for 2027 elections by politicians including the President, should be the priority that Nigerians who own our Democracy demand.
I would wager a guess that the organisers of this seventh Anniversary event chose this theme to help energize a sense of urgency for crucial national debates on how to turn around the failures of our country and transform governance for improved wellbeing of Nigerians. They have convened us to do so by interrogating the contradictions of how a Nigeria that was intended, designed and described as a federal system, has operated and continues to operate as a unitary state.
Our current system and structure of governance — as I have been known to publicly advocate — are not merely imperfect; they are now evidentially “broken” because of deep structural flaws. The fundamental defects actively hinder our progress as a nation, fueling dysfunction and holding back the immense potential of our people. These are reasonings that frame the leitmotif for the Restructuring Agenda. If it is not broken, don’t fix it but if it is broken, fix it urgently, not deny it.
The continuous, passionate calls, advocacy and agitations for restructuring our country which resound from almost every corner of Nigeria — from various regions, ethnic groups, and civic organizations—are not just noise. They are a powerful testament to the growing collective consciousness and courage of some of our citizens to confront the bull by the horns. The time for genuine change is now.
So, what theoretically is federalism? What makes Nigeria a federation?
Federalism is a system of government where political power is divided between a central (federal) government and regional government (such as states or provinces), with each level having constitutionally guaranteed authority over certain areas of governance.
Three key characteristics of federalism are:
1. Division of powers
Federalism involves a constitutional distribution of powers between different levels of government. Typically:
•Federal/Central Government handles national issues like defense, foreign policy, currency, and interstate commerce
•State/Regional Governments manage local affairs like education, healthcare, police, and local infrastructure
•Concurrent Powers are shared by both levels, such as taxation and law enforcement
2. Constitutional framework
The division of powers is enshrined in a written constitution that both levels of government must respect. Neither level can unilaterally change the powers of the other.
3. Dual sovereignty
Both the federal and state governments derive their authority directly from the people, not from each other. This creates dual sovereignty where citizens are subject to both federal and state laws.
Nigeria’s federal structure
Nigeria’s federal structure is what makes Nigeria to be described as a federation. Nigeria operates a three-tier federal system established by the 1999 Constitution:
1.Federal Government (36 states + FCT)
•Defense and security
* Foreign affairs
* Currency and monetary policy
* Interstate commerce
* Major infrastructure projects
2. State governments (36 States)
* State roads and transportation
* Secondary education
* State healthcare systems
* Agriculture and rural development
* Urban planning
3 Local Government Areas (774 LGAs)
* Primary education
* Primary healthcare
* Local roads and markets
* Waste management
* Community development
Constitutional framework
The 1999 Constitution provides the legal foundation for fiscal federalism through:
* Exclusive Legislative List: 68 items reserved for federal government
* Concurrent Legislative List: 30 items shared between federal and state governments
* Residual Powers: Remaining items fall to state governments
What is fiscal federalism?
Fiscal federalism refers to the division of government functions and financial relations among different levels of government in a federal system. It encompasses a range of issues which written constitutions clearly specify for clarity, common understanding and application. Generally, it would include the following:
1. Revenue assignment: Who collects which taxes?
2. Expenditure assignment: Who is responsible for which public services?
3. Intergovernmental transfers: How resources flow between government levels?
4. Borrowing powers: Which level can incur debt and under what conditions?
There are also often a set of defined core principles that underpin the proper functioning of fiscal federalism and these often include the Principle of Subsidiarity which mandates for services to be provided at the lowest appropriate level of government. The Principle of Fiscal Equivalence requires that those who benefit from public services should pay for them. The Principle of Fiscal Autonomy expects that each level of government should have adequate revenue sources while equity canvasses for ensuring fair distribution of resources across regions.
