New Revenue Sharing Formula
The Chairman of the Revenue Mobilization, Allocation and Fiscal Commission (RMAFC), Mr Elias Mbam, has given an indication that government will soon tinker with the current revenue sharing formula. This is a cheering development, considering the fact that the search for an appropriate formula for the distribution of the country’s revenues has led to diatribe and disputes among the three tiers of government.
At present, the formula, approved through an Executive Order by former President Olusegun Obasanjo in 2004, is Federal Government (52.68%); 36 State Governments (26.72%) and 774 Local Governments (20.60%). In built into the proportion to the Federal Government are: Ecological Fund (1.50%), Solid Mineral Fund (1.75%), National Reserve Fund (1.50%) and Agricultural Development Fund (1.75%). For oil producing states, there is 13% derivation that accrues to them.It is not clear what the impending revenue sharing formula will be.
The agitation over the years by Nigerian Governors Forum, and supported by experts on Fiscal Federalism, has been that the Federal Government should reduce its share of the revenue, while States and Local Governments, which are closer to the people, should be given more. The objective of a true federal system is to ensure that public services are effectively and efficiently provided for citizens. Government should be responsive to community through the provision of infrastructure and social amenities. As at now, this is not the situation in Nigeria.
Though local governments have been created, many of them are not capable of providing basic services which the 1999 Constitution says are their responsibilities. The constitution gives local councils many responsibilities, among them “establishment and maintenance of cemeteries, burial grounds and homes for the destitute or infirm; establishment, maintenance and regulation of slaughter houses, slaughter slabs, markets, motor parks and public conveniences; construction and maintenance of roads, streets, streets lightings, drains and other public highways, parks, gardens, open spaces, or such public facilities as may be prescribed from time to time by the House of Assembly of a State; naming of roads and streets, and numbering of houses; provision and maintenance of public conveniences, sewage and refuse disposal…” Even Primary Health Care (PHCs) are supposed to be managed by local councils. However, many these have not happened due to paucity of funds.
On the part of state governments, many of them are heavily indebted to both local and foreign creditors. Many state governments have been unable to pay the minimum wage of N18,000 monthly. They owe civil servants’ salaries, allowances and pensions for several months. Not even Paris Club refund and bailout funds have solved the perennial problem of unpaid salaries.With the approved N30,000 minimum wage, the situation would be worse unless the revenue sharing formula is altered in favour of states and local governments.
However, there is an urgent need for all tiers of government to boost their revenues by stimulating activities in industries where they have comparative advantage. Because of the increase in population, all tiers of government need funds to be able to provide social services, including health, education, electricity, roads, and many more. The current revenue formula has been in use since the population of the country was142.6 million, according to 2006 National Population Census. Today, the country’s population is over 200 million. In order to effectively provide social services, the country’s revenue needs to improve significantly. And at the moment, it has not.
It is good that RMAFC is considering a tweak of the formula. But we call on state and local governments to ensure transparency and accountability in the use of these funds. Over the years, as a result of corruption, allocations from the federation account and internally generated revenues have been stolen by political office holders in collusion with civil servants. Unless corruption is overcome, and unless anti-corruption agencies put their feet down to deal with corrupt elements, a new revenue formula may not deliver the dividends of democracy.