A NEW REVENUE ALLOCATION FORMULA.

There is need to review the revenue allocation formula in the overall interest of the country

Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Elias Mbam said recently that a new revenue allocation formula would soon be presented to President Muhammadu Buhari for onward transmission to the National Assembly. By virtue of the 1999 Constitution as amended, the RMAFC is empowered to review the revenue allocation formula from time to time to reflect changing realities. But that major task has been in abeyance for almost three decades despite fierce agitations.

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The revenue allocation formula is the proportion of resources accruing to the federation that goes to each of the components of the nation. It also defines the slice of the resources retained in the territories where they are generated as well as the proportions of the revenue accruing to the collecting agencies of government. The perceived lack of fairness in the distribution of the resources often accounts for tension and controversies in the polity. But with a fixation on ‘sharing the national cake’ mostly oil rent, the revenue allocation formula has always been a contentious issue.

Established in 1989, the RMAFC came up with the current revenue formula in 1992 during the military era of General Ibrahim Babangida. Attempts to tinker with the sharing arrangement in 2013 were thwarted by the federal government perhaps for fear of losing its hefty share of the national cake. President Goodluck Jonathan could not present the newly drafted revenue formula to the National Assembly before his tenure lapsed. The Buhari administration also declined to receive the draft from RMAFC when it assumed power.

Thus, in spite of more than two decades of democratic rule, the country’s revenue allocation formula is still stuck in the past. It is therefore little wonder that the federal government has more than a fair share of the resources of the country to the detriment of other units that are closer to the people with plenty of needs and responsibilities. Under the prevailing formula, the federal government gets 52.68 per cent, the 36 states share 26.72 per cent while the 774 local government areas in the country share 20.60 per cent every month. Besides, the horizontal distribution of the resources among the states encourages outright laziness.

In the times we operate in, the economic realities of the allocation are unacceptable to many parts of the federation. “We can no longer deny that a comprehensive review of the revenue allocation formula currently in use has become overdue”, declared Kogi State governor Yahaya Bello, at the RMAFC public hearing for the North Central Zone, at Government House, Lokoja. “Existential realities among the three tiers of government today necessitate a more equitable sharing plan for all revenues accruing into the federation account”.

Indeed, in all the zones visited by the commission, the refrain was that there is urgent need to devolve more financial resources from the centre to the subnational governments given the fact that the states and local governments harbour most of the people. This is towards ensuring that these tiers of government can carry out their functions and ultimately improve the economic growth and development in the country.

Perhaps it is in this sense that many stakeholders are asking for equity in the sharing of resources generated by their states. Indeed, Lagos State is asking that it should be accorded special status in recognition of its huge financial commitments to infrastructure and provision of basic amenities for the increasing population of its residents, as well as its preeminent contribution to the national coffers. “Our demand is a sharing formula that is just, fair and equitable,” said Sanwo-Olu, “reflecting the contribution of stakeholders to the common purse.”

We hope the RMAFC will base their review of the revenue allocation formula on objective criteria in the overall interest of the country.