The Fight Between Federal and State Govts


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The 9% Fight Between Federal and State Governments Over Revenue Allocation




Mobolaji E. Aluko,

Burtonsville, MD,  USA


March 4, 2004







Let’s cut to the chase and lay out the history of revenue allocation in Nigeria in tabular form:  see Table 1.  With 1 Federal Government, 36 state governments and 774 local governments, the ongoing controversy between the Federal Government, the States and the Revenue Mobilization, Accounts and Financial Commission (RMAFC) – let’s leave the local governments out of it, they are just stand-by on-lookers for now – are essentially as follows:


Federal Govt. wants:      Federal – 56% ;  States – 24%;  LG – 20%

RMAFC/ States want:    Federal -  47% ;  States – 33%;  LG – 20%


Difference                       Federal -  -9%;  States -  +9%;  LG -   0%



However since there are only 1 Federal Government and as many as 36 state governments, the difference per level of government is huge:


Federal:       9/56*100 =  16% reduction in revenue


State:           9/24/36*100 =  1% increase in revenue on average per state



The contrast is therefore glaring, and on this I support the Federal Government: no institution will quickly settle for a 16% reduction in revenue controlled without a fight in order to avert a financial crisis.  At best, this change should be phased over a four to eight-year period, to arrive at what the states really want. 





I also think that the states are being penny-wise and pound-foolish in not concentrating on constitutional and creative ways of taking control of revenue generation sources away from the federal government and onto themselves.  This should be the tactic rather than allowing the federal government access to the money in the first instance for distribution in a manner that would appear to be unfavorable to the feds.  For example, the ability to register business corporations by states and impose some taxes should have been the hue and cry all of this time.  That is the real resource control, not simple fights over 1% increase in money essentially from oil.


I rest my simple case.






MID-WEEK ESSAY:    Simplifying  Our Revenue Allocation Formula Once and For All

Mobolaji E. Aluko, April 17, 2002

Monday Quarterbacking: Revenue Allocation and the Nigerian State: Of Derivation, Dichotomy and Debt Issues

Mobolaji E. Aluko, May 20, 2002



 Intrigues behind new revenue allocation formula 


 New Age Online; Thursday, March 4, 2004

(see article below)







TABLE 1:  Brief Historical Outline of Revenue Allocation Formulas in Nigeria




















Aboyade Commission








Okigbo Commission








Revenue Allocation Act








Pre-Supreme Court – Legal Decrees/Law


Pre-April 2002






Pre-Supreme Court - RFMAC Proposal


August 2001






Supreme Court Ruling


April 2002






Post-Supreme Court - Executive Order # 1


May 2002






Post-Supreme Court - Executive Order # 2


July 2002






Post-Supreme Court - RFMAC Proposal


January 2003








New Age Online

Thursday, March 4, 2004


Intrigues behind new revenue allocation formula

AYO FALODUN reports on the intrigues and power play that have stalled the passage of a new revenue allocation formula bill five years after the return to civil rule.

In the last five years, the 36 state governments have been at daggers-drawn with the Federal Government over the making of a revenue sharing formula that would be acceptable to all the stakeholders.

Sections 162-168 of the 1999 Constitution provides for the collection and disbursement of certain revenue at the federal level. Section 163(2) provides that “the president upon the receipt of advice from the Revenue Mobilisation Allocation and Fiscal Commission, 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.”

Section 162(3) provides that “any amount standing to the credit of the Federation Account shall be distributed among the federal, state governments and local councils in each state on such terms and in such manner as may be prescribed by the National Assembly.”

From the foregoing constitutional provisions, it is evident that they have not been complied with since May 29, 1999 when the 1999 Constitution took effect and when President Olusegun Obasanjo was sworn in after over a decade of uninterrupted military rule.

Thus, the 36 state governors, in recent times, have been agitated by what they perceive as a deliberate ploy by the Federal Government to stall the evolution of a new revenue allocation formula.

About three weeks ago, the Governors’ Forum, led by its new Chairman, Obong Victor Attah, the governor of Akwa Ibom State met in Abuja and later stormed the office of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) to demand the retention of the formula which it presented to the National Assembly in January 2003 but which was withdrawn by Obasanjo in November 2003.

Apart from demanding that the Federal Government should abide by the constitution with regards to revenue sharing, the governors’ visit was also meant to put pressure on the RMAFC to exercise the powers conferred on it by the Third Schedule of the 1999 Constitution. It empowers the RMAFC to “review from time to time the revenue allocation formula and principles in operation to ensure conformity with changing realities.”

