What’s revenue allocation formula review?
This is the process to alter the national revenue allocation formula by the federal government, states and local governments. The exercise which has started this July 2021 is by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC).
Revenue allocation and what is being reviewed?
Revenue allocation is the criteria, process and method of sharing a federation’s financial resources among the various tiers of government in the federation in such a peaceful way that guarantees development, progress and enhances unit. Revenues that flow into the federation account can be classified into oil and non-oil revenue.
Under the current revenue sharing formula, the Federal Government takes 52.68 percent, the states 26.72percent and the local governments, 20.60percent with 13percent derivation revenue going to the oil-producing states.
Why the review?
There have been growing agitations for the revenue sharing formula to give more resources to the states, local governments and the export commodities producing states.
RMAFC said the review is targeted at equitable distribution of the accrued revenue into the Federation account to the three tiers of government and this will be concluded before the end of 2021.
Major takeaway
The sustainability of economic development in Nigeria has been a serious challenge despite the huge revenue allocated to the three tiers of the government on a monthly basis from the federation account. This recurring decimal has left the country in a pitiable condition with inadequate infrastructure to carry on economic activities.
Federation Account Allocation Committee (FAAC)
The functions of the FAAC is to ensure that allocations made to the Local Government Councils in the State from the Federation Account and from the State concerned are promptly paid into the State Joint Local Government Account and distributed to Local Government Councils.
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Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) was established by Decree No. 49 of 1989 and later amended by Decree 98 of 1993 (now RMAFC Act CAP R7 LFN 2004) under Section 153(1) of the 1999 Constitution of the Federal Republic of Nigeria (As Amended), the Commission is listed as one of the fourteen (14) Federal Executive Bodies. It has a Chairman and Members from each State of the Federation and the Federal Capital Territory appointed by the President.
Constitutional responsibilities of RMAFC
The constitutional responsibilities of RMAFC were designed to ensure the orderly operational and management of the nation’s fiscal federalism. However, in carrying out these functions, the Commission is guided by its Vision and Mission statements as spelt out below: To be a World Class Federal Agency that promotes optimal and sustainable national revenue base and ensure equitable fair and just fiscal structure for transparent collection, remittance and disbursement of revenue to the designated beneficiaries aimed at enhancing good governance; and to ensure effective mobilisation of all revenue accruable to the Federation Account, advice on fiscal matters and monitor effectively all remittances for equitable and fair disbursement to the beneficiaries to promote national unity and development through established fiscal structure under relevant extant laws.
Functions/Powers of RMAFC
The functions of the Commission as provided under Paragraph 32(a-e) of Part I to the Third Schedule of the 1999 Constitution of the Federal Republic of Nigeria (As Amended) are as follows: (a) monitor the accruals to and disbursement of revenue from the Federation Account; (b) review, from time to time the revenue allocation formulae and principles in operation to ensure conformity with changing realities; Provided that any revenue formula which had been accepted by an Act of the National Assembly shall remain in force for a period of not less than five years from the date of commencement of the Act; (c) advise the Federal and State Governments on fiscal efficiency and methods by which their revenue can be increased; (d) determine the remuneration appropriate for political officeholders including the President, Vice President, Governor Deputy Governors, Ministers, Commissioners, Special Advisers, Legislators and the holders of the offices mentioned in Sections 84 and 124 of this Constitution; and (e) discharge such other functions as are conferred on the Commission by this Constitution or any Act of the National Assembly.
Membership of Statutory Bodies
For the purpose of performing its functions, the Commission’s Act Cap R7 LFN, 2004 made the Commission a statutory Member of the following Bodies/Agencies: (a) The Federation Account Allocation Committee (FAAC); (b) The State Joint Local Government Account Allocation Committee (SJLGAAC); (c) The Joint Tax Board (JTB); (d) The Niger-Delta Development Commission (NDDC; and (e) The Commission on Ecological Fund.
Furthermore, the Act also empowers RMAFC to demand and obtain regular and relevant information, data or returns from any Government Agencies including the following: (a) The Nigerian National Petroleum Corporation (NNPC); b) The Nigerian Customs Service (NCS); (c) The Board of Federal Inland Revenue (FIRS); (d) The Central Bank of Nigeria (CBN); and (e) The Federal Ministry of Finance (FMF).
Advocacy to reduce Cost of Governance
Revenue Mobilisation Allocation and Fiscal Commission has been at the forefront of calls for a reduction in the day to day government expenditure. Cost of Governance is any cost associated with the running of government. In other words, it is the cost incurred by the government in the course of providing goods and services to the citizenry.
It may be subdivided into recurrent and capital expenditure. Whereas recurrent expenditure is government spending on overhead and personnel costs, capital expenditure on the other hand is government spending in providing infrastructural facilities.
For any society to make meaningful progress there ought to be a competent and cost-effective management system that is capable of maximizing the nation’s scarce resources to the benefit of all. The cost of running the government in Nigeria has been on the increase over the years to the extent that stakeholders are worried about the problem and are seeking ways to address the anomaly which is posing fundamental threat to the nation’s development.
The essence of efficiency in governance is to ensure that public fund is spent judiciously. In other words, every kobo must be fully accounted for and spent judiciously for the welfare of the masses.
