In his Independence broadcast on October 1st 2023, Governor Godwin Obaseki of Edo State cried out to the world about the deplorable state of federal roads in Edo State, particularly in Benin metropolis, and called on the federal authorities to devolve greater autonomy and financial resources to the states and local governments by increasing their share of the national revenue allocation. Obaseki was not alone. As a matter of fact, all heads of government at state and local government levels have been consistently crying out over the years to no avail. In 2017, Governor Nyesom Wike of Rivers State said that “true fiscal federalism will strengthen the economy of the country as all sections will develop based on their comparative advantages”. This posturing, on several occasions at that time, threw him up into a collision course with the power brokers in Abuja where, ironically, he is presently serving as a minister under his former political foes.
The argument against the states has often been the same pedestal sarcasm: What have the governors done with the previous allocations given to them? Won’t local government chairmen use the funds to marry more wives? But if one must push that self-defeatist argument, as lazy as it is, what exactly has the federal authorities done with the large chunk they have cornered for themselves over the years? Much of this back and forth arises from the fact that every attempt at rejigging the revenue sharing formula is either perceived as agitation for restructuring or for resource control, both of which appear like monsters in the eyes of certain category of the ruling elite. The reason for this perception continues to defy every human logic. To them, restructuring is a recipe for secession, likewise agitation for resource control and fiscal federalism. On the contrary, the generality of Nigerians believe that if Nigeria were a building, it would have since collapsed in the absence of a new bulwark to hold it together. If, for instance, all the budgetary provisions for construction and maintenance of the so-called federal roads together with the roads are transferred into the states’ own share of federal revenue, how will that lead to secession? At any rate, most states already bear the burden of taking it upon themselves to reconstruct and carry out maintenance work on most of these federal roads. Even if one argues that some state roads are death-traps, what will federal roads be called other than graveyards?
The term fiscal federalism was introduced into public finance by the German-born American economist, Richard Musgrave, in 1959. It deals with the division of governmental functions and financial relations among different levels of government: federal, state, and local governments. As defined by Wikipedia, the term deals with “understanding which functions and instruments are best centralized and which are best placed in the sphere of decentralized levels of government”.
As presently configured, the sharing formula allocates 52.68% of the country’s revenue, most of which comes from crude oil exports, to the federal government, 26.72% to the state governments, and 20.60% to the local governments. Under the immediate past regime of former President Muhammadu Buhari, a new formula was proposed which was more or less like cutting a little more piece of cake to the birthday child to make his birthday less boring! 45.17%, 29.79%, and 21.04% were proposed for federal, state, and local governments, respectively. Expectedly, this formula appears to have died a natural death; and with the bottomless bucket of socio-economic and political headaches plaguing the present occupants of Aso Rock, any attempt to tinker with the issue of revenue allocation may further obfuscate their predicament.
From the records contained in a research conducted by Victor I. Lukpata, of the Department of History and Diplomatic Studies, Federal University Wukari, Taraba State, from as far back as 1946 when the Regional Governments were granted internal autonomy by the Richard’s Constitution till date, the sharing formula appears to have always been subjected to all kinds of tinkering. One of the most problematic issues under the Babangida regime was the revenue sharing formula, so much so that Babangida had to review the revenue allocation four times during his tenure. From the inception of the Babangida regime in 1985 up until 1989, the formula of revenue allocation stood at: Federal – 55%; State – 32.5%; Local Government – 10%. Allocation to the oil mineral producing states and general ecological problems stood at 1.5% and 1%, respectively.
According to Lukpata, between 1990 and June 1992 there were about four revisions to the revenue allocation formula. However, the formula in June 1992 was more important because of the inability of local governments to effectively administer primary education. Consequently, the vertical revenue allocation formula was revised and the Armed Forces Ruling Council (AFRC) accepted the following revenue arrangement: Federal Government – 48.5%; State Government – 24%; Local Government – 20%; Special Funds – 7.5%.
At the inception of the new democratic dispensation after several years of military rule and in accordance with section 162 (2) of the 1999 constitution, the Obasanjo-led administration set up a commission in September 1999 headed by Engr. Hamman Tukur. It would be necessary to state that the 1992 revenue allocation formula backed by Decree 106 was in place and still operational into the new era of democracy. But this could not address changing realities like the increase in the number of states (6), local government councils (185), and the constitutional provision that increased derivation principle from 1% to 13%. By the time collations were made and analysed, a critical study on constitutional responsibilities of each tier was done to assign commensurate indices through percentages to the beneficiaries. It was therefore not surprising that it took the commission almost a whole year to submit its first proposal to the president in August 2001, which was subsequently passed to the National Assembly in its original form. The proposed revenue formula remained in the National Assembly for almost eight months before the Supreme Court verdict of April 2002 on resource control nullified special fund in the existing formula. This invariably affected the fate of the pending formula with the legislators. At the end, the commission came up with the final sharing formula with federal government having 46.63%, states 33%, and local government 20.37%. It further recommended that FCT should be treated like a state and the municipal councils as local governments.
It would thus appear that the sharing formula had followed a certain pattern whereby each new formula depended largely on the whims and caprices of each new regime at the centre without recourse to the needs and inputs of the federating units. It is all well and good that the federal government has both the yam and the knife and shares the meal as it pleases to the federating units if that will bring unity. But come to think of it, It does not appear that the units want to snatch the yam or the knife from Abuja; their point, if one is to be unbiased on the matter, is that the size of the yam they are getting is very much reminiscent of the tortoise in the adage who ate all the yam and smeared her children’s mouth with oil so that it would appear as though it was the children that ate the yam!
The United States and Canada where taxes are decentralized offer glowing examples of true fiscal federalism which perhaps explains why there is even development across board and less friction between the centre and local authorities. Here in Nigeria, states and local governments would certainly want to see a serious ratcheting up of responsibilities and funds accruable to them from the federation account as against the present lopsided sharing formula that concentrates a large chunk of the nation’s collective purse in Aso Rock.
In spite of constitutional provisions, sharing formula, under the present and past administrations, has left much to be desired across the federating units. The formula has resulted in inequitable distribution of resources, inadequate revenue generation by state and local governments. The principles on which the sharing formula were based over the years have been impacted severally by present-day realities, and should be re-interrogated. For instance, if population and land mass are factored in as coefficients, with current population figures and actual demography of various states yet unknown, and with some swathes of land under the control of insurgents and bandits, how can such a formula be equitable?
The change in the internal political structure of the nation as a result of state creation has led to distortion in the revenue allocation formula and this has weakened the fabrics of true federalism. For example, 12 states were created out of four regions in 1967. In 1976, the number of states rose to 19, and in 1996, the number of states rose to 36 with 774 local governments. Till date we still have 36 states and 774 local governments. Given the associated rising cost of running government and provision of utilities, and social infrastructure, statutory allocations to state and local governments together with internal revenues have become grossly inadequate. Whether Nigeria likes it or not, whether the present administration of President Bola Tinubu takes on the additional trouble that comes with fiscal rejigging or kicks the can down the road, it is clear that the time has come for the revenue allocation formula to be reconfigured with more resources to the federating units and less to the federal government.
____________
Anthony-Spinks writes from Asaba, Delta State.