The lukewarm attitude shown by Obasanjo to the commission’s revenue allocation proposal has been blamed for the current stalemate.

The proposal gave the Federal Government 46.63 per cent share of the Federation Account, 33 per cent to the states and 20.37 per cent to the local governments.

In contrast, the presidency, which wants a bigger chunk of revenue than the 46.63 per cent allotted to it by the RMAFC has held on to the revenue sharing formula which the incumbent government inherited from the military regime of General Abdulsalami Abubakar (rtd). That formula allocates 45.5 per cent to the Federal Government in addition to sundry special funds which jerk up its total allocation to 56 per cent. The states and local governments have 24 per cent and 20 per cent respectively.

The controversy over the alleged procedural error in the presentation of the RMAFC revenue sharing proposal to the National Assembly through the office of the president was yet to subside when Obasanjo wrote to the legislative arm of government to withdraw the proposal late last year. He alleged that there were fake versions of the RMAFC’s recommendations in circulation.

However, events which unfolded subsequently showed that the president’s action was informed by his disagreement with the reduction of the Federal Government’s share from 56 per cent to 46 per cent.

Obasanjo resorted to the use of “executive order” to ensure that the centre would retain its old share of 56 per cent. Indeed, the Chairman of RMAFC, Engineer Hamman Tukur lent credence to the suggestion that the president’s action was warranted by his desire for a greater share of revenue.

Of course, the 36 state governors are angry about the president’s attempt to alter RMAFC’s recommendations through the backdoor.

The Governors’ Forum is of the view that if the withdrawal of the proposal sent to the National Assembly was actually warranted by the “circulation of fake versions,” all that RMAFC needs do is to authenticate the original version and forward it to the National Assembly for consideration.

The governors have also stepped up their lobby of the National Assembly leadership and members to play their part to ensure the removal of the hiccups on the path of the passage of the new revenue allocation bill proposed by the RMAFC.

In this regard, the states’ chief executives have met with the Senate President, Chief Adolphous Wabara. Sources in the National Assembly indicate that the dramatic withdrawal of the new Revenue Allocation (Modification) Bill by Obasanjo confounded the legislature. It has also caused discontent in other tiers of government.

Delving into history, the country has had some revenue sharing panels before RMAFC. There was the Raisman Commission of 1958. This was followed by Aboyade Technical Committee, 1977 and Okigbo Panel, 1979. The RMAFC was established in 1992 by the regime of military president General Ibrahim Babangida (rtd).

Observers of governmental affairs are worried by the orchestrated scheme by the Federal Government to unilaterally review in its favour the revenue allocation proposal from the RMAFC because a lot of painstaking efforts went into the making of the proposal.

RMAFC’s spokesman, Yushau Abdulhameed Shuaib disclosed that the commission received more than one million pages of memoranda, across the country. With inputs from some consultants, the memoranda were analysed which led to its first revenue allocation proposal to the National Assembly in August 2001.

It gave the Federal Government 41.3 per cent, states 31 per cent, local governments 16 per cent and special funds 11.7 per cent. The special funds covered 1.2 per cent allocation to the Federal Capital Territory, 1 per cent each to ecology and national reserve fund, agriculture/solid mineral fund, 1.5 per cent and Basic Education and Skill Acquisition (BESA), 7 per cent.

Work on the proposal in the National Assembly moved slowly for about eight months until the Supreme Court gave a verdict in April 2002 on revenue control which nullified the special fund in the then existing formula. This affected the fate of the proposal then before the National Assembly.

All the same, the Federal Government, through an executive order took over items on the special fund “to manage on behalf of the federation.” Therefore, by May 2002, Federal Government’s share became 56 per cent while the states and local governments retained 24 per cent and 20 per cent respectively.

But following outcry from other tiers of government, the Federal Government, in July 2002 using another executive order conceded 1.32 per cent from its allocation to give it a share of 54.68 per cent, 24.74 per cent to the states and 20.60 per cent to the local governments.

Against the background of the Supreme Court’s ruling, RMAFC returned to work on another revenue sharing proposal whose withdrawal from the National Assembly by Obasanjo has been generating ripples in political circles.

RMAFC’s chairman, Tukur has described the withdrawn formula as “scientifically collected, statistically analysed and systematically presented, devoid of emotion, sentiment and political hanky-panky.”

Therefore, to ensure that President Obasanjo does not get away with the unilateral alteration of the new revenue allocation formula is one of the crucial tasks before Attah, the new chairman of the Governors’ Forum.



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This page was last updated on 10/27/07.