Revenue Generation and Sources
- The Federal Government Revenue Sources
Oil and Gas Revenue (70-80% of total revenue)
* Petroleum Profit Tax (PPT)
* Royalties from oil and gas
* Joint Venture Cash Calls
* Nigerian National Petroleum Corporation (NNPC) contributions
Non-Oil Revenue
* Company Income Tax
* Value Added Tax (VAT)
* Customs and Excise duties
* Federal Government Independent Revenue
2. The State Government Revenue Sources
Federal Allocations (60-80% of state revenue)
* Monthly allocations from Federation Account
* VAT distributions
* Excess Crude Account distributions
Internally Generated Revenue (IGR)
* Personal Income Tax
* Business registration fees
* Land use charges
* Motor vehicle licenses
3. The Local Government Revenue Sources
Federal Allocations
* Direct allocations from Federation Account
* State-Local Government Joint Account
Internal Revenue
* Market fees and levies
* Property rates
* Vehicle Park levies
* Birth and death certificate fees
Revenue Allocation Mechanisms
Federation Account Allocation Committee (FAAC)Monthly distribution of federally collected revenue based on constitutional and legal frameworks:
Current Sharing Formula
* Federal Government: 52.68%
* State Governments: 26.72%
* Local Governments: 20.60%
Revenue Allocation Principles
* Equality (40%): Equal treatment of all states regardless of size or population
* Population (30%): Based on official census figures (disputed 2006 census)
* Land Mass/Terrain (10%): Compensation for geographical disadvantages
* Internally Generated Revenue (10%): Rewards for fiscal efforts by states
* Social Development Factors (10%): Education enrollment, health facilities, water supply
Value Added Tax Distribution
* Federal Government: 15%
* State Governments: 50%
* Local Governments: 35%
Distribution to states based on:
* Equality: 50%
* Population: 30%
* Derivation: 20%
What is the call for restructuring all about?
Advocates for restructuring in Nigeria are asking for a fundamental reorganising of the country’s political and economic system to create a genuinely federal state where power is shared more equitably between federal and sub-national governments, resources are controlled closer to where they are produced, and governance is brought closer to the people.
Restructuring call is a genuine demand for a patriotic act of undoing the centralization legacy of military rule and returning to federalism principles that made Nigeria successful in its early post-independence period.
Is the unabated clamor for genuine federalism justified? The unbiased response to this salient question can be found through a review of governance performance since the 64 years of Nigeria’s independence in 1960. Governance failures are more accurately used to describe Nigeria when being compared to contemporary countries like India, Malaysia, South Korea, Singapore and even Indonesia and Bangladesh with similar political and developmental history.
Perpetuating poor governance poses existential to Nigeria and Nigerians
The reality today is that Nigeria cannot afford perpetuating a protracted abysmal governance because at this point it poses the severest existential risk to the country and people. The absence of good governance is proven by empirical studies to be the greatest obstacle hindering Nigeria’s political, economic and social development thereby limiting the prospects for inclusive prosperity, stability and resilience.
World Bank Governance Indicators show a continued record of decline in rule of law, control of corruption in Nigeria. Transparency International Corruption Perception Index ranks Nigeria 140th out of 180 countries with an aggregate governance score of 2.6 out of 10.
This means that Nigeria scored 26 points out of 100 on the 2024 Corruption Perceptions Index which places the country in the bottom third of nations assessed. On the Mo Ibrahim Index of African Governance, Nigeria ranks 34th out of 54 African countries.
The persistent record of poor governance is not an accident considering that democracy has been hijacked by a criminal enterprise gang who by state capture in Nigeria and most of Africa have arrested the development of their people. This anomaly has distorted politics and its processes and outcomes into a monopoly of governance by the political class to build their personal wealth and influence to the utter neglect of their impoverished citizens.
Take the matter of security governance in the context of catastrophic insecurity and instability.
Nothing currently impedes Nigeria and Nigerians on all aspects of progress as the erosion of the value for and dignity of human life which is resulting from the worst degree of insecurity and instability that the country has experienced in the last decade or more.
Normalized security crisis persists across all regions of the country. Long-running terrorism is the case in the North, East, West, and Central, characterized by Boko Haram terrors, kidnapping, massacres and farmer-herder killings in the North Central, serial killings and violence in the South-East, militancy, political violence and farmer-herder killings in the South-South and South-West.
The command-and-control centralised security architecture that places monopoly power in the President as Commander-in-Chief of the Armed Forces makes the security establishments unable to respond to local threats. State governors are reduced to “Chief Security Officers” without actual security power. Community policing initiatives are hampered by constitutional limitations and have rendered hinterland parts of our country vulnerable as ungoverned spaces.
Leadership failures manifest themselves in weakened capacity and lack of will of political leaders to manage the rich diversities of the country thereby worsening ethnic and religious divisions and tensions. Religious and ethnic conflicts persist due to poor capacity to inspire and mobilize Nigerians behind common aspirations institutionally thereby creating room for secessionist rhetorics more than fifty years after the civil war.
