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Revenue Allocation is a dynamic process which has been changing with the historical and political condition of the country. The issue of revenue sharing came to sharp focus with granting of the internal autonomy to the regions- North, West and East under the Richardson constitution of 1946 and the subsequent sharing of responsibilities between the federal, state and local governments.
The Federal Government use to declare revenue according to the proportion of its contribution to the central revenue derivation principle, Adebayo (2008). Thus, the origin of federation in Nigeria had brought a lingering problem of how best to find a permanent solution to equitable revenue allocation formula in Nigeria which had been politicized by successive administration both military and civilian regimes.
According to Philips (2007), the three important problems are as follows:-

  1. How to allocate functions rationally.
  2. How to share revenue between the government of the federation
  3.   How to allocate taxing powers.

Since 1970 to 2010, there had been a continuous review manipulation and time inconsistence of revenue allocation formula in Nigeria that prompted me to research into a permanent and equitable revenue allocation formula.

The different commissions established to provide equitable revenue allocation formula include:-

  1. Two post-independence ad-hoc revenue allocation commissions.
    1. Binns Commission (1964)
    2. Dina Committee (1969)
  2. Four military government issued decrees, all during Gowon’s regime.
    1. 1997
    2. Decree 13 of 1970
    3. Decree 9 of 1971 and 1975
  3. Two comprehensive revenue allocation commissions
    1. Aboyade Committee (1977)
    2. Okigbo Commission (1980)

iv.      Two revenue allocation Legislation Acts

    1.         Allocation of revenue Act (Federation Account) (1981)
    2. Allocation of revenue amendment Decree (1984) and finally established a permanent National Revenue Mobilization Allocation and Fiscal Commission (RMAFC) through Decree 49 of 1989, a commission which continues with us today even in the 1999 constitution.

This commission was also inaugurated by His Excellency, President Obasanjo, on the 20th of September, 1999 in line with paragraph 31, part 1 of the third schedule to the 1999 constitution. Indeed, the history of revenue allocation and fiscal responsibility commission in Nigeria in connection with derivation principle and the Niger Delta problems has been quite intriguing.

The Origin of the problems of the revenue mobilization allocation and the fiscal responsibility commission in Nigeria can be traced back to the onset of “Federalism or Fiscal Federalism” is in name only rather than in deed and in truth. In our current revenue allocation formula, where since 1970, the Federal governments have been playing “Musical Chairs” with the lower levels of state and Local government over distribution of the total collected revenue resulting to lack of development according to book “Revenue Sharing and the Political Economy of Nigerian Federalism” by T.Y. Danjuma, (2006). The fiscal federalism in Nigeria has not been able to contribute optimally to social and economic development because of its ad-hoc policy measures adopted the federal government, transferring federally-collected revenue to itself and effectively neutralizing the statutory allocation formula thereby reducing the statutory allocations that are received by state and local governments. These ad-hoc measures including the use of dedication accounts, stabilization funds, petroleum (special) trust fund and AFEM intervention surplus etc: CBN annual report (December 2008)
Thus, the origin of a federation established at once raises three important questions namely:
1.       How to allocate functions rationally
2.       How to allocate taxing power
3.       How to share revenue between the governments of the federation. (2007).
Drastic reduction on the principle of derivation in revenue allocation from 100% in 1953 to 13% presently resulted to restiveness in Niger Delta Region of the country which has negative impact on Nigerians GDP/Foreign exchange earnings. There has been an upsurge of economic nationalism in the oil rich areas. This has involved rigorous demand for wide ranging institutional and distributional reforms, including the amendment of the Nigerian constitution to make mining and minerals a joint federal-state, rather than exclusively federal responsibility thereby neglecting the ecological problems and risks of oil exploration and exploitation at the expense of the host communities. It is argued that oil prospecting and production activities have been systematically destroying the environment of the oil bearing areas, pollution and continuous flaring of associated gas create health hazards and render fishing and other farming activities almost impossible, Osagie, (2009) and this gave rise to militancy and kidnapping in recent times in the Niger Delta Region.
One of the major problems of Revenue Mobilization Allocation and Fiscal Responsibility Commission (RMAFC) is undue interference by politicians (National Assembly Members) and non-implementation of commission’s recommendation which resulted to jumbo salary of Law Makers who worked out their own salary and allowances irrespective of what the commission approved.
It could be recalled that Late Yar’Adua had mandated that RMAFC in 2008 to review the remunerations of Lawmakers in order to reduce national aggregate expenditure due to the wake of the global economic crisis between 2007 to 2009, however, after the review, the former chairman Harman Tukur recommended N11.5 Million as Basic salary and allowances for a senator and N9.5 Million for house of Representative Members but the Lawmakers had in January 2009 turned down on executive bill that sought to out down all political officers emolument. Financial standards August, 23 (2010).
Consequently, the newly appointed chairman of the commission, Engr. Elias Mbam had promised to initiate a plan to give the nation a new revenue sharing formula which is still in the pipeline subject to president Jonathan’s approval.
Therefore, due to the above analysis, the statements of problem are as follows:

  1. Whether the present revenue association formula is acceptable and equitable in fostering national integration.
  2. Whether there are possible solutions to the problems that emanate from revenue allocation that will enhance national development.
  3. Whether there are suggestions on the more appropriate percentage allocation of revenue from excess crude oil to the Ministry of Niger Delta Affairs against ecological problems.
  4. Whether the problem of fiscal federalism can affect the taxing power and responsibilities of states in revenue generation
  5. Whether the federal government interference affects the performance of the commission.