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Governors push for new revenue sharing formula

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Since the return to civil rule in 1999, Nigerians have continued to clamour for an equitable revenue sharing formula. The issue has refused to go away from the front burner of national discourse. State governors have been leading the agitation for upward review in the revenue sharing formula. They claim the financial burden shouldered by states makes subsisting revenue formula lopsided in favour of the Federal Government.
Chairman, Nigeria Governors Forum (NGF) Dr Kayode Fayemi said the review of sharing formula became imperative because states bear heavier burdens. He said the states no longer want handouts from the Federal Government but be allocated what should be their entitlements from the Federation Account. The Ekiti State Governor insists that “the revenue formula should change in view of the realities on the ground. States are bearing more responsibilities, including funding primary/basic education, primary healthcare and reconstruction of federal roads of which refunds were not made by the federal authorities”.
Fayemi emphasised that “states are contributors to the nation’s revenue, they are just takers, states don’t want a handout, they want what they are entitled to. It is about our federalism”. He added: “It is about the federating units. We need to look at the responsibility each unit has been rendering and the resources to be allocated to each unit. It shouldn’t be about giving a handout to states, they want what they are entitled to.”
The current revenue sharing formula gives Federal Government 52.68 per cent from the Federation Account; 36 states are allocated 26.72 per cent while the balance of 20.60 per cent is allocated to the 774 local councils. In addition, the nine oil-producing states of the Niger Delta receive 13 per cent revenue as derivation to compensate for ecological degradation caused by oil production in the region.
However, the Executive Chairman, Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), Mr Elias Mbam had assured that a new revenue formula will be ready before the end of the current administration in 2023. He described the process as inconclusive assuring that the commission would this time conclude the exercise.
Mbam said there are new considerations to be factored into the current exercise that was lacking in the aborted one. He said: “If you look at what obtained in 2014 and now, a lot has changed. The security consideration is not the same. There are so many issues, which needed to be considered in addition to what it was and as such, we felt that we need to constitute another committee that will look at all the variables, all the issues that are taken into consideration in the review and let us bring up a new advice to the president. And that is exactly what we have done.
“Last year, I inaugurated a new committee to the revenue allocation formula. It’s timely wishes of most Nigerians and it is one of our primary responsibilities. The committee has been constituted and has commenced work. In this process, so many things may not be seen until it gets to an advanced level. The preliminary works they are doing now may not be noticed from outside because they have to do some studies on fiscal matters and areas that will be considered in arriving at the appropriate revenue sharing formula.
“Apart from this study, they need to do a little review including what we did in 2014. It is after these preliminaries that they will come out with the invitation for memorandum and progress to the point where they will require the inputs of relevant stakeholders. There are so many variables that will determine the time. That is not within our control, but we will do our best to get it done within a reasonable time.”
The refusal by some state governors to pay the N30,000 minimum wage is premised on the fact that the monthly allocation they receive from the federation account is inadequate to meet the current wage bill and other development projects before them.
For instance, the Niger State government said it would be difficult for it to pay the minimum wage under the current revenue sharing formula. Secretary to the State Government, Alhaji Ahmed Matane said the minimum wage would affect capital projects and development in the state. He explained that out of N2.2 billion monthly statutory Allocation from the Federation Account about N1.6 billion was used to pay salaries and pensions while N600 million was left for capital projects and payment of overhead costs to Ministries, Departments And Agencies (MDAs).
He said: “We have a challenge. We have 33,250 workers on the payroll of Niger State as against what is obtained in other northern states where they have an average of 22,000 civil servants. We are on the edge with this new minimum wage. For sure, the new minimum wage of N30,000 will be a huge burden on the government, but we are looking into how to manage the development.”
Analysts observed that apart from the new wage bill which governors have to pay, the commitments and responsibilities of governors are on the increase in a manner that calls for a corresponding increase in their revenue. Thus, increasing their shares of federal revenue will enable them to live up to their billings. Such a move would also divest the Federal Government of its immense powers and likely make the presidency less attractive as a platform of the contest.
A committee set up by NGF to review the sharing formula had recommended 42 per cent of the federal allocations for states as against the 26.72 per cent they currently get. They are also asking that the share of the Federal Government be slashed from the current 52.68 to 37 per cent while requesting that the share of local government be increased from the current 20.60 per cent to 23 per cent in the new formula.
The governors, according to a highly placed source, based their proposals on their quest to be able to pay the minimum wage, the need for more resources to fight insecurity and the decaying infrastructure in their domain which they do not have the funds to address.
Analysts said the governors’ demand is a reflection of the unsatisfactory structure of the country whereby everything is concentrated at the centre whereby making the central government stronger than all the federating units.
