Nigeria - Politics, government, and taxation
Nigeria is a federal republic currently under a strong presidential administration, a National Assembly made up of 2 chambers—a Senate and a House of Representatives—and a judiciary. It has 36 administrative divisions known as states. Each of the states is divided into local governments. Thus, Nigeria has 3 tiers of government: national, state, and local.
Nigeria emerged from British colonial rule with a multi-party system deemed essential to democratic governance. However, those political parties were not differentiated or distinguished from each other by any political or economic ideology. Rather, they were essentially ethnic and regionally based, and were preoccupied with promoting ethnic and regional interests. Two of the largest parties, the Northern Peoples Congress (NPC) and the Northern Elements Progressive Union (NEPU), represented and championed the interests of the predominantly Muslim Northern Nigeria. The other leading parties, the National Council of Nigerian Citizens (NCNC) and the Action Group (AG), pursued the interests of the southeast and southwest where they were respectively based. The primary interest of the political parties was thus to use Nigeria's constitutional set up, together with the country's national wealth and power, to promote ethnic and regional security and well-being rather than a national end. Thus, upon independence from Britain in 1960, the 4 leading political parties preoccupied themselves with acquiring control of Nigeria's national wealth and power rather than distributing the nation's power and resources equitably among its nationality groups. This issue continues to dominate Nigerian politics in spite of the formation of more comprehensive national parties in the late 1970s and early 1990s.
The politics of ethnic and regional security play a key role in Nigeria's political and economic development as well as its role in Africa and the world in general. It is the major source of growing political crisis in Nigeria. It undermines the selection of responsible and responsive national leadership by politicizing ethnicity. National leaders are recruited on the basis of their ethnicity and region, rather than their ability, experience, and vision. Hence, Nigeria's political and economic performance falls below par in comparison with other countries of comparable size and resources. The primacy of ethnicity has resulted in periodic outbreaks of violence between Nigerian people groups; this violence, in turn, supports military governments that rule with an iron fist in order to maintain order in Nigeria's tense political climate. Census enumeration for economic planning and electoral representation has fallen victim to the same ethnic politics as people groups claim bloated population numbers in order to secure more government funding and representation. It is also often the factor that determines the location of industries and development projects rather than feasibility studies or viability of the location.
Nigeria has been under 3 civilian administrations and 7 military regimes since its political independence from Britain in 1960. After the independence elections in 1959, an NPC-NCNC coalition ruled the country with Sir Abubakar Tafawa Balewa of the NPC (the senior partner) as the prime minister. In mid-January 1966, Sir Abubakar and a few of his associates were killed in a poorly executed but popular military coup after a succession of political crises, violence, and repression which Sir Abubakar could not or refused to stop. The leader of the coup, Major Kaduna Nzeogwnu, portrayed the deposed leaders as corrupt individuals who sought to keep Nigeria permanently divided so they could remain in office.
The 15 January 1966 military coup established Nigeria's first military government under General John T.U. Aguiyi-Ironsi. Like most of the leaders of the coup that overthrew Abubakar's government, Aguiyi-Ironsi was an Igbo from southeastern Nigeria, which immediately raised the suspicions of the Muslim leaders and soldiers of northern Nigeria. They saw the coup as a plot to impose Igbo-domination on Nigeria, and resentment in northern Nigeria against Aguiyi-Ironsi grew fast. His corrective policy of centralization of power became an excuse for a counter-coup by northern soldiers that put a northerner, Yakubu Gowon, in power on 29 July 1966. Initially, Gowon's regime was uncertain and unstable. It witnessed an orgy of ethnic bloodletting in which about 30,000 Igbo residents in northern Nigeria were slaughtered. Attempts to restructure Nigeria into a confederation failed. In May 1967 as Colonel Obumegwu Ojukwu, governor of Eastern Nigeria, contemplated the breakaway of the region, Gowon issued a decree dividing Nigeria into 12 states—6 in the North, 3 in the East, and 3 in the West and Midwest. On 30 May 1967 Ojukwu declared the Eastern region the Sovereign Republic of Biafra. Consequently, a 30-month Nigeria-Biafra War began in July 1967. The war ended in January 1970 when Nigeria forced Biafra's surrender.
Achievement of post-war reconciliation and reconstruction goals was remarkably smooth, facilitated by the oil boom of the early 1970s. However, Gowon suspended the country's normal political activities beyond his promises and the expectations of eager politicians. In addition, he was unable to curb widespread corruption as well as a scandalous and excessive import of cement that clogged the port of Lagos (then Nigeria's capital). Consequently, he was overthrown in a bloodless coup on 29 July 1975 by General Murtala Muhammad.
