Why we embarked on review of Nigeria’s allocation formula – RMAFC

Following increasing agitation by various interest groups, including states and local governments, and the need to accommodate changing realities, the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has commenced the process of a holistic review.

Speaking with some media executives in Lagos last weekend, Elias Mbam, RMAFC chairman, explained that the exercise had become necessary as a result of political, social, economic, demographic and environmental issues that needed to be captured.

According to Mbam, “The last general review of the revenue allocation formula was carried out over twenty-eight years ago (1992). The political structure of the country has since changed with the creation of six additional states in 1996, which brought the number of states to 36. Correspondingly, the number of local governments also increased from 589 to 774.

“There have been some considerable changes arising from the policy reforms that altered the relative share of responsibilities of the various tiers of government including the controversies over funding of primary education, primary health care, etc.”

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Mbam said inadequate/decaying infrastructure and heightened widespread internal security challenges across the country, and indeed, ecological challenges like global warming, desertification, flooding and population explosion made the review imperative.

He also noted as part of the reasons, the “inability of the current vertical formula to adequately address the apparent mismatch between statutorily assigned functions and tax powers of each of the three levels of government.”

Allaying fears that the project may be caught up in the milieu of the coming general election, the leadership of RMAFC pledged that although the efforts made in the past to review the formula were stillborn, this time around, it would be conclusive.

“I want to reiterate that the RMAFC is highly determined to produce within the shortest time possible, a new revenue sharing formulae that will be fair, just and equitable to the three tiers of government. The Commission has programmed to complete its review process by the end of 2021,” he said.

He pointedly said the review was focused on the vertical allocation, which deals with the formula for the allocation to the Federal, states and the local governments.

On the suggestion raised that the local government allocations must be directly sent to that tier of government, he promised that the committee would address all knotty issues.

The RMAFC chairman however, advised that all states and local governments must look inward for more revenues.

“There is no part of this country that does not have enough resources to survive, but the problem is that everybody is looking to Abuja to collect money from RMAFC at the end of every month. The local governments should look more at their backyards to survive,” he advised.

He called for inputs from groups and individuals in order to come up with acceptable allocation formulae.

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).

Among other functions of the Commission is to monitor the accruals to and disbursement of revenue from the Federation Account; review, from time to time the revenue allocation formulae and principles in operation to ensure conformity with changing realities, and also advise the Federal and State Governments on fiscal efficiency and methods by which their revenue can be increased.

It also determines 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 the nation’s Constitution.