Revenue Allocation Formula in Nigeria

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Revenue Allocation Formula in Nigeria

By | July 2010
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REVENUE ALLOCATION FORMULA IN NIGERIA
INTRODUCTION
Prior to the discovery of oil in Nigeria, other sectors of the economy thrived. Agriculture, for instance, was a major source of revenue for the Western Region. The Eastern Region that was less endowed devised other sources of revenue. All this has however changed since the discovery of oil in the country. This has led to the demise of the other productive sectors of the economy. In fact, Nigerians are poorer today than they were in the pre-oil boom days. This is mainly because of the methodology of sharing the oil revenue. The struggle for the control of the oil wealth has led to an unfortunate shift from a revenue-oriented principle to an expenditure-oriented principle of revenue allocation. According to a former Governor of one of the oil producing states: It is an act of self-deception for anyone to argue that there is nothing wrong with the revenue formula. We have had basically two systems of revenue allocation in Nigeria. The first system which we practiced during the First Republic allowed the North to keep the proceeds from its groundnut and cotton, the West to keep the proceeds from its cocoa, and the East to keep the proceeds from coal and oil produce. Then we changed the system so that the Federal Government got its hands on the proceeds from on-shore and off-shore crude petroleum proceeds, and yet we don't expect the minorities in the oil-producing areas to perceive that is an injustice done to them. The oil-producing minorities have a point that the rule of the revenue allocation game was changed to disfavor them (Professor Bolaji Akinyemi, COMET, June 6, 2001)." It is against the backdrop of the preceding assertion, delivered by a Nigeria academic and a delegate to the National Political Reform Conference, that the complicated discussion regarding the revenue allocation formula at the National Political Reform Conference might be visualized. The South-South zone (in the imagined or putative...

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