In February 1976 Muhammad, who had already initiated a plan for a return to civilian rule over a period of 4 years, was himself assassinated in an attempted coup later that year. He was succeeded by his second-in-command, General Olusegun Obasanjo. In the same year, 7 additional states were created, bringing the total to 19. By 1996, 17 others were carved out. Meanwhile, Obasanjo strictly observed the set schedule for a return to civilian rule. An assembly elected to draft a new constitution completed the task in 1978. The constitution was published on 21 September 1978. On the same day the ban on political activity was lifted, leading to the formation of 5 political parties. In 1979, the political parties competed in a series of elections for state and national offices. Shehu Shagari, a northern Muslim and member of the National Party of Nigeria (NPN), was elected as president. Thus, after a transition period of 3 years Obasanjo transferred political power in October 1979 to a civilian administration led by Alhaji Shehu Shagari.
President Shagari's administration marked the beginning of Nigeria's Second Republic. His administration was a coalition of 2 political parties—the National Party of Nigeria (NPN, senior partner) and the Nigerian Peoples Party (NPP). Under the administration, the characteristic politics of ethnic and regional security that ruined the First Republic re-emerged. The coalition collapsed in 1981. Internal dissension, corruption, and abuse of power by the administration became manifest and weakened the moral authority of the government.
Senior military officers overthrew Shagari's government on 31 December 1983. The officers accused the government of widespread corruption, waste, and mismanagement of the economy, making Nigeria a "beggar nation." From 1984 to 1998, Nigeria experienced socioeconomic and political subjugation under 3 successive military dictators: Muhammadu Buhari (1984 to 1985), Ibrahim Badamosi Babangida (1985 to 1993), and Sani Abacha (1993 to 1998). The series of dictators caused further decline in the Nigerian economy as unprincipled, unproductive, corrupt, and weak political elites partnered with the military to smother any opposition and banish all democratic liberties and opportunities in the country. A planned return to civilian government in 1993 did not take place. On 23 June 1993 Babangida nullified the election of Moshood Abiola, a Yoruba businessman from southwest Nigeria as president on 12 June. Faced with riots, in which 100 people were killed, and lack of support from the military, Babangida stepped down on 26 August and installed a military-backed interim government headed by another southwestern Nigerian businessman, Ernest Shonekan. Shonekan, who received little or no public support because he was perceived as a strategic tool of the military, was to rule until new elections, scheduled for 1994. He was unable to deal with Nigeria's ever-growing economic problems and was removed on 17 November 1993 by Sani Abacha, who then assumed full political authority.
Abacha quickly dissolved all democratic political institutions and replaced all elected governors with military officers. He promised to return the government to civilian rule but refused to disclose a timetable. Faced with domestic and external criticism for his measures, Abacha called for elections for delegates to a Constitutional Conference. Most Nigerians boycotted the elections which were held in May 1994. Leaders of the major opposition group, the National Democratic Coalition (NADECO), were arrested when they attempted to reactivate disbanded democratic institutions. In 1997 Abacha inaugurated a period of transition to civilian rule and promoted the emergence of 5 political parties. Soon, however, he decided instead on a program of self-succession; he created and financed a youth movement and other paid political sycophants (flatterers) to advocate his self-succession. He manipulated the 5 political parties to adopt him as their candidate for the presidency. Thus, the national election that had been planned for August 1998 was to become a referendum (a decision by the general population) on Abacha's self-succession. Every measure of opposition against the plan was foiled, while lavish national resources were spent to promote it. The referendum on Abacha's self-succession did not take place, however. On 7 June 1998, Abacha died suddenly, the nation was told, from natural causes. While he ruled, Abacha had committed human rights abuses, significantly impaired the authority and independence of the judiciary, imprisoned his critics, looted the national treasury, and failed to tackle the nation's economic problems.
Upon Abacha's death, General Abdulsalami Abubakar was selected by the military leadership to succeed him. Abubakar worked to calm the tempers of an agitated nation and promised to end military dictatorship through a genuine transition to civilian rule by the end of May 1999. He proceeded to release Abacha's political prisoners, including journalists and human rights activists. He reached an understanding to release Moshood Abiola—the presumed winner of the 12 June 1993 presidential election annulled by Babangida—from detention. However, Abiola died of a heart attack in August before he could be released. In a further move, Abubakar dissolved the 5 Abacha-regime political parties. In their place emerged 15 others, only 3 of which—People's Democratic Party (PDP), All People's Party (APP), and the Alliance for Democracy—were certified to contest the elections at local, state, and national levels. The elections were completed at all levels by February 1999. The PDP won a majority of the seats in both chambers of the National Assembly as well as 21 of the country's 36 governorships. Olusegun Obasanjo, a former military head of state and a PDP candidate, won the presidential election. On 5 May 1999, Abubakar proclaimed by decree a constitution which went into effect on 29 May 1999. On the same day Obasanjo was inaugurated as the president of the Third Republic of Nigeria.
His administration faces formidable political and economic problems. Leaders of the southern states persistently demand a sovereign national conference to restructure the federation. The governors, especially those of the oil-producing states, demand a new formula for revenue allocation. Leaders of the northern states complain of neglect and inadequate allocation of resources and national offices to their region. Infrastructure of roads, especially in the south, is in disrepair. There is a growing income disparity, and a constant shortage of electricity and gasoline. Lax security and widespread armed robbery have triggered demands for regional control of security and resources. Ethnic and religious clashes discourage foreign investment and worsen the enormous rate of unemployment. Critics have described Obasanjo's government as unimaginative in dealing with these issues.
