Revenue Allocation Formulae:

Topics: United States, Federal government of the United States, U.S. state Pages: 8 (1802 words) Published: July 1, 2011
Revenue allocation formulae:

The current revenue allocation formulae is

52.68%, 26.72% and 20.60%.for the F.G, States and L.Gs respectively

| FEDERAL GOVT. | STATE GOVT. | LOCAL GOVT. | | | | | |52.68% |26.72% |20.60%. |


The current revenue allocation, as defined in Section 162 (