The review of revenue sharing formula – The Sun

The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has rekindled fresh hope for a new revenue sharing formula among the three tiers of government. The agency would soon set up a committee to review the present sharing formula. This was disclosed recently in Abuja by the Chairman of the Commission, Mr. Elias Mbam. 

We welcome the new proposal and hope that it will not go the way of the previous recommendation that was scuttled at the implementation stage. Going by the current revenue sharing formula, the Federal Government receives 52.68 per cent of the national revenue, while states and local governments are allocated 26.72 per cent and 20.60 per cent, respectively. Also, 13 per cent of the national oil and gas revenue is allocated to the oil-bearing states and communities as derivation fund. It will be recalled that the existing revenue sharing formula was designed and implemented during the administration of former President Olusegun Obasanjo in March 2003.

In 2013, the commission embarked on a nationwide consultation across the 36 states of the federation to fashion out a new revenue sharing formula that would ensure a “balanced development of the country.” Consequently, a revised revenue sharing formula was reportedly ready by December 2014, but it was never implemented.

However, the reality now is that a new revenue sharing arrangement that would be favourable to the states and local governments is most desirable. No doubt, the new revenue sharing formula will go a long way to solve many of the nation’s challenges. Giving more revenues to the states and local governments will tremendously hasten the development of the country. It will also reduce the quest for power at the centre and sundry agitations in the country.

Therefore, the government should support the move to review the extant revenue sharing formula. We say this because while it is the constitutional duty of the RMAFC to design a new revenue sharing arrangement, it is the duty of the Federal Government to implement it. By virtue of Paragraph 32(b) in Part I of the Third Schedule to the 1999 Constitution (as amended), the RMAFC is empowered “to review, from time to time, the revenue allocation formula and principles in operation to ensure conformity with changing realities, provided that any revenue formula which had been accepted by an Act of the National Assembly shall remain in force for a period of not less than five years from the date of commencement of the Act.”

Also, Section 162 (2) of the Constitution provides that “the President upon receiving advice from the RMAFC, shall  table before the National Assembly, proposals for revenue allocation from the Federation Account, and in determining the formula, the National Assembly shall take into account, the allocation principles, especially those of population, equality of states, internal revenue generation, landmass, terrain as well as population density provided that the principle of derivation shall be constantly reflected in any approved formula, not less than 13 per cent of the revenue accruing into the Federation Account directly from any natural resources.” Therefore, in pursuance to this provision, a review of the current revenue sharing formula is long overdue.

We also recommend that the Federal Government should cede some of its responsibilities in the exclusive legislative list, to the states. There is need to reduce the current share of the Federal Government allocation by 15 per cent or 20 per cent, bearing in mind that the states and local governments are closer to the grassroots where the majority of Nigerians live.

We commend the RMAFC for the plan to review the revenue formula and urge the members to diligently carry out the assignment. In the same vein, we advise the commission to revisit the issue of financial autonomy for the local governments. It will be a matter of regret if,  after sixteen years of operating the present revenue sharing formula, the country fails to have an equitable revenue arrangement that will be in line with the current economic realities in the country.

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