New revenue formula reduces FG allocation by 3.33%


* Increases state and LG allocation by 3.07 and 0.44% respectively
* New revenue distribution formula ready after constitution review, says Buhari

Deji Elumoye in Abuja

Nigeria’s 30-year-old Revenue Allocation Formula will soon be overhauled with a proposal from the Revenue Mobilization Tax and Allocation Commission (RMAFC) for the reduction of the allocation to the Federal Government from 3.3%, while the allocation to the 36 states and 774 local government councils will get an increase of 3.07 and 0.44% respectively.
This is just as President Muhammadu Buhari has said that he will await the final outcome of the constitutional review process before submitting the report of the review of the vertical revenue allocation formula to the National Assembly as a draft law for promulgation.
The vertical revision of the revenue formula will also affect Special Funds, with CMRAF proposing a 0.2% increase for the Federal Capital Territory (FCT) and a 0.38% decrease for Natural Resources Development.
Speaking at the State House, Abuja on Thursday while receiving the RMAFC report from its Chairman, Elias Mbam, President Buhari stressed that for the nation to have a lasting review of the current revenue allocation formula, it must first be an agreement on responsibilities. to be achieved by all levels of government.
In particular, he noted that the proposal seeks a reduction of 3.33% of the current allocation for the federal government and on the other hand, an increase of 3.07% and 0.44% for the states and local governments. on the other hand.
He added that regarding special funds, the CMRAF report proposed an increase of 0.2% for the Federal Capital Territory (FCT) and a decrease of 0.38% for the development of natural resources.

The President recounted that the federal government had also contributed to the process of revising the vertical revenue distribution formula based on the existing constitutional provisions regarding the roles and responsibilities of the different levels of government.

His words: ”It should be noted the increasing visibility of responsibilities at the sub-national level due to the weaknesses at this level. For example, primary health care; Basic primary education; levels of insecurity; and increasing remittances to states and local governments through the Value Added Tax (VAT) split formula, where the federal government only gets 15% and the states and local governments share respectively 50% and 35%.
President Buhari said he would go ahead to submit the revenue allocation report to the National Assembly as a bill for enactment.
However, he argued that since the revision of the vertical revenue distribution formula is a function of the roles and responsibilities of the different levels of government, “I will await the final outcome of the constitutional revision process, especially since some of the proposed amendments would affect the recommendations contained in this document”.
He listed some of the report’s recommendations: ”Establishing local government as the level of government and associated repeal of state/local government account, moving airports, fingerprinting, identifying and criminal records from the exclusive Legislative List to the concurrent Legislative List, empowering the RMAFC to enforce payment of accrued liabilities and disbursement of revenue from the federation account as well as streamlining the review process of the income allocation formula.”
The president assured the commission members that the federal government would immediately submit the report to its internal review and approval processes, pending the finalization of efforts by the National Assembly.
According to him, this strategy, rather than issuing an Executive Amendment Order, as was done in 1992, is more in line with Nigeria’s entrenched democratic principles.
He commended the RMAFC for a thorough job, pledging his unwavering commitment and support in carrying out their constitutional mandates.
The President also thanked Nigerians, especially state and local governments, for contributing through the extensive stakeholder engagement processes that produced the report.
He said: “I am aware that the current income distribution formula has not been reviewed since the last exercise carried out in 1992.

”Given the changing dynamics of our political economy, such as privatization, deregulation, financing of primary education, primary health care and the growing demand for decentralization, among others, it is necessary that we examine again our revenue sharing formula. , in particular the vertical aspects related to levels of government.
“It becomes more compelling as we need to reduce our infrastructure deficit, make more resources available to combat insecurity, address climate change and associated global warming, and make life more meaningful for our people by rapid growth”.
President Buhari said that as an advocate for grassroots development, he has always been committed to ensuring that all levels of government are treated fairly, equitably and justly in the sharing of national resources.
”I want to let you know that I have carefully followed most of the discussions held in the geopolitical consultation process and one thing that clearly struck me was the agreement that a review of our revenue formula vertical cannot and should not be an emotional or sentimental discussion and it cannot be done arbitrarily.
”All over the world, the allocation of income and resources has always been a function of the level of responsibilities attached to the different components or levels of government.
”So I’m glad to see that the discussions went along those lines and were squarely based on the roles and responsibilities as set out in the 1999 Constitution (as amended).
”However, I also note that in reaching the final decisions in most of these engagements, little emphasis has been placed on the fact that the second schedule of the Nigerian constitution contains 68 articles on the exclusive legislative list and the 30 articles remaining on the list. Concurrent listing requiring both federal and state governments.”
Earlier in his remarks, the Secretary to the Government of the Federation (SGF), Boss Mustapha, said that the RMAFC had followed due process in undertaking the exercise and sought the opinion of the federal government before finalizing the report.

Giving a summary of the report, Mustapha said it was in four volumes, including a summary in the main report.
According to him, “Volume 1 contains the various memoranda submitted by the federal and state governments, as well as the FCT. Volume 2 details the presentation of academia, civil society, professional bodies, traditional leaders, individuals, as well as the women and youth council.
”To complement the inclusiveness of the stakeholder participatory processes adopted, Volume 3 is a research that captures the body of knowledge that supported the review, while Volume 4 is a further distillation of state submissions and local governments as well as NGOs and area councils of the FCT.
Also speaking, RMAFC President Mbam said the main philosophy behind the proposed revision was guided by the need for distributive justice, fairness and equity as enshrined in the relevant sections of the Constitution. of 1999 (as amended).
He added that the principles take into account the indivisibility of the country, public opinion and the weighted constitutional responsibilities and functions of the three levels of government.
He announced that the proposed vertical revenue distribution formula recommended 45.17% for the federal government, 29.79% for state governments and 21.04% for local governments.
Under Special Funds, he said the commission’s report recommended 1.0% for ecology, 0.5% for stabilization, 1.3% for natural resource development and 1.2% for the FCT. Arriving at the new vertical revenue allocation formula, Mbam told the President that the commission had carried out wide consultations with key stakeholders, public hearings in all geopolitical areas, administered questionnaires and studied some other federations with similar fiscal arrangements like Nigeria to draw useful conclusions. lessons from their experiences.
According to the RMAFC Chairman, the commission also traveled to all 36 states, FCT and 774 local government areas to raise awareness and get input from stakeholders.
He added that literature reviews were conducted on the revenue allocation formula in Nigeria dating back to the pre-independence period, while the commission received memoranda from public sectors, individuals and private institutions to across the country. Explaining the main reasons for the exercise, Mbam noted that since the last review carried out in 1992 – 29 years ago – the political structure of the country has changed with the creation of six additional states in 1996, which has increased the number of states at 36. .
As a result, he said, the number of local government councils also increased from 589 to 774.
“There have been considerable changes resulting from political reforms which have altered the relative share of responsibilities of different levels of government such as deregulation, privatization and the continuing controversies over the financing of primary education, primary health care “, did he declare.
The Chairman of the RMAFC noted that while Section 32(b), Part 1 of the Third Schedule to the 1999 Constitution 9 (as amended) empowers the commission to review revenue allocation formulas from time to time ; the inadequate and dilapidated infrastructure, as well as the widespread and increased internal security problems across the country also necessitated the exercise, among others.

Sallie R. Loera