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Imperative Of Revenue Allocation Review



The recently approved N30, 000 minimum wage and the increasing security challenges around the country, among other issues are posing a noticeable financial challenge to the states. A lot is expected from the state government in the drive to bring the situation to manageable levels. These challenges have also heightened agitations for a review of revenue sharing formula for Federal, States and Local Governments.

Presently, the revenue sharing formula is skewed in favour of the Federal government which gets 52.68 per cent, while States and Local Governments receive 26.72 per cent and 20.60 per cent respectively. In the same vein, 13 per cent of oil and gas federally collectable revenue is returned to the oil-producing states as derivation revenue to compensate them for ecological disasters arising from oil production. This formula was promulgated under the administration of former President Olusegun Obasanjo.

This newspaper recalls that the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), in 2013 came up with the need to review the formula for balanced development of the country. It followed this up with a nationwide consultation where it met with stakeholders on the issue. In December 2014, the commission came out with a proposed new revenue formula.

In line with this, the Federal Government constituted 12 committees to review the present revenue sharing formula of the federation suggest ways to expand the revenue base of the nation. This development is also in line with President Muhammadu Buhari’s directive that the RMAFC should focus on expanding the sources of revenue to the Federation Account.

RMAFC was established to monitor accruals into and disbursement of revenue from the federation account, review from time to time the revenue allocation formula and principles in operation to ensure conformity with changing realities.

The 12 committees include the Indices and Disbursement Committee, Federal Allocation Account Committee, Crude Oil Monitoring Committee, Inland Revenue Monitoring Committee and the Revenue Allocation Formula Committee. Others are Customs Revenue Monitoring, Solid Minerals Monitoring, Remuneration and Monetisation, Fiscal Efficiency and Budget, Mobilisation and Diversification and Investment Committees.

RMAFC is constitutionally empowered to monitor the accruals to and disbursement of revenue from the Federation Account. It is also saddled with the responsibility of reviewing from time to time, the revenue, allocation formula to conform to realities.

The Commission also serves as adviser to the Federal, State and Local Governments on fiscal efficiency and methods by which their revenue could be increased. They are also saddled with the responsibility of determining the appropriate salaries and benefits for all Political Office Holders in the country, including the President.

However, we think that the commission should also push for the diversification of the nation’s revenue base for a more sustainable growth and economic development. It should see to the expansion of the sources of revenue for the federation. It is only by so doing that there will be enough to go round

It is also our opinion that the committee should strive to look into promoting policies that would further strengthen the Commission’s ability to block revenue leakages from the Federation Account.

We suggest that the stakeholders should look beyond oil and gas, and include solid minerals, agriculture and manufacturing. The matter is of utmost importance that it ought not to be left only to the federal government alone. States should also be proactive and move beyond the policy of going cap in hand to Abuja for allocation.

It is imperative, in our view, that governors need to apply their ingenuity and look beyond oil and gas so that they can develop those sectors of the economy they can competitively benefit from. However, it is our considered opinion that state governments, in the light of the prevailing circumstances, are right to demand for a review of the revenue sharing formula of the Federation Account.

It is a fact that reviewing the formula is not as easy as ordinarily thought.   We admit that it is cumbersome to the extent that the formula itself has its roots in the constitution which defines the functions of the three tiers of government. It is doable with the required political will. Regardless, it is imperative that the needful should be done to amend the constitution so as to be able to adjust the formula to accommodate emerging realities in governance processes, procedures and expectations.



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