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The 9% Fight Between Federal and State
Governments Over Revenue Allocation
By
Mobolaji E. Aluko,
alukome@aol.com
Burtonsville, MD, USA
March 4, 2004
INTRODUCTION
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.
WHAT TO DO?
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.
BIBLIOGRAPHY
http://www.gamji.com/aluko16.htm
MID-WEEK ESSAY: Simplifying Our
Revenue Allocation Formula Once and For All
Mobolaji E. Aluko, April 17, 2002
http://www.ngex.com/personalities/voices/mqb052002baluko.htm
Monday
Quarterbacking: Revenue Allocation and the Nigerian State: Of Derivation,
Dichotomy and Debt Issues
Mobolaji E. Aluko,
May 20, 2002
TABLE 1: Brief Historical Outline of
Revenue Allocation Formulas in Nigeria
|
ITEM |
Date
|
Federal
Govt
% |
State
Govt.
% |
Local
Govt.
% |
Special
Funds
% |
Total
% |
|
Aboyade Commission
|
1977 |
57.00 |
30.00 |
10.00 |
3.00 |
100.00 |
|
Okigbo Commission
|
1980 |
53.00 |
30.00 |
10.00 |
7.00 |
100.00 |
|
Revenue Allocation
Act
|
1981 |
55.00 |
30.50 |
10.00 |
4.50 |
100.00 |
|
Pre-Supreme Court –
Legal Decrees/Law
|
Pre-April 2002 |
48.50 |
24.00 |
20.00 |
7.50 |
100.00 |
|
Pre-Supreme Court -
RFMAC Proposal
|
August 2001 |
41.23 |
31.00 |
16.00 |
11.70 |
100.00 |
|
Supreme Court
Ruling
|
April 2002 |
|
|
|
Unconstitutional |
|
|
Post-Supreme Court
- Executive Order # 1
|
May 2002 |
56.00 |
24.00 |
20.00 |
0.00 |
100.00 |
|
Post-Supreme Court
- Executive Order # 2
|
July 2002 |
54.68 |
24.72 |
20.60 |
0.00 |
100.00 |
|
Post-Supreme Court
- RFMAC Proposal
|
January 2003 |
46.63 |
33.00 |
20.37 |
0.00 |
100.00 |
http://www.newage-online.com/politics/article01
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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