Review of New Revenue Formula Ready Before Year’s End- RMAFC Chairman
By Patience Ikpeme
The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has begun the review of Nigeria’s revenue formula, with a promise to conclude the exercise before the end of the year.
Addressing journalists and members of the Civil Society in Abuja, the Chairman of the RMAFC, Dr. Mohamed Bello Shehu, expressed disappointment that the last review was conducted in 1992 under a military government.
He said the constitution mandates a review “from time to time” to ensure the formula aligns with the country’s “changing realities.”
Dr. Shehu noted that since the last review, significant changes have occurred, including constitutional amendments that have moved certain responsibilities from the federal exclusive list to the concurrent list.
He cited the example of railways and the prison system, which states can now develop. These shifts, he said, make a review essential to the nation’s fiscal structure.
The RMAFC boss said the primary aim of the review is to foster greater fiscal independence for states. “The situation has made it essential to re-evaluate the structure of fiscal federalism in order to foster economic growth in individual states enabling them to become independent from the central government and ensuring equity, responsiveness and sustainability,” Dr. Shehu stated. He clarified that in a federation, the “federating units” should compete to provide services to their people.
He also discussed a particular fund, the 1.68% Natural Resources Development Fund, which was meant to be accessed by states for specific projects but has not served its intended purpose. Dr. Shehu said the commission is trying to make amends for the fund’s ineffectiveness.
The commission is reviewing both the vertical and horizontal aspects of the revenue allocation. Dr. Shehu provided the current vertical formula: the federal government receives 52.68%, states get 26.72%, and local governments receive 20.60%. He also mentioned the “spatial funds” that account for 4.18% of the federal share.
For the horizontal allocation, which distributes revenue among states, he said the commission will be reviewing the indices currently used, such as population and school enrollment.
On the process, Dr. Shehu said there is a debate over whether the commission should submit its findings directly to the National Assembly or through the President, as stipulated by the constitution. “What happens if Mr. President decides not to send it to the National Assembly, which is what had happened like I think two or three times in the past,” he pointed out.
He said the commission is constitutionally and financially empowered to carry out the review, which will be “inclusive, data-driven and transparent,” with broad consultations.
Professor Uche Uwaleke of Nasarawa State University, a participant at the event, offered his suggestions on the review. He said that any extra money allocated to states should be “ring-fenced” to ensure it is used for specific developmental purposes.
“If we find a way of ring-fencing… that’s my message, we ring-fence the more money we are going to push to subnationals, so that when they now come into the coffers of states and local governments, they are not looked at as discretionary funds, that they can use for even recurrent spending,” he advised.
Professor Uwaleke also suggested that the horizontal allocation formula should be reviewed. He said the 30% weight given to population could be reduced and the allocation to social development increased, as this would incentivize states’ progress in healthcare and education.
He also noted that states are expected to receive more revenue from new tax laws, including a 5% share of the federal government’s VAT.
