Federal government has proposed a review of the national revenue sharing formula that will possibly result in over 3 per cent cut from both the federal and state governments to add to that of Local Government Areas.
The central government is proposing that the current position be changed in favour of LGAs to enable inclusive growth.
“As an interim and immediate measure, the federal government is therefore proposing the following: Federal Government 50.65%; State Government 25.62 %; Local Government 23.73% and Derivation Allocation 13%,” Secretary to the Government of the Federation, Boss Mustapha said.
The SGF said the position of the federal government is a reflection of President Muhammadu Buhari’s commitment to ensuring resources for development get to the poorest of the poor in our rural communities, imperative to incorporate local communities in our security architecture as well enhancing equitable and inclusive national development.
Mustapha who was represented by the permanent secretary, political and economic affairs in his office, Andrew David Adejoh, made the remarks at a public hearing on the review of the existing vertical revenue allocation formula.
The present vertical Revenue Allocation Formula is: Federal Government 52.68%; State Governments 26.72%; Local Governments 20.60% and Derivation Formula 13%.
He said for Nigeria to have an endearing vertical review of the present revenue allocation formula, it must first agree on the responsibilities to be carried out by all the tiers of government.
Justifying the federal government’s position on the review of the revenue formula yesterday, Mustapha said the revenue allocation should be done constructively in the face of dwindling national revenue base and the imperative for states to generate their IGR. Equally important is the fact that this review should culminate in improved national development.
In conclusion, we have to understand that just as the amount of money put into a project is a function of what the project entails, so should any review of the vertical revenue allocation formula be consistent with the constitutional responsibilities of all the tiers of Government. Until such a time that the constitution is fully reviewed and more responsibilities are taken out of the Exclusive Legislative List, we might not be able to arrive at an equitable, unbiased and sustainable vertical revenue formula agreeable to all.
He said the federal government has taken cognizance of the growing clamour for a review of the present vertical revenue allocation formula.
“Alongside the above, other considerations that informed the Federation Government’s position on the review of the present vertical revenue allocation formula included Federal Government’s increasing visibility in Sub-national level responsibilities due to weaknesses at that level e.g Primary health care, basic primary education; Increasing level of insecurity and increased remittances to State and Local Governments through the Value Added Tax sharing formula, where the Federal Government has only 15 % and the States and Local Government share 50% and 35% respectively,” he stated.
The practice across the globe is that revenue and resource allocation has always been a function of the level of responsibilities attached to the different components or tiers of government.