The Constitution fails to adequately address Nigeria’s diversity and the federal character principle which is breached capriciously by political leaders creates opportunities for unjust abuse of quota system rather than merit-based governance.
The economy in doldrums
Economic stagnation and declining welfare of majority of Nigerians with poverty levels increased from 27% (1980) and now 129 million Nigerians—56% of the population—live in poverty, a sharp rise from 40.1% in 2018 World Bank.
Meanwhile, inflation, that worst enemy of the poor and which acts as a punitive tax on investment, hit a 28-year high of 34.19% although the current rate stands still at a stratospheric 32.5%. The ratcheting numbers for debts are staggering. The 2025 budget of N49.74 trillion represents a 56.89% increase from 2024 with debt servicing alone consuming N16.3 trillion—nearly 98% increase from N8.25 trillion in 2024. Nigeria’s total debt could reach N187.79 trillion by end-2025, with the debt-to-GDP ratio hitting 53.8%.
Unjustifiably for a country with enormous agricultural potentials, over 31.8 million Nigerians are experiencing acute food insecurity, and the country has the second-highest burden of stunted children globally, with 32% of those under five affected.
Youth unemployment currently exceeds 40% and reflects the fact that the economy is not rapidly expanding to offer opportunities to even the skilled unemployed. Over-dependence on oil revenue due to centralized fiscal system and limited economic diversification and innovation stymie the entrepreneurial spirit of women and young people.
Revenue concentration and oil dependence issues
Persisting over-reliance on volatile oil revenues (70-80% of total revenue) has entrenched the economic problem of Dutch Disease depicted in the neglect of non-oil sectors, weak diversification and low productivity of the economy. As a result, the economy is constantly vulnerable to external shocks in the boom-bust cycles in government finances dominated by proceeds from oil. Weak tax culture and administration.
Human development lags as population explodes
Nigeria ranks 161st out of 189 countries on the UN Human Development Index with an HDI of 0.548 (2022), placing it in the “low human development” category. Maternal mortality rate is among the highest globally.
Latest figures show a maternal mortality rate of 576 per 100,000 live births, the fourth highest on Earth according to UNICEF. Each year approximately 262,000 babies die at birth, the world’s second highest national total. Nigeria now has 18.3 million out-of-school children making it the country with the highest number of out-of-school children globally according to UNICEF. Life expectancy is 54 years and significantly 23 years lower than the 77 years average for the world.
The benefits of fiscal federalism are far from Nigerians
Evidently as the conditions of Nigeria reveal, the benefits of fiscal federalism are not automatic simply because a written constitution like the 1999 Constitution of Nigeria states so. The constitutional process and the democratic negotiations of the priorities of the citizens as well as careful institutional design and execution, strong political will, and sustained commitment to democratic governance and rule of law are what accord legitimacy to the document as a grundnorm. These failures demonstrate that the current constitutional framework is fundamentally inadequate for Nigeria’s development needs.
Nigeria clearly has not been fortunate with any of these key determinants of all successful federal systems. The absence of these critical elements and many others explain the basis of poor benefits accruing from Nigeria’s federal system. The multiple political disruptions of democracy in Nigeria systematically eroded the practice of the known principles of federalism.
The experience of successful federal systems like those in the United States, Canada, Germany, and Australia demonstrates that when properly implemented, fiscal federalism can deliver significant benefits in terms of economic growth, democratic governance, and social development.
For Nigeria, with its enormous diversity and complex challenges, our Nationalists at independence were persuaded that fiscal federalism offered perhaps the best path toward achieving unity, prosperity, and good governance while respecting the country’s rich cultural and ethnic diversity.
However, as the democratic journey of Nigeria suffered disruptions over time, militarised, centralized, unitary practices took a chokehold on governance and ended up framing and being written in the constitutional frameworks. Hence, the structure of governance of Nigeria has limited fiscal autonomy for states and local governments.
The distribution of power, functions and resources is heavily skewed toward the federal government. For example, revenue allocation to the Center is 52.68% and the Federal Allocations account for between 60-80% of what constitutes State revenue of the 36 States in general with about only 3-4 exceptions that have materially high Internally Generated Revenue (IGR).
Furthermore, our version of fiscal federalism imposes a uniform structure on diverse regions with different needs. States have been reduced to administrative units that are entirely or mostly dependent on federal allocations. The Local governments are also stripped of meaningful autonomy and practically cannot deliver on their mandates.