From independence in 1960 to the present, Nigerian governments, whether civilian or military, have not differed substantially on their economic policy. Each supported the concept of a mixed economy—a public sector controlled by the state and a private sector or free enterprise—and state intervention in such social sectors as education and health. This was in accord with the system of economy inherited at independence from Britain. In 1962, 2 years after independence, Sir Abubakar's government inaugurated a 6-year development plan. The plan mapped Nigeria's transition from an agricultural economy to a mixed economy whose bases were agricultural expansion and limited industrial growth.
Broad in its scope, the economic development plan sought to achieve national economic objectives, such as faster growth and higher levels of average material welfare. The plan included economic forecasts, policies towards the private sector, and a list of proposed public expenditures. Nigerian political leaders determined the general objectives and priorities of the plan, but the main authors of the actual document were foreign (Western) economists. The national government became heavily involved in carrying out the plan because it was unable to generate local private investment to raise sufficient capital for development. The Western advisors discouraged increased taxes on the wealthy and called for foreign assistance—about 50 percent of the public-sector investment—in carrying out the plan.
After the civil war, the military regime of Yakubu Gowon instituted a second development plan for the years 1970 to 1975. The plan sought to promote reconstruction after the civil war, to restore the nation's productive capacity, and to achieve a measurable degree of self-reliance. In 1972 the government issued the first of Nigeria's indigenization decrees that forbade aliens to invest in specified enterprises and reserved participation in certain trades to Nigerian citizens. At that time, about 70 percent of commercial firms operating in Nigeria were foreign-owned. In 1975, as a follow-up to the indigenization decree, the federal government bought 60 percent of the equity in the marketing operations of the major oil companies in Nigeria. It rejected full nationalization as a means of promoting its program of indigenization. After the overthrow of Gowon in 1975, a third development plan (1975 to 1980) was begun. Stimulated by the oil boom of 1974, the plan sought to expand agriculture, industry, transport, housing, education, health facilities, water supply, rural electrification, and community development. These objectives were not fully achieved because of inflation in minimum wage and administrative salaries awarded by the Udorji Commission and decline in projected oil revenue.
The slump in oil revenue caused the civilian administration of Shehu Shagari to delay the start of the fourth development plan (1981 to 1985). Falling oil revenues, cost of increased food imports, and the inability of the local governments to carry out their responsibilities threatened and undermined the plan. The overthrow of the civilian government of Shagari by Muhammadu Buhari in 1985 delayed the fifth development plan. In 1989, General Babangida, who had overthrown Buhari in 1985, abandoned the idea of a 5-year national development plan. In its place he introduced a 3-year "rolling plan" between 1990 and 1992, anticipating a more comprehensive 15-to 20-year plan. Because of rapid change and economic uncertainty, such rolling plans were to be revised at the end of each year and new estimates, targets, and projects were to be added. Babangida's rolling plan sought to reduce inflation and naira exchange rate instability, achieve food self-sufficiency, maintain infrastructure, and reduce the adverse effects of economic structural adjustment he had imposed on the nation. His rolling plan did no better than previous 5-year plans to promote Nigeria's economic development. The current civilian administration of Obasanjo is emphasizing a private-sector-led economy and "market oriented" economy. So far, it has done little to create a solid enabling environment in spite of its anti-corruption campaign aimed at injecting transparency and accountability into economic decision-making.
Nigeria derives its budgetary revenues primarily from petroleum profit taxation, import and excise duties , and mining rents and royalties. Petroleum taxation accounts for 65 percent of the budgetary revenues. As of May 2000 the tax rate for assessable petroleum profit was 85 percent. In March 1995, the government established a new tariff structure levying taxes on imported goods, ranging from 5 to 60 percent. Import tax is non-preferential and applies equally to all countries. Import duties are either specific or ad valorem ( value-added tax , VAT) depending on the commodity. In 2000 the VAT rate was 5 percent. Import duties are collected by the Nigerian Customs Service in association with government-appointed accounting/auditing firms and paid into the federal treasury through selected banks, such as First Bank of Nigeria, Public Limited Company (PLC); Union Bank of Nigeria, PLC; and United Bank for Africa, PLC.
Other sources of revenue include: companies' income tax (30 percent of assessable profit), capital gains tax (10 percent of capital gains), various types of licenses, and personal income tax. Employees "pay as they earn." Such taxes are deducted at monthly pay periods by employers for the federal treasury. In 2000 the tax rate varied from 5 to 25 percent of cumulative or total taxable income. Prior to the 1970s, self-employed people, including well-to-do traders and business people, paid virtually no income taxes. The government sought to collect the taxes by introducing tax clearance certificates. Individuals had to produce such certificates, proving that they had paid their taxes, before receiving government benefits, holding public office, or receiving passports for foreign travel.