November 27, 2012 9:11 pm

The north: Unequal growth puts strain on federation

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A girl hawks drinking water©Reuters

National divide: people in the north are among the poorest in Africa

The comparative economic decline of Nigeria’s north was putting a strain on the federation long before an Islamist insurgency took root. The insurgency, spawned in the poorest part of the country, the northeast, is compounding this threat to Nigeria’s unity.

Kidnappings, bombings and a brutal military campaign against the al-Qaeda linked Boko Haram sect, have deterred fresh investment, while slowing both national and regional trade.

Like the ancient walled city of Kano, Maiduguri in the northeast was once one of the largest trading centres in the semi-desert Sahel.

Under curfew, and subject to frequent bouts of violence, Maiduguri is a pockmarked city and a ghost town much of the time. Kano too is a shadow of its former self, its large industrial zone a wasteland, with most of its warehouses and factories closed.

Consumer goods companies say sales are falling as traders who used to flock across the border from neighbouring countries go elsewhere.

Internally, trade has slowed and transport has become more expensive because of shorter market hours and holdups at military road blocks. The International Monetary Fund has shaved its overall estimate of growth in gross domestic product for Nigeria this year to a below trend 6.3 per cent.

Boko Haram was not inspired directly by the economic conditions of the predominately Muslim north. Its origins were in a radical Muslim cult drawn into a fight with security agencies.

“Their beef was not originally political. It morphed when they felt more grievances with the state,” says an official drafted in to help develop a de-radicalisation plan for the region, including a shakeup of the Koranic education system.

Over the long term, this is unlikely to work, regional politicians and business people argue, unless there is something of a Marshall Plan to regenerate the economy and create jobs.

“The best thing is that the whole mess is waking people up to the need to revitalise the north. We have the largest population and a huge youth bulge,” the official says.

As things stand, the way state funds are allocated and the direction in which private investment is flowing, are skewed heavily in the south’s favour.

Oil-producing areas of the south benefit from 13 per cent of the revenues generated from oil in their area, on top of the federal allocations they and other states receive.

As world oil prices have risen, this has led to a widening gulf in income between states with oil and those without. The formula was introduced after the military relinquished power in 1999 as part of efforts to redress historic grievances among the inhabitants of the Niger delta and quell a militant campaign that was jeopardising output.

But by seeking to address one problem, Nigeria may inadvertently have helped create another, weakening other states in the federation and fostering resentment in the poorest region.

The imbalance is so stark because the state still depends on oil for more than 80 per cent of revenues. It has made little progress in raising taxes from agriculture, which accounts for 42 per cent of GDP, and the north’s mining potential has long gone unexploited.

“When you look at the figures and look at the size of the population in the north, you can see there is a structural imbalance of enormous proportions,” Lamido Sanusi, the central bank governor told the FT earlier this year.

Broken down on a per capita basis, the contrast between allocations to the states in the north and those in the south are stark. Between 1999 and 2008 the inhabitants of the six states in the northeast received on average N1,156 per person compared with N3,332 per person in the south.

As might be expected, inhabitants of the delta are fiercely defensive of this revenue formula, given that their own region saw little benefit from oil during the many years when Nigeria was ruled by northern leaders. But the absence of dividends flowing to the north is a source of national tension, for which market forces have not provided an answer.

Many of the state-owned or protected industries established in the north as part of earlier efforts to promote economic balance, were loss-making by the time the government accelerated its privatisation programme in 1999. Almost all the region’s textile factories have since closed, at the cost of hundreds of thousands of jobs.

The north’s inhabitants, although more numerous, are among the poorest in Africa, and therefore represent a less attractive market for the banks, telecoms and retail companies booming in southern pockets of comparative affluence.

While industry in the north might become viable again if reforms in power supply begin to deliver, the case for more state intervention to bridge the gulf is unlikely to go away.

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