But the 774 local government areas under the aegis of the Association of Local Government of Nigeria (ALGON) have rejected the 23 per cent proposed for them by the governors. Instead, they are pushing for 35 per cent. ALGON President, Mr David Alabi argued that their 35 per cent demand had become imperative following the increased responsibilities of the councils.
Alabi said the present situation where the Federal Government gets the highest allocation is not good for the country in terms of infrastructural development. He said given the fact that local governments are closer to the people and their enormous responsibilities, they should get the highest allocation followed by the states while the Federal Government should get the least from the Federation Account.
Alabi said 35 per cent allocation to local governments would enable them to tackle issues of insecurity and other issues pertinent to development in their areas. He added: “The Federal Government is getting the highest allocation, whereas we are getting only 20.6 per cent, it ought to be the other way round because the aggregate of the development that you have in local government areas make a state. If you go to some local governments we don’t have roads.
“We have a lot of infrastructural deficit in all the local government areas in the country. To tackle these infrastructural challenges, the councils need a lot of money and that is why we are asking for an increased allocation. With a minimum of 35 per cent allocated to the councils, there would be meaningful development in Nigeria. We will be able to tackle insecurity at the local government level in collaboration with major stakeholders. The councils are critical stakeholders to work with in order to solve security challenges facing Nigeria.”
To Dr Tunji Ogunyemi of the Obafemi Awolowo University (OAU), the state governments are right demanding for a greater percentage share of the Federation Account. He explained: “The 52 per cent share of the Federal Government was based on arbitrary consideration of the requirements of the Federal responsibility. The truth is that the Federal share is unfair and disproportionate.”
Ogunyemi suggested the following sharing formula based on section 162 of the Constitution of the Federal Republic of Nigeria: Federal Government -30 per cent, state governments – 50 per cent, local governments –15 per cent and Ecological Fund –five per cent.
The university don said before the advent of new sharing formula, “ I think a first step should be to demand that the share of the Federal Government of Value Added Tax (VAT) proceeds be abrogated and the share of the state should not be less than 75 per cent of those proceeds.”
The debates over revenue sharing have become a recurring feature of Nigeria’s distorted federalism. Experts have defined federalism as a system of government in which governmental parts that exist in a country are shared between the central government and component regions. It is also defined as the system of government in which governmental powers are shared between the central government and the federating units, including states and local governments.
Elder statesman and former Federal Commissioner of Works and Housing, Alhaji Femi Okunnu believes the Federal Government is cheating all the states in revenue allocation. He noted that before independence, the colonial government with the consent of the regional governments appointed the Fiscal Commission to look into the functions and powers of the legislative list and determine the percentage of revenue the regional government will need to carry out their functions and the percentage that will go to the Federal Government; to determine how much the Federal Government would spend to service its own functions.
Okunnu said that was how the government at independence up to the time of Murtala/Obasanjo regime (1976 to 1979) followed the fixed constitutional formula of 20 per cent to the Federal Government, 50 per cent to the state of origin and the remaining 30 per cent to the distributive pool to be shared among the regions or states.
He could not understand why the Federal Government’s share of the Federation Account should jump from 20 per cent to 52 per cent when the functions of the states are getting bigger. The Federal Government functions as listed in the 1999 Constitution include Weights and Measures, Traffic control on the Federal roads, Declaration of Waterways, Stamp Duties, Quarantine, Designation of professional occupation, Passport and Visa, Insurance, Law of Evidence , Awards of National honours Honour, Law on Copy Right and such other functions which do not require a great deal of expenditure.
Okunnu pointed out that some of the Federal functions like passport and stamp duty and passport generate income for the Federal Government. He added that there are some functions, which the government had sold to the private sector, which requires little expenditure e.g. post and telecommunication and power supply.
The former federal commissioner insists that the Federal Government should go down to 25 per cent if not 20 per cent as before; state of origin at least 25 per cent if not 35 per cent and the remainder should go into the distributive pool.
An economist, Dr Ralph Ibekwe blamed what he called the disproportionate revenue sharing formula on the military incursion into the government. He said the military promulgated the Distributive Pool Account Decree 13 which granted 60 per cent share of export duties instead of 100 per cent, 50 per cent on motor fuel, and 50 per cent of the excise duty revenue leaving the rest to the Federal Government.
He said that the promulgation of Decree 13 was the reason why the issue of resource control is threatening the peaceful co-existence of the federating units in the country. He warned that Nigeria is likely to witness more inter-ethnic group crises if states are not granted the right to rule and controlled their resources. He recalled that before the military seized power in January 1966, regional governments controlled the resources generated from their domain and pay taxes to the Federal Government as stipulated in the 1963 Constitution.
The effort to have a change in the formula has been a sustained agitation dating back to the President Olusegun Obasanjo era.

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