The Chairman of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), Dr. Mohammed Shehu, has announced the commencement of a review of the current Revenue Allocation Formula (RAF) in the country.
The review comes 33 years after the last review, and following three previous botched attempts to get a new revenue sharing formula.
The federal government had urged RMAFC to carry out a comprehensive and diligent review of the existing revenue allocation principle with a view to formulating a workable and acceptable formula for the country.
Speaking on Monday while announcing the commencement of the revenue formula’s review in Abuja, Shehu said Paragraph 32 (b), Part I of the Third Schedule of the 1999 Constitution (as amended) mandated the commission to “review, from time to time the revenue allocation formulae and principles in operation to ensure conformity with changing realities”.
The Secretary to the Government of the Federation (SGF), George Akume, gave the charge yesterday in Abuja when he received a RMAFC delegation led by Shehu.
Akume expressed confidence in the commission’s capacity to deliver on its mandate, and assured of the readiness of his office to support the project.
Akume also called on RMAFC to factor into any new revenue allocation formula an irreducible minimum allocation to some Ministries, Departments and Agencies (MDAs) of the federal government, like the Ministry of Defence, because of their critical role in the protection of the country’s sovereignty.
Shehu assured the SGF that the commission was working on a new revenue allocation formula, the draft of which would soon be forwarded to his office for input before being forwarded to the National Assembly for final approval.
While announcing the start of the review process yesterday in Abuja, Shehu said the last review of the revenue sharing framework was carried out in 1992, after which there were several executive orders from May 2002 to date, to try to modify the template, but to no avail.
He also said the exercise would be concluded by the end of the year.
Shehu added that the aim of the review was to produce a fair and equitable revenue-sharing formula that reflected the current responsibilities, needs, and capacities of the three tiers of government – federal, state, and local government – in line with their constitutional roles.
He said, “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.
“As you may be aware, since that time, Nigeria has undergone profound transformations demographically, economically, constitutionally, and constitutionally.
“The recent constitutional amendments by the ninth 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 sub-national governments.”
Shehu added, “This situation has made it essential to re-evaluate 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.”
He reaffirmed the commission’s commitment to integrating cutting-edge research, empirical data, and international best practices in its analysis.
According to him, “We invite the cooperation of the media and all Nigerians in this patriotic exercise for which your support is crucial in building public trust, ensuring accountability, and keeping the public informed.
“I wish to reiterate the commission’s commitment to discharging this sacred responsibility with utmost integrity, objectivity, and national interest.
“This is a historic opportunity to shape a more resilient and equitable fiscal system for Nigeria, and we shall not fail.”
The RMAFC chairman pointed out that apart from allocating revenue, the commission was also concerned with how the funds would be utilised, going forward.
He said for the country to experience real development, local governments must be restored as centres of development.
Stakeholders including Director, Institute of Capital Market Studies, Nasarawa State University, Keffi, Professor Uche Uwaleke, emphasised the need to ring-fence the extra allocations that would be going to the states, amid the accountability issues often witnessed at the sub-national level.
Uwaleke said benchmarking part of the funds to development and infrastructural projects would ensure that extra allocations are better utilised. He stated that this was particularly important given that the extra allocations to states following fuel subsidy removal had not made much developmental impact in the states.
Stakeholders also stressed the need to build incentives around the potential increment in allocations to sub-national governments, as well as ensure greater levels of transparency and accountability.
Shehu further explained that the commission had produced a report on Vertical Revenue Allocation Formula in April 2022, which was jettisoned because the constitution amendment by the ninth National Assembly in 2023 affected the responsibilities of the various tiers of government under the first and second schedules of the 1999 Constitution (as amended).
He said that necessitated a fresh review of the formula to reflect the current socio-economic challenges in the country as well as the new economic policies of the current administration.
He said the kick-off of the review marked a pivotal step in the evolution of fiscal federalism and inter-governmental fiscal relations.
He said, “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).”
