When the Problem Is How to Manage Financial Windfalls: Issues of Public and Private Sector in Nigeria

WHEN THE PROBLEM IS HOW TO MANAGE FINANCIAL WINDFALLS: ISSUES OF PUBLIC AND PRIVATE SECTOR IN NIGERIA

TABLE OF CONTENT

1. Introduction

2. Legal Perspective

3. Private and Public Sector - Clash of Interest

4. Effect of Windfall on the Nigerian Economy

5. Towards Proper Management of Financial Windfall

6. Conclusion

INTRODUCTION

Windfall is described as unexpected good fortune by the Concise Oxford Dictionary of Current English. As such, financial windfall could be described as unexpected financial good fortune. In other words, it is unexpected revenue accruing to a person, group of persons, an incorporated entity and/or state as the case may be.

It must be noted that such accruing fund was never expected; it is, therefore, not budgeted for and spending such money tends to be more sensitive, difficult and dangerous. It is sensitive because for every bonanza, there is a price to pay for it at the end of the day. It is difficult because you do not have a plan for spending such money as it was not expected and when it comes suddenly there is always noise from left and right accompanying such money. One, everybody want to be part of success, as such, in Nigeria context it has to be shared like a wedding cake or else,...............! Again, it is dangerous because if not properly managed or invested it can dictate the doom of such entity. As you can set a standard, as a result of the windfall, that you will not be able to catch up with in the near future. Then, there will be problem(s).

Financial windfall is a temptation and trial to many, as it can be a blessing as well as curse on the person(s) having it. To narrow the discussion down, we assume that the government is the receiver and manager of such financial windfall. As such, it will be the problem of private and public sector of the economy to either enjoy the blessing or suffer the curse arising from such windfall.

However, financial windfall could arise as a result of unexpected event like war, unexpected rise in demand for a country mineral resources like gold in Ghana or crude oil in Nigeria and possibly, monopolistic effect on price of crude oil in Nigeria, for instance.

One could imagine why there should be a problem in managing fund especially unexpected fund but academically and even, practically it is found to be very tedious as a lot of things has to be put into consideration. During the Gulf war, Nigeria, for instance, enjoy huge financial windfall as a result of the war between Iraqi and United States of America. But this time around that America is terrorizing Afganistan by indirectly terrorizing the Organisation of Petroleum Exporting Countries (OPEC) that they should not take advantage of the situation on ground to increase the price of crude oil or else individual member country will be seen as supporting terrorism. Who is terrorizing who!

The question is must there be a problem in managing financial windfall? Yes, there are many problems because the private sector and/or public sector want to be charged with such responsibilities. The question again, is why asking for bigger and enormous task and responsibility? Simply, it is because they are Nigerian! An average Nigerian wants the best for his or herself alone. No more, no less! It is not because they want to be prudent and wise in managing such fund.

This is, therefore, the reason for this study. To know why there is clash of interest from both the private and public sector; who should manage such financial windfall really and possible immediate and future effects of such windfall on the economy and on the citizenry in terms of standard of living and possibly, suggest some prudent ways of managing such fund.

LEGAL PERSPECTIVES

This is just to look at the legal and constitutional framework of managing such financial windfall. Section 162 subsection 1 of 1999 constitution says "The Federation Account shall maintain a special account to be called The Federation Account into which shall be paid all revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the armed forces of the Federation, the Nigeria Police Force, the ministry or department of government charged with responsibility for foreign affairs and residents of the Federal Capital Territory, Abuja."

While subsection 2 of that same section 162 talks about seeking for approval from the National Assembly by the President upon receipt of advice from the Revenue Mobilisation Allocation and Fiscal Commission on the revenue allocation to the states and local governments based on population density, equality of states, internal revenue generation, land mass, terrain and so on.

We shall be concern with the subsection 3 of section 162 which states that "any amount standing to the credit of the Federation Account shall be distributed among the federal and state governments and the local government councils in each state on such terms and in such manner as may be prescribed by the National Assembly".

The word revenue in subsection 1 of this section means any income or return accruing to or derived by the government of the Federation from any source according to subsection 10 of section 162 of 1999 constitution.

Based on the above citation, certain things were obvious to us.

1. That all revenue whether "breeze fall" or windfall, any revenue whatsoever collected by the government of the federation shall be kept by the government of the federation.

2. That the only exception are taxes from the personnel of the armed forces, foreign affairs and the Federal Capital Territory, Abuja.

3. That such fund can only be shared, based on the approval of National Assembly accordingly among the three tiers of government. This implies that the private sector could not benefit from such financial windfall, at all.

4. That management of financial windfall is vested in the President of the federation and it should be spent just as other revenue accruing to the government.

In the days of the military government in Nigeria, like during General and President Ibrahim B. Babaginda's regime, such windfall is spent at the discretion of the Military Head of state