Revenue allocation formula in nigeria. Derivation Principle of Revenue Allocation in Nigeria 2022-11-07

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In Nigeria, the revenue allocation formula is a process by which the country's national revenues are distributed among the various levels of government (federal, state, and local) and among the different sectors (such as education, health, and infrastructure). The formula is an important part of the country's fiscal federalism system, as it determines how much money each level of government and sector receives and how those funds are used.

The revenue allocation formula in Nigeria has undergone several changes over the years, with the most recent revision occurring in 2020. The current formula consists of three tiers: the first tier is the allocation of revenue to the federal government, the second tier is the allocation of revenue to the state governments, and the third tier is the allocation of revenue to the local governments.

At the federal level, the largest share of revenue goes towards defense, debt service, and the judiciary. Other sectors that receive a significant share of federal revenue include education, health, and infrastructure.

At the state level, the revenue allocation formula takes into account the population, land area, and internally generated revenue of each state. States with a larger population and land area, as well as those that generate more internal revenue, receive a larger share of the revenue. The revenue allocated to the states is used to fund various sectors, including education, health, and infrastructure.

At the local government level, the revenue allocation formula is based on the population and land area of each local government area. Local governments with a larger population and land area receive a larger share of the revenue. The revenue allocated to the local governments is used to fund various sectors, including education, health, and infrastructure.

The revenue allocation formula in Nigeria has been a source of controversy in the past, as different levels of government and sectors have argued for a larger share of the revenue. However, the current formula has generally been seen as fair and has helped to ensure that all levels of government and sectors receive the funding they need to provide essential services to the people of Nigeria.

Revenue Allocation in Nigeria: Definition and the Sharing Formula

revenue allocation formula in nigeria

The current revenue allocation formula among the three tiers of the Nigerian government are: Federal Government: 52. There are several systems of government currently being practiced all over the world. However, it is the state and local governments that are nearer to these ones and can meet their needs more accurately. Do you require the service of a tested, trusted and experienced trader who can help you trade your online Forex, Bitcoin and Binary accounts for minimum 10-20% weekly profit?. It suggests that a certain percentage of the value of resources got from a state should be returned to the state in form of special allocation e.

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Which state has the highest revenue allocation in Nigeria?

revenue allocation formula in nigeria

Highlighting the key recommendations in the report, Mbam said the proposed vertical revenue allocation formula suggested 45. The derivation principle has often been criticized based on the fact that states that are more endowed with natural resources will earn more and thus be richer while less endowed states will not see as much growth and development. The principle has continued to undergo retrogressive changes as different administrations took over power. Such is the obstacle of politicization of successful revenue allocation in the country. All the 36 states in Nigeria get 26. Principle of national interest This principle advocate for equal allocation of revenue among the states in the country.

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What Is Revenue Allocation In Nigeria?

revenue allocation formula in nigeria

When the military took over power in 1966, it set up an interim committee Dina committee that again recommended the derivation principle due to its relevance. Unlike Nigeria, the Peruvian fiscal decentralization policy based on the system of automatic transfers to mineral producing areas failed because it never took into consideration the strength of its human capacity at the local level before implementing the policy. This has led to several revenue sharing formulas over the years and there are constant calls for adjustment of the current formula. The fund is not equal and the same. Government revenue allocation is one aspect of governance that grabs the interests of politicians and citizens of the country. From the period of oil discovery in 1958, the percentage derivation due for mineral producing states began to decline.

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(PDF) Revenue Allocation Formulae in Nigeria: A Continuous Search

revenue allocation formula in nigeria

REVENUE SHARING FORMULA IN NIGERIA The Revenue Mobilization Allocation and Fiscal Commission RMAFC is charged with the duty of revenue sharing between the three tiers of government. Thus, sharing the generated revenues builds a cordial relationship between the federal, state as well as local governments. Chick Commission 1953 This commission recommended the splitting of the central marketing board into regional marketing boards, which was done in 1954. The main principle of Federalism refers to the decentralization of power. THE PRINCIPLE OF EVEN DEVELOPMENT In a bid to determine how the revenue should be allocated, the principle of even development was also applied in other to ensure that development is evenly spread across all the federation units. In fact, Nigerians are poorer today than they were in the pre-oil boom days. This has in turn led to the inability of the local government to contribute to the growth of the economy in the country through embarkment of projects.

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Revenue Allocation Formula in Nigeria

revenue allocation formula in nigeria

Applying the derivation principle in its original sense may increase the chances of implementing programmes according to the needs and priorities of the people. Hence, these states believe they are being cheated when the Northern states have more of what they seemingly work for. Rather, it is a politically imposed type of compromise between ethnocentric parties. The allocation on primary school enrollment is made solely on direct proportion. Find out in this article. This high concentration has promoted wasteful spending and encouraged corruption by the politically privileged elites at the central level.

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Problems of Revenue Allocation in Nigeria

revenue allocation formula in nigeria

In 1970, a decree No. This is what the oil rich Niger Delta region continues to ask for, since federalism in Nigeria has become a politically manipulated practice by the power dominant majority, creating a serious barrier to the resource control agitators. Truth be told, state governors have bastardised section 162 6 , 7 and 8 of Nigerian Constitution which are meant to see to adequate funding of the 768 local government areas as recognised by section 3 6 of the Constitution of the Federal Republic of Nigeria 1999, as amended. This decree altered the revenue allocation formula by toning down the all-powerful derivation principle and introducing measures of fiscal equalization among the states. Tag: What Is Revenue Allocation In Nigeria. At the expiration of the proposed term, a review can be made to ascertain the level of success achieved before further steps are taking. Problems of Revenue Allocation in Nigeria It seems no revenue allocation formula has been fit for Nigeria.

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Revenue allocation formula in nigeria Free Essays

revenue allocation formula in nigeria

INDEPENDENT REVENUE Similarly, this principle of allocating revenue states that each tier of government is capable of generating revenue for itself. This does not allow for proper allocations to be made to the local government. Federation, Unitary, and confederation are three very good systems of government. The Federal Government is equally duty-bound to share the revenue received to the entire State. The response of the president to the new revenue allocation formula is on point. Which Constitution established the Revenue Allocation Commission? Basically, fiscal federalism is all about revenue generation and sharing amongst all levels of government for development of a nation.

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Derivation Principle of Revenue Allocation in Nigeria

revenue allocation formula in nigeria

In terms of capacity, we believe Nigeria has come of age, but the influence of the former tends to weaken the latter. I said this against the background of some of the other recommendations in the report. Most importantly, as I said on Daily Politics on Trust TV when this issue was discussed on Friday, April 8, 2022, the key issue in the revenue share should not be about who gets more or less but what the managers of these resources or revenue do with the money. This soon broke down because the West favoured the derivation principle, the North the principle of need, while the East preferred the national interest principle. The North and West felt irked that the East contributed the least to the central pool, but claimed the most from it. However, this has not been the case in Nigeria and one would wonder why. First, both protectorates had fiscal years beginning at different times of the year.

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Government Revenue Allocation In Nigeria & Sharing Formula

revenue allocation formula in nigeria

Oil is a major source of energy in Nigeria and the world in general. It takes into account other factors of disparity such as population and level of development and then proposes that more revenue should be allocated to less developed states so as to bridge the gap in development. The Eastern Region that was less endowed devised other sources of revenue. The major functions of the FAAC is to ensure that allocation made to the States from the Federation Account are promptly and fully paid into the Treasury of each state, on basis and terms prescribed by law. Agriculture, for instance, was a major source of revenue for the Western Region. Thus, it is imperative that states being affected by these problems are aided in solving them.

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