Why we’re reviewing revenue sharing formula – RMAFC

The chairman of the Revenue Mobilisation Allocation and Fiscal Commission, RMAFC, Dr. Mohammed Bello Shehu said there is a need to reconstruct Nigeria’s federalism, hence the need to review the current revenue sharing formula among the federation units.

He said this at a press conference in Abuja on Monday to formally unveil the exercise to review the current Revenue Allocation Formula (RAF) for sharing revenue amongst the three tiers of government in Nigeria.

Constitutionally, he said Paragraph 32 (b), Part I of the Third Schedule of the 1999 Constitution of the Federal Republic of Nigeria (as amended) mandates the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) to “review, from time to time the revenue allocation formulae and principles in operation to ensure conformity with changing realities.”

According to him, the exercise is in response to the evolving socio-economic, political, and fiscal realities of our nation, the Commission has resolved to initiate the process of reviewing the revenue allocation formula to reflect emerging socio-economic realities.

“As you may be aware, since that time, Nigeria has undergone profound transformations demographically, economically, constitutionally, and constitutionally,” he said.

Further justifying the move for a review, the chairman said “the recent Constitutional amendments-by-the 9th National Assembly, which devolved certain responsibilities from the Exclusive to the Concurrent Legislative List, such as generation, transmission, and distribution of electricity; railways; and prisons (correctional centres), have placed financial and administrative burdens on subnational governments.

“This situation has made it essential to reevaluate 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.

“The aim of this review is to produce a fair, just, and equitable revenue-sharing formula that reflects the current responsibilities, needs, and capacities of the three tiers of government; Federal, State, and Local Governments in line with the constitutional roles.”

He promised that the Commission will carefully assess the needs, service delivery obligations, fiscal performance, and developmental disparities.

“Let me state clearly that this review will be inclusive, data- driven, and transparent. It will involve broad-based consultations with critical stakeholders, including the presidency, national assembly, state governors, ALGON, the judiciary MDAS, civil society organisations, traditional rulers, the organised private sector, and
development partners.

“The Commission s also committed to integrating cutting-edge research, empirical data, and international best practices in its analysis,” he said.

The chairman of the Revenue Allocation Formula which is saddled with the responsibility, Kabir Mohammed Mashi said the Commission had produced a report on Vertical Revenue Allocation Formula in April, 2022 which was jettisoned on the basis of the fact that constitutional amendment by the 9th National Assembly in 2023 affected the responsibilities of the various tiers of government under the 1 and 2nd Schedule of the 1999 Constitution (as amended).

This, he said led to the need for a fresh review of the revenue allocation formula in its entirety to reflect the current socio-economic challenges in the country as well as the new economic policies of the current administration.

“Today’s gathering marks a pivotal step in the evolution of our fiscal federalism and intergovernmental fiscal relations. It provides an opportunity for us to intimate you of our activities so as to understand the approach and offer your perspectives on this vital matter.

“The Commission is determined to Conduct this review through a process that is inclusive, transparent, evidenced-based and fully aligned with the spirit and letters of the 1999 Constitution (as amended),” he said.

Presently, revenue is shared in accordance with the vertical formula, as determined by RMAFC and approved by the National Assembly.

The formula allocates 52.68%, 26.72% and 20.60% to the Federal, State and Local Governments, respectively.

Additionally, one per cent each is allocated to the Federal Capital Territory, ecological fund, natural resources, and stabilisation fund under the vertical allocation structure.

At the event were federal commissioners of RMAFC from Abia, Akwa Ibom. Anambra, Delta, Ekiti, Katsina, Kwara, Lagos, Kogi, Ogun, Ondo, Oyo, Plateau, Rivers, Niger, Yobe and Zamfara states.

Stakeholders from the Nigerian Governors Forum, Association of Local Government of Nigeria, ALGON, National Bureau of Statistics, the civil societies and academics were present at the unveiling ceremony.