Why It’s Unconstitutional To Exclude Southeast From $23B loan

By Aloy Ejimakor

According to several credible news outlets, the Southeast is excluded from the proceeds of, or the spending plan proposed for the $23B foreign loan recently approved by the Nigerian Senate. If true, it’s unconstitutional, and wrong, to boot.

First, it’s mischievous to suggest that the loan was approved for the Federal Government. It’s not. Instead, the loan was, as a matter of law, approved for Nigeria or the Federation of Nigeria and the proceeds must be bound for the Federation Account, not the account of Federal Government.

If it’s the Senate that is characterizing the proceeds of this loan as belonging to the Federal Government alone, that too is unconstitutional. It’s not the Senate of the Federal Government but a Senate of the Federal Republic of Nigeria or of the Federation of Nigeria.

Second, it’s not the separate resources of the Federal Government that will be used in repaying the loan. It’s the resources of Nigeria or the Federation of Nigeria, particularly oil, of which a substantial portion comes from the Southeast.

Third, loan or not, the $23B should count as REVENUE (or proceeds) accruing to the Federation of Nigeria, not the Federal Government of Nigeria, which is merely a tier of the three tiers constituting the Federation of Nigeria. The States and the Local Governments are the other two tiers. They cannot be excluded from the till.

Fourth, Section 162(1) of the Constitution provides that “The Federation 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 the residents of the Federal Capital Territory, Abuja”.

As can be seen from above, LOANS are not one of the ‘proceeds’ exempted from the Federation account. To be sure, the same Constitution defined “revenue” at Section 162(10) by stating that “For the purpose of subsection (1) of this section, “revenue” means any INCOME or RETURN accruing to or derived by the Government of the Federation from ANY SOURCE and includes- (a) ANY RECEIPT, however described, arising from the operation of any law…”.

As can easily be gleaned from the plain texts of above provisions, ‘loans’ can comfortably fall under the category of ‘any source’ or ‘any receipt’, howsoever described.

Further, Section 162(3) of the same Constitution provides 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”.

This mean that the Constitution is concerned with ANY AMOUNT, which plain meaning is simply that loans are not excluded from amounts or monies ‘standing to the credit of the Federation Account’.

And the said ‘prescription of the National Assembly’ that the Constitution strictly requires before such amounts are distributed was promulgated as an Act, known as “Allocation of Revenue (Federation Account, Etc) Act”.

Under this Act, the amount standing to the credit of the Federation shall be distributed as follows: Federal government – 52.68 percent, States – 26.72 percent, Local Governments – 20.60 percent, with 13 percent derivation revenue going to the oil producing states, of which Southeast currently has 2 States.

It is pertinent to note that the ‘13 percent derivation’ underscores the prime role oil plays in the revenue of the Federation of Nigeria. So, in the reckoning of how this loan is to be distributed or spent, Nigeria must be mindful of the unarguable fact that most (if not all) of the interest and the ultimate repayment of the principal will come from oil revenue generated from States that includes two Southeastern States but excludes most of the States where a lion share of this loan is proposed to be spent.

Taken further, and as is surely the case in societies guided by ordinary fairness and justice, this loan should have been subject to a 13 percent ‘first line charge’, to be distributed to the oil-producing States in the recognition that they will, to the exclusion of all other States, bear the entire brunt of repaying this loan.

To be sure, it is only after complying with the constitutional sharing formula that the Federal Government shall be free to spend its statutory share anywhere and anyhow it likes, and it may then decide to exclude the Southeast, as it often does.

Ejimakor is a Legal Practitioner based in Abuja