Revenue Allocation in Nigeria

Revenue allocation means the sharing of the country’s wealth among the federal, state, and local governments. There are two major parts of revenue allocation in Nigeria which are as follows:

Vertical Revenue Allocation: This is simply sharing the nation’s income among the tiers of government (federal, state, and local)

Horizontal Revenue Allocation: This is sharing the wealth of the nation among units within the government based on some principles. The principles include population size, landmass, ecological problems, as well as formula e.g. federal government- 40%, state government – 20%, local government – 15%, mineral production area – 10%, ecological problems area – 5%, others – 10%. Note that this formula changes from time to time.

The Revenue Mobilization Allocation and Fiscal Commission (RMFC) is charged in Nigeria to work out a suitable revenue sharing formula.

Resources control is the direct power over the resources, management and utilization in the area of location to ensure sustainable human development. 

Principles of Revenue Allocation in Nigeria

1. Land mass and terrain.

2. Development of the mineral producing areas.

3. Each level of government must have certain minimum responsibility and level of services provided by the government for continuity of services.

4. The principle of derivation states that where there is a bulk of revenue, each level should be given a share of what every other unit receives.

5. Government setting national standard. 

Challenges of Revenue Allocation in Nigeria

1. The principle of equality among the state

2. Lack of valid economic basis

3. Unreliable statistical data

4. Disparities in the area of economic development

5. The lack of clarity in the area of national interest and finance

6. The slashing of funds meant for development to personal