There are indications that allocation to local government councils is set to increase if the proposal by the federal government sails through.
Making the proposal in a speech at the town hall meeting on the review of Nigeria’s vertical revenue allocation formula Tuesday in Abuja, Secretary to the Government of the Federation Boss Mustapha said the proposal was to ensure increased development in the rural areas.
As it stands, the sharing formula is: FG 52.68 per cent; States 26.72 per cent; LGs 20.60 per cent, and Derivation 13 per cent.
Over the years, there has been clamour for a review of the revenue sharing formula as the present arrangement is skewed in favour of the federal government.
The last revenue review was carried out in 1992.
However, with issues such as heightened insecurity, decaying infrastructure and reduced foreign exchange earnings, analysts say there is no better time than now to review the revenue sharing formula.
Speaking at the event, the SGF, who was represented by Permanent Secretary, Political and Economic Affairs, Mr. Andrew David Adejoh, urged RMAFC to carry out the review taking into cognisance the dwindling national revenue base and the imperative for states to generate their IGR.
He said: “Like I said over there, federal government’s position is very clear. First and foremost, the vertical revenue sharing formula should follow the constitutionally laid down responsibilities and in doing that you recognised that 68 items and they are not small items are federal government responsibilities; 30 are only state and even within those 30, is concurrent.
“So, by the time you go through it you will discover that the federal government has need for even more resources than being clamoured for. However, the federal government recognises that the country is made up of constituent states where the development happening is amenable for a review and that is why we have done some review to make sure that we move from where we were at 52.68 to 50.6. Then for state government, we did a reduction of a per cent and increased that of local government because development needs to start getting to the local people if we, as a country, have to get the cutting edge of development.
“Alongside the above, other considerations that informed the federation government’s position on the review of the present vertical revenue allocation formula included federal government’s increasing visibility in sub-national level responsibilities due to weaknesses at that level e.g primary health care, basic primary education; Increasing level of insecurity and increased remittances to State and Local Governments through the Value Added Tax sharing formula, where the Federal Government has only 15 % and the States and Local Government share 50% and 35% respectively.
“As an interim and immediate measure, the federal government is therefore proposing the following: Federal Government 50.65%; State Government 25.62 %; Local Government 23.73% and Derivation Allocation 13 %,” the SGF said.
FCT minister
In his presentation, Minister of the Federal Capital Territory (FCT) Mohammed Bello called for a special funding arrangement for the FCT.
According to the minister, if the level of funding continues the way it is going, Abuja would just be one big major slum.
“There is so much that needs to be done to finalise the master plan and concept, and that cannot be done based on the present system of funding, where Abuja is seen as a small company of the Federal Government of Nigeria’s budget. Abuja should not be looked at as just the federal government project but as a project for the whole of Nigeria.
“The funding for FCT for 2021 when we got the approval earlier this year, was N300bn based on our internally generated revenue and other ways we use to create resources. The federal component of that budget for 2021 was N37bn. So, what we get from the federal government in terms of budget support is less than 25 per cent of our overall budget.
“We have 4-5 massive interchanges and bridges that need to be completed, which we are working towards completing by May 2023.
“We need to sit down and agree that Abuja is a federal project, and we give ourselves a timeline that for the next 10-15 years, this is the specific revenue arrangement for the FCT, by which time it would have properly grown into all the phases we have planned and envisaged. Then it can become a mature city,” the FCT minister said.
RMAFC
In his remarks, Chairman Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) Engineer Elias Mbam said the revenue sharing formula would be based on the responsibility of each tier of government.
“It’s going to reflect the more responsibility we have, the revenue and the less we have the less revenue. So it’s going to be tied directly on the responsibility of each tier of the government.
“Well, I said here that it’s a process and the process will determine what each tier of government will get. I cannot ordinarily say it will be less or more but if we can put the statistics down and the result is that any tier gets more, so be it. If it is the other way round, so be it. It is a process, you put the statistics down and the result speaks for itself,” he explained.
While encouraging states to improve their IGR in order to earn more, the RMAFC boss assured its report would be ready by the end of the year for onward delivery to President Muhammadu Buhari.
“I said before the end of this year, our own side of the work will be concluded and will be ready to submit our report to Mr. President. We said before December 31st 2021 our report will be ready for Mr. President,” he added.
