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FOR A NEW REVENUE SHARING FORMULA

By NBF News
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The formula currently employed for sharing national revenue to the three tiers of government has continued to generate heated debate and controversy across the country. With the approval for an increase of the national minimum wage from N7, 500 to N18, 000, agitation for a review of the formula to give a higher percentage to the states has heightened. The general view is that a review of the existing formula is overdue.

Another reason often canvassed to support the need for a change of this contentious formula is the higher responsibilities placed on state and local council authorities in the Nigerian constitution. The proponents hinge their argument on the need for equity and fairness in distribution of national revenue.

The existing sharing formula gives the Federal Government 52.68 percent of centrally collected revenue in the Federation Account, leaving the states and local councils with 26.72 and 20.60 percent, respectively. This glaring imbalance is once again on the front burner, with some state governors hinging implementation of the new wage structure approved by the Federal Government on an increase in their share of national revenue.

The states and local councils also want the increase to fund essential social services. They insist that it would be easier for them to implement the new salary structure and provide social services if the sharing formula was not lopsided in favour of the Federal Government. We strongly agree with these views. The central issue in the renewed calls for a new formula is equity. This issue is even more crucial now because of our mono-product economy that has crude oil sales as main source of revenue accruing to the Federation Account. The exigencies of these times and the principle of fiscal federalism demand that a radical review of the existing formula be carried out without further delay.

The current formula does not adequately take care of the realities on ground. Every passing day, it becomes clearer that the responsibilities of the states and local councils are more enormous than their present financial muscles can carry. The present National Assembly inherited a formula that favoured the Federal Government at the detriment of the states and local councils.

The time is ripe to review the formula in such a way that reflects responsibilities of each tier of government. Because of the huge responsibilities states and local councils are saddled with, we suggest nothing less than 50 and 10 percent, respectively, for them. This will help to reduce the present desperation for political positions at the centre. It will also reduce the need for the other two tiers of government to go cap in hand to the Federal Government for financial assistance for critical infrastructural projects.

We urge the incoming National Assembly to confront this imbalance frontally by re-adjusting the current formula. Whatever model of revenue formula to be worked out by the legislature should be scientifically determined, while also taking care of the need for justice, equity and fairness. Anything short of this may not be in the best interest of the citizens and our democracy.

Indeed, democracies that are thriving are those where the revenue accruing to the national treasury is shared in such a manner that none of the component units is slave to the others. In this regard, conscious efforts should be made to obtain input on this issue from major stakeholders in the polity. Beyond that, it has become imperative that states and local governments step up efforts to boost their Internationally Generated Revenue (IGR).

The present situation in which state and council authorities are totally dependent on monthly Federal allocation is not good at all. Restructuring of the revenue sharing formula based on the scope of responsibilities of the different tiers of government will promote peace, stability and even development of the nation. It should be treated as a priority and with all the seriousness and urgency it deserves.