Review of Revenue Allocation Formula Underway, Says RMAFC

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Elias Mbam

•Sets up committee next week

Ndubuisi Francis in Abuja

The federal government has disclosed that it is on the verge of considering a review of the existing revenue sharing formula for the three tiers of government, federal, states and local governments, to reflect current economic realities.

There has been increasing pressure from the 36 states of the federation for a review of the formula by the states, especially after the recent approval of a new minimum wage in the country.

The present configuration of the sharing formula has 52.68 per cent of federally-collected revenue going to the federal government; 26.72 per cent for states; while local governments picked up the remaining 20.60 per cent.

Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Mr. Elias Mbam, who dropped the hint on the impending review of the revenue sharing formula, in Abuja, yesterday, after he received an award of excellence from the Nigeria Civil Service Union, also said that the commission would also move for the diversification of the nation’s revenue sources for a more sustainable growth and economic development.

Mbam disclosed that the commission plans to constitute a standing committee by next week to start work once again on the review of the nation’s revenue sharing formula.

“My agenda is to expand the sources of revenue for the federation. I will like to expand the cake that we are sharing so that people will get reasonable quantity,” he said, adding: “I intend to do this through diversification in areas outside oil and gas and that includes solid minerals, agriculture and manufacturing.”
He said further: “So, we will encourage states and let them know what is available outside oil and gas so they can develop this aspect of the economy to their own benefit.”

Mbam also spoke on the need to revisit the issue of financial autonomy of local governments, which would enable majority of Nigerians at the grassroots get the best out of democracy.

Apart from the existing review formula for the three tiers of government, 13 per cent of the oil and gas federally-collected revenue is reserved for the oil-producing states and communities as derivation revenue to compensate for ecological risks associated with oil production.
The extant revenue sharing formula was designed during the administration of former President Olusegun Obasanjo.

However, the RMAFC in 2013 saw the need for further review to ensure balanced development of the country, propelling it to embark on a nationwide consultation with the 36 states as well as meeting with notable political and economic influencers.
By December 2014, the commission said it was ready with its proposed new revenue formula but was eventually unable to actualise its objective.