Background
Since its discovery of oil, Nigeria has not successfully translated its vast oil reserves into the anticipated economic growth and development. Instead, Nigeria has relied on oil revenues to keep its economy afloat, sustaining its currency or driving public services. The consequence of this reliance extends beyond the national level, impacting fiscal sustainability at the subnational level as well.
The Niger Delta, heavily reliant on federal allocations from oil revenues, faces significant challenges due to the global shift towards renewable energy and the projected fossil fuel demand decline. This transition necessitates a proactive approach to diversify the subnational revenues and secure a sustainable future. This regional stakeholders’ dialogue organized by Policy Alert, BudgIT Foundation and the Natural Resource Governance Institute has provided a platform for stakeholders from oil producing states to understand the impacts of global transition from fossil fuels will have on their domestic economy and fiscal health. This two-day dialogue provided an opportunity for oil producing states to learn from the pilot subnational fiscal resilience approaches explored with the Akwa Ibom state government and design their own unique responses to the global energy transition.
The Akwa Ibom state government shared progress made to build fiscal resilience while other oil producing state representatives agreed that there was a need for the state to adapt and build resilience in response to the global shift. Stakeholders emphasized the importance of updating policies, diversifying revenue sources, and strengthening the skills of decision-makers. Raising awareness and integrating energy transition plans into the state’s development strategy are essential steps for moving forward.
Introduction
The dialogue was opened by Koko Udo who gave welcome remarks on behalf of the Executive Director Policy Alert, Tijah Bolton. According to him, the looming global energy transition presents a significant challenge for oil-dependent regions including Akwa Ibom to ensure the state’s long-term fiscal health, we must proactively explore and unlock alternative revenue sources and that is why this partnership between Policy Alert, NRGI, and BudgIT is committed to driving this essential conversation.
The objectives were;
- To share insights on innovative fiscal policies and explore investment opportunities, with a focus on non-oil sectors such as agriculture, ICT, and renewable energy, in order to build resilience against the decline in oil revenues.
- To improve the living standard by investing in human capital development to address youth unemployment, poverty, and exclusion, ensuring that the Niger Delta workforce is equipped with the necessary skills for sustainable economic growth.
- To highlight the need for policy formulation around key sectors like power generation, tourism, and digital innovation, which would create the enabling environment that attracts private investments and supports the growth of Small and Medium Enterprises (SMEs) across the region yielding increased revenues for the states.
- To leverage lessons from research and analysis done on Akwa Ibom state by BudgIT Foundation supported by NRGI and Policy Alert for reflection and adaptation by other oil producing states in attendance; Bayelsa, Abia, Edo, Rivers, Delta, Cross River, Imo and Ondo.
Tengi George-Ikoli the Senior Program Officer, Natural Resource Governance Institute (NRGI) outlined the need for Nigeria particularly oil producing states in the Niger Delta to respond to the global shift from fossil fuel as it hampers our economic growth hence, the need for state government to implement various initiatives targeted at stimulating economic growth and social development beyond fossil fuels.
The panel discussions on the energy transition focused on improving government responses to the global energy shift. They highlighted how states in the Niger Delta region are boosting their revenue through key strategies. The panel featured experts such as Dr. Gills Harry (Deputy Director, Office of the Auditor General, Rivers State), Mr. Emeka Okonkwo (Deputy Director of Budget, Delta State), Mr. Razaq Fatai (Chief Data Officer, Nigeria Governors Forum, Abuja), and Mrs. Ekemini Effiong (Deputy Director, State Budget Office, Akwa Ibom State).
Problems identified as affecting youths in the Niger Delta region included youth unemployment, illiteracy, poverty, poor health care, youth exclusion in decision making.
The second panel discussion focused on how citizens are demanding for their governments to respond to the energy transition. It included speakers like Mr. Bassey Willie (Daily Trust), Mr. Emeka Okonkwo (Deputy Director of Budget, Delta State), Mrs. Linda (Kebetcache Women Resource Centre), Mr. Emem Edoho (ED, NAPDRR), and Mfon Gabriel (ED, Citizens Advocacy Centre). They shared insights on the situation in fence-line communities, highlighting the struggles of marginalized groups who lack access to basic services. The panel called on the government to increase investment in the social sector. This would be part of efforts in building fiscal resilience in coastal resorts and my country’s non-oil revenue generation such that as Nigeria’s oil trade partners divest from oil, Nigeria has diversified revenues & divest sectors contributing to her economy.
Observations
- The Niger Delta region is made up of a young, dynamic population with high unemployment rate hence the dire need to invest in human capital development to take advantage of the renewable sector value chain and sectors where states have comparative advantage.
- To build a fiscally resilient Niger Delta, there’s a need to rationalize state assets to yield ROI. Establish fiscal laws that align with the federal capital budget to help classify and cross compare projects, create the right environment for private sectors to invest while the government stays out of business.
- High debt profile of states in the region. The need to redesign their debt portfolio, reducing exposure to foreign loans. The transition will shrink the fiscal space of the states, debt could worsen that. Insufficient investment in education, healthcare, and skills training has resulted in high rates of youth unemployment and poverty.
- Insufficient Power Generation: Lethargy by states to key into the power sector liberalization, this has affected Small and Medium Enterprises (SMEs) and in turn impedes the states’ ability to raise revenues from such businesses.
- A need to implement innovative revenue generation strategies by adopting technological systems for revenue collection, modeling successful states like Kaduna.
- A need to Implement policy regulation frameworks that are gender inclusive and responsive will reduce wastage in project interventions.
- Akwa Ibom state possesses abundant natural resources, including fertile land, water bodies, and mineral deposits this offers opportunities for trade and commerce given its strategic location
Commitments by Akwa Ibom State Government
- To advocate for the release of gas flare penalties by the federal government: Since the gas flare penalty is meant for the remediation and relief for host communities, the Akwa Ibom government will spearhead this advocacy. The spending on remediation and relief will help address social challenges, such spending will allow the Akwa Ibom Government to direct resources to other things, easing the expenditure pressure on the government.
- To automate its revenue collection system, diversify its revenue collection system, diversify its revenue base and make the investment climate friendly to attract more private investments which will in turn yield more taxable income. Resuscitate all moribund companies owned by the state to further boost investment income.
- To streamline and align expenditure to the focus areas of government from the 2025 appropriation act. This will eliminate inefficiencies and wasteful spending associated with public service. This will involve mainstreaming the realities of the energy transition into its operations, highlighting the economic implications of the energy transition. Will nudge Ministries, Departments and Agencies (MDAs) to align their focus and operations to achieving fiscal resilience.
Resolutions
- Diversification is crucial therefore there should be deliberate effort on the part of the government to steer the state away from reliance on oil derived revenues.
- The state government should deepen engagement with its citizens in policy formulation and implementation. This will ensure that government spending is impactful.
- Invest in research development through partnership with local universities. Such partnerships are crucial going into a technologically driven future.
- Infrastructure Development: A robust infrastructure is crucial for attracting investment and facilitating economic activity. Develop the state’s tourism potential, focusing on cultural heritage and natural attractions.
- Optimizing the investment climate in the state to attract more private investment. Also repositioning state owned investments for profitability. This will create jobs and help the governments of the region to boost revenue.
- Improved accountability and transparency in utilizing public funds.
- Enhanced and effective collaboration among south-south states to transit from fossil fuel to renewable energy.
- Increase investment in agriculture and fishery leveraging the region’s advantages in these areas.
- Determining a sustainable debt ceiling for states of the region, and limiting government borrowing only to high return endeavours.
- Investing in human capital through improved allocation and releases for the social sector namely; health, education, water and sanitation (WASH).