The structural disadvantage stifles innovation and competition among sub-national governments and the consequences of the imbalances have become increasingly evident in the failure to achieve meaningful political stability, security and order, economic progress, equity, inclusion and social cohesion.
The common denominator of structure in building a house and a nation
As in the building of a house which requires a strong foundation so also does nation-building thrive on the existence of the right structural anchor. In political systems, the structure of governance acts as the powerful determinant that shapes political outcomes, often more than ideological intentions or individual leadership do.
The Constitution defines the structure upon which a country operates. The structure defined by Constitutional architecture is what propels or constrains the political, economic and social possibilities of the people both individually and collectively.
A constitution can define the structure of governments to be unitary — that is, centralised or federated — that is, decentralised. Federal structures distribute power differently than unitary states, creating multiple centers of authority that must negotiate rather than a single hierarchy. It therefore matters enormously who midwives a constitutional process and concludes on the principles and substance of its provisions.
No wonder protagonists, including me, who champion constitutional reforms in Nigeria call attention to the military-conducted 1999 Constitutional processes and decisions which inherently delegitimized it as a document that embodies the agreed will and aspirations of the people of Nigeria.
A strong incentive for Constitutional change: Enormous Benefits of Fiscal Federalism are Eluding Nigeria Nigeria has both a revenue and expenditure problem in resource management. Starting with expenditure, true fiscal federalism enhances efficiency induced by better resource allocation. Unlike unitary structures, Sub-national governments can allocate resources more efficiently based on local knowledge and preferences, leading to better matching of public services with citizen needs.
There is also reduced government waste arising from the possibility of competition among states which creates pressure to minimize inefficiency and bureaucratic waste. Innovation in Service Delivery is achieved as States would experiment with different approaches to providing services, leading to innovation and best practices that others can adopt.
Increased Revenue Generation is usually achieved in federal systems through the Tax Competition Effects. States would compete to create business-friendly environments, potentially increasing overall tax compliance and economic activity. Diversified revenue sources which changes Nigeria’s current “monocultural economy” that depends almost entirely on oil is possible. States would be incentivized to develop diverse economic sectors. Improved Tax Administration whereby States closer to taxpayers could develop more effective, technology-driven tax collection systems should ordinarily be prevalent.
Economic Development and Growth should be the positive outcomes of regional specialisation in a true fiscal federalism framework. Different states focus on their comparative advantages (agriculture, manufacturing, services, natural resources). Were this to be the case, States with better governance and infrastructure would attract more domestic and foreign investment.
Democracies mature and become resilient through strong political participation of citizens, especially at the State and local levels. Citizens would have more meaningful opportunities to influence governance at those levels.
Fiscal and financial benefits of revenue optimisation is highly feasible as healthy competition between states for tax compliance could increase overall government revenue occurs. Efficient public spending supported by local knowledge would lead to better prioritization of public investment as well as reduce fiscal leakages and deficits. Sustainable Debt Management as States would bear direct responsibility for their borrowing decisions, creating incentives for fiscal discipline.
Nigeria has a poor leadership preparation system from the local to national levels. Political leadership development would encourage a strong pipeline of competent and accountable public leaders to emerge. Decentralized governance creates more opportunities for political leaders to gain executive experience and produce better results for the welfare of the people.
Corruption and bureaucratic incompetence and inefficiency can also decline in cases of devolution of power because multiple centers of authority naturally increase transparency in decision-making.
Overall, federalism is associated with faster decision making because it eliminates the need for federal approval on many issues thereby speeding up government responsiveness. Smaller, more focused government units typically operate more efficiently than large centralized bureaucracies.
Socio-political benefits are generally more likely thus improving national unity and stability. The true practice fiscal federalism could address the “perceived injustice in resource distribution” that fuels ethnic conflicts. Effective accommodation and management of the high degree of diversity of the Nigerian people along many identities of ethnicity, gender, ideologies, languages, cultures, religions, beliefs, etc.
Social Development benefits from fiscal federalism as more attention is directed towards improving the wellbeing of the poorest and most vulnerable people at the grassroots through targeted social programs. States are more inclined to be context-specific in their design of programs to tackle poverty and deliver social protection.
A true practice of fiscal federalism will foster greater regional autonomy and cross-regional cooperation and collaboration and satisfy demands for self-determination without breaking up the country. Leadership capacity could improve regionally as more autonomous governance would develop a larger pool of experienced administrators and leaders from the incentive of the people to elect competent governments.
