The Challenge of New Revenue Allocation Formula

rmafc-chairThe 1999 Constitution confers on the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) the power “to review from time to time, the revenue allocation formulae and principles in operation to ensure conformity with changing realities Provided that any revenue formula which has been accepted by an act of the National Assembly shall remain in force for a period of not less than five years for the commencement of the act.”

The current chairman of the commission, Engr. Elias Mbam and other federal commissioners in the agency since their assumption of office in December 2010 have been working towards providing fair and just revenue formula for the country since the nation could not have a new formula in more than a decade.

The nation could not have officially and legally endorsed revenue formula since military era due to various factors includes politicking and lack of political will. Former members of the RMAFC led by Engr. Hamman Tukur could neither get approval of National Assembly nor receive blessing of the Federal Executive Council on its draft proposal of 2002. Till their 10 years’ tenure ended in 2010 nothing was done on the draft submitted by the Commission.

At that period the stakeholders showed lack of interest on the review as there was allegation that states had strong objections to certain aspect(s) of the commission’s report with regards to the transfer of funding of primary education from Local governments to the states. At the federal level too, former President Olusegun Obasanjo was alleged to have expressed serious reservation to downward review of federal allocation in the draft proposal citing the enormous responsibility of the central government on energy, internal security, pension of police and Armed forces.

The new chairman of the Commission Engr. Mbam recently told members of the Federation Account Allocation Committee (FAAC) that the issue of designing a new Revenue Formula is a major priority of the Commission. He assured that nation that the Commission under him will do everything humanly possible to give the nation an equitable, just, fair and acceptable new revenue sharing formula by first quarter of 2011 that will satisfy the yearnings and aspiration of all stakeholders and the Nigerian people.

The Commission’s assurance became necessary when many stakeholders have continued to clamour for the review of the current revenue formula which in some quarters is considered an illegal index. For instance Governor Muazu Babangida Aliyu of Niger State who condemned the existing formula as old and legacy of military era, argued that it was unfair for the federal government to take 52.8percent while states and local governments share only 47.2 percent.

Other governors have also reacted on the need for upward review to favour the states because of the incapacities of States to meet up with the payment of the newly approved national minimum wage. Some commentators believe that there is too much wastage at the centre and that the present arrangement does not augur well for the states that need the resources to bring meaningful development to the people. The growing clamour for the review of the sharing formula by stakeholders particularly the state governments is understandable considering the enormity of the challenges confronting the states.

So far, the Commission could be said to be on the right track considering the constitution of a constitutional committee on revenue formula, consultation with stakeholders as well as the retreat members had in a Southern state where they evaluated and strategized on how to tackle major constitutional and contentious issues confronting the agency.

However, in revenue allocation system, many issues shape its process of formulation and final adoption. One obvious and consequential challenge is that revenue allocation appears to be more political in nature than technical. It is easier for one to gather the necessary parameters and principles for making of the formula, but political dimensions might interplay to create distortions in the final outcome. This may own to the fact that within the discipline of political economy, the thrust is on the improvement of the economic circumstance of the people.

It is necessary to point out that for a meaningful new revenue allocation formula; there is a need for proper knowledge on the constitutional responsibilities, common interest and task distributions among the federating units. Similarly, the constitutional mandates and other legal instruments must be associated to the tiers of government, as the major beneficiaries.

Changes in the social-economic environment as well as political conditions and historical factors are worthy of consideration, especially the changes in political structure where states are assuming responsibility over functions of local councils. The issue of minimum wage increase and the devastating effect of floods, desertification, erosion among others should be worthy of consideration.

The anticipated new revenue formula should properly state the position and mandates of the Federation Account Allocation Committee (FAAC) and State Joint Local Government Account Committee (SJLGAC) and if they are necessary or completely disbanded.While FAAC members, especially representative from the states have a say in what go to their government and other sundry matters that the National Assembly cannot legislate upon its own.

There is also need for the nation to seriously look for alternative means of income generation other than over dependence on oil revenue thereby giving ample opportunities to the commission to critically examine the responsibilities of all beneficiaries before assigning weights. These factors are perhaps responsible for the persistent pressure being mounted on RMAFC to address the issue of new revenue formula.

Since President Goodluck Jonathan, during the last presidential debate organised by Broadcasting Organisation of Nigeria (BON), promised to table before the National Assembly any revenue formula submitted by RMAFC without objection, it is necessary that adequate action should be pu in place towards a just allocation to the tiers of government.

While there should be effective measures for data collections and wide range of consultations across length and breadth of the country and, an exercise of this nature requires adequate funding and public support. Beside the sharing formula, RMAFC is charged with monitoring of accruals into and disbursements from the federation account. This singular function translates to monitoring the activities and funds generated by NNPC, Nigeria customs service; Federal Inland Revenue Service, CBN and DPR into the federation account before sharing get to the major beneficiaries.The commission is not adequately funded e
ven when it is responsible for determining salaries and allowances of all political office holders in the country.

An institution that is saddled with such enormous responsibilities does not only require semi-autonomy but full autonomy to serve as an independent umpire in revenue matters among the tiers of government.


Gabriel David



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