Addressing The Challenges Of Revenue Sharing Formula

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A News Analysis by Rachael Ishaya, News Agency of Nigeria (NAN)

Credit: Businessday
Credit: Businessday

Agitations for a more equitable revenue sharing formula in Nigeria, perhaps, propelled the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) to carry out a nationwide sensitisation programme recently.

Currently, the revenue sharing allocation formula is: 52.68 per cent for the Federal Government, 26.72 per cent for the state governments and 20.60 per cent for the local governments.

Critics of the revenue sharing formula have, on several occasions, been calling for a review of the modus operandi.

They recall that the current formula was designed in 2002 when 13 per cent of the national income from oil and gas was approved for the 11 oil producing states as derivation revenue.

They, however, note that issues relating to the revenue allocation formula often provoke controversies and emotional debates, stressing the need to handle them with caution and exhaustive consultations.

The Chairman of RMAFC, Mr Elias Mbam, said that the commission had initiated a public sensitisation and mobilisation campaign on the review of the allocation formula via consultations, sensitisation and public hearings.

He said that the aim of the campaign was to reach out to more Nigerians and provide another opportunity for stakeholders to express their views and submit memoranda on the review process.

Mbam said that the people’s views would aid the commission in efforts to produce a new allocation formula which would reflect Nigerians’ wishes and accelerate the country’s socio-economic development.

“The review of the revenue allocation formula is very sensitive and critical; it is not something we want to do and make a mistake,’’ he said.

Meanwhile, the RMAFC has adopted the draft report on the proposed new revenue sharing formula, which would be presented to the presidency soon.

Mr Zubairu Dada, the Chairman, Public Affairs and Communication Committee (PAAC) of the commission, said that the draft report was adopted after a two-week retreat in Cross River where all the submissions, documents and input from stakeholders were considered.

“The need for distributive justice, fairness and equity in the allocation of resources, as enshrined in the 1999 Constitution, guided the review exercise,’’ he said.

Dada stressed that the draft report was the outcome of a careful analysis and examination of the diverse views of Nigerians.

However, Mbam noted that production of a suitable revenue sharing formula would solve some of the socio-economic and political problems plaguing the country.

“If we produce a formula that most Nigerians are happy with, more than 50 per cent of what the proposed national dialogue aims to achieve will be addressed.

“This is because the proposed confab is all about how to share political power and the nation’s revenue.

“These are the two major contending issues; if we are able to settle one of the aspects, they can use what we have devised as input in what the national dialogue will do,’’ he said.

All the same, stakeholders note that it is important for the RMAFC to consider a formula with leaner allocation to the Federal Government so as to curb frequent agitation for the review of revenue sharing formula.

For instance, Gov. Godswill Akpabio of Akwa Ibom told the review committee to consider an increment to the 13 percent derivation revenue, currently allocated to oil producing states for the development of the region.

“We have not received enough funds but we have shown enough for the little we have received; this is a clear testimony that if we get more, we will give more to our people,’’ he said.

Mr Emeka Ananaba, the Deputy Governor of Abia, said that the state recommended a reduction in the Federal Government’s allocation from the Federation Account “from 52.68 per cent to 45 per cent.

“The allocation to the states should be increased from 26.72 per cent to 32 per cent, while the allocation to the local governments should also be increased from 20.60 per cent to 23 per cent.

“Also, the 13 percent derivation revenue should be increased to 20 per cent, in recognition of the enormous environmental problems facing the concerned areas,’’ Ananaba said.

Nevertheless, Gov. Peter Obi of Anambra drummed support for a 40-40-20 percent revenue allocation formula, saying: “In a federation anywhere in the world, the key driver is the state, which is the sub-nation.

“The format should be 40 per cent for Federal Government, 40 per cent for state governments and 20 per cent for local governments, with a proviso that no state will receive lower than a benchmark.

“I state this because there are states receiving 10 per cent of what another state receives as allocation.’’

However, Gov. Olusegun Mimiko of Ondo State has an opposing viewpoint, insisting that the new formula should support the allocation of a greater percentage of resources from the Federal Account to states.

“We believe that the Federal Government is having much, while little goes to the other tiers of government,’’ he said.

Gov. Umaru Al-Makura of Nasarawa State, nonetheless, brought a new dimension into the agitation for the review of the revenue sharing formula.

He suggested that the large concentration of solid mineral deposits in Nasarawa State must be taken into consideration in plans to review the revenue sharing formula.

Irrespective of the views of the stakeholders, experts underscore the need to exercise caution and restraint in ongoing efforts to revise the revenue sharing formula.

Mr Abubakar Oladimeji of the Nigerian Institute of Social and Economic Research (NISER) stressed that the issue of revenue allocation had always been a thorny issue.

He said that the revenue distribution formula was a major source of political and social tension in the country.

“The reduction of the tension requires an examination of the impact of the revenue allocation system on the nature of the federal arrangement,’’ he added.

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