Educational advancement and overall human capital development usually benefits from genuine practice of fiscal federalism. States could develop education systems that reflect local needs while maintaining national standards. Skills development and training programs would be tailored to match the economic development strategies of different States. Brain retention will consequently be enhanced in a context of better opportunities and governance as emigration of skilled people reduces.
Equity and justice in the ownership and governance of natural resources. Resource control and environmental justice for especially oil-producing states is best guaranteed by a true practice of fiscal federalism. Such arrangement would have “absolute control over the mineral resources found within their jurisdiction” addressing long-standing grievance.
Fiscal federalism enhances opportunities for balanced development. Non-oil producing states would be incentivized to develop their own resource bases rather than depending on oil revenue redistribution. This would reduce regional disparities as competition and local initiatives act as a trigger for lagging regions to catch up.
Is there a pathway out of our Constitutional conundrum? — How to get a new Constitution for Nigeria
A strong institutional framework is imperative for fiscal federalism to harness the country’s economic potential, strengthen governance, and promote equitable development. A robust and transparent institutional foundation is critical for fiscal federalism to function effectively.
The fundamental pathway to a clear, balanced, equitable, effective and efficient Constitutional division of responsibilities is a people-led Constitutional process for a new Constitution. Such a legitimate process would assign distinct fiscal and administrative roles to federal, state, and local governments and redistribute the overloaded items on the Exclusive List to enhance efficiency.
Different regions could pursue policies that reflect their cultural values and priorities while simultaneously maintain and defend their collective identity and common interests, shared values and agreed vision as Nigerians.
Cognizant of primary powers granted by Section 9 (1) of the 1999 to the National Assembly on matters of amendments of the Constitution, it has created a conundrum for advocates of a new constitutional process that is people-led. The provision states that the National Assembly “may, subject to the provision of this section, alter any of the provisions of this Constitution”.
It is in exercise of this power that the National Assembly has legitimately carried on with amendment proceedings that have culminated in the ongoing exercises across the country. Sadly, these National Assembly has not inspired the confidence of majority of Nigerian citizens who insist a preference for a constitutional process that guarantees ownership and legitimacy of a New Constitution that is citizens-led.
I recommend therefore that instead of the expensive and wasteful exercise charade going on now as a National Assembly-led amendment of the 1999 Constitution, the lawmakers should strategically retrace steps in the interest of Nigerians and commence a Single-Issue amendment that permits a constitutional process of empowering eligible voters to elect delegates to a Constituent Assembly in a process that is compliant with proportional representation.
The recommended approach to constitutional reform should be people-led and designed to further advance the principles of ownership and legitimacy by providing that the conclusions of the Constituent Assembly constitutional dialogue will be voted and approved through a Referendum that enables all Nigerians of eligible age to vote Yes or No on each issue presented.
The media in Nigeria should be in the frontline of the mobilisation for the demand of a new Constitution. What happened to the Nigerian journalism of the past that helped to steer the country towards the right direction? Where are our journalists who in the past acted as credible purveyors of public debates on the most fundamental issues of nation building?
We need the media to reemerge and be at the forefront of the vanguard to rescue our democracy. A constitutional process which centers the Nigerian people in process and substance is worth fighting for by all Nigerians.
It is time to mobilise and bring men, women, the young, the old, civil society organisations, community-based organisations, the academia, ethnic nationalities, Nigerians in Diaspora, professional groups, faith-based organizations, traditional rulers, religious leaders, youth groups, market men/women, security experts, student leaders, the private sector and persons with special needs together on the Constitutional reforms agenda.
Ladies and gentlemen, our democracy can still flourish but it will not until we collectively mobilize our citizens to demand for the new Constitution that positions our country to evolve into a nation of people with shared values, an agreed identity and common vision.
The journey towards a new Constitution has begun with The Patriots, who in their recent 2025 National Summit on The Future of Nigeria’s Constitutional Democracy and in collaboration with the Nigerian Political Summit Group took responsibility to confront our present reality with the Truth and nothing but the Truth.
And that Truth, is that Nigeria urgently needs a new Constitution… if we must stop failing. It is in fact a matter of life and death.
Thanks for listening to me.
Ezekwesili, Founder and President of Human Capital Africa, and former Minister, delivered this keynote address at the seventh Anniversary Lecture of Penpushing Media in Abeokuta, Ogun State, 31 July 2025
