FG to review revenue sharing formula

The Federal government is set to inaugurate a committee to review the revenue sharing formula for the three tiers of government in the coming week due to the current economic reality in the country.

The Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Mr. Elias Mbam, made this disclosure while addressing the journalists after he received an award of Excellence at the event organized by the Nigeria Civil service Union in Abuja Tuesday.

The RMAFC chairman surprisingly revealed that the purpose of the review is to expand and increase the scope of revenue collection in the country and allow states and local governments to have a bigger share of the “national cake.

The details: The RMAFC boss said states and local governments are to get bigger shares with the proposed sharing formula.

He said: “My agenda is to expand the sources of revenue for the federation. I will like to expand the cake that we are sharing so that people will get reasonable quantity. I intend to do this through diversification in areas outside oil and gas, and that includes solid minerals, agriculture and manufacturing.

“So, we will encourage states and let them know what is available outside oil and gas so they can develop those aspects of the economy to their own benefit.”

On Revenue Allocation: RMAFC had in 2013 embarked on nationwide consultation on the need to review the revenue allocation formula in order to give room for even distribution of revenue and balanced development in the country.

The current revenue allocation formula, which was designed during the administration of ex- President Olusegun Obasanjo, recommended that the federal government gets 52.68%, while the states and local governments will receive 26.72% and 20.60% of the total amount respectively.

  • Similarly, the 13% federally collected revenue from oil and gas is reimbursed to the oil-producing states as derivation revenue to compensate for ecological disasters arising from oil production.
  • Despite efforts to come up with a new formula, a newly proposed formula which was debated on in 2014 never saw the light of the day for some unknown reasons.
  • Five years on, the revenue allocation still remains the same.
  • Meanwhile, Elias revealed the plans by the Commission to constitute a standing committee in the coming weeks to review the formula.

Recent development: Nairametrics recently reported on the N762.597 billion disbursed to the three tiers of government in June 2019. In the arrangement:

  • Federal government got the lion share, gulping N309.433 billion or  52.68% of the total fund.
  • The state governments received N201.157 billion or 26.72% of the net statutory revenue.
  • Local governments collected N151.384 billion representing or 20.60% of the total amount.
  • The 13% federally collected revenue from oil and gas totaling N38.705 billion was disbursed to the oil-producing states.

The National Cake: On the flip side, while the planned review of the allocation revenue is a welcome development, the RMAFC chief surprisingly said it means more national cake to share. 

  • However, there are concerns over the rising debt levels of some states across the federation, and a fragment of the said national cake is usually pumped into the settlement of debts and servicing.
  • In the meantime, the upward review in the allocations received by the states and local government will to an extent, support the state governments in settling their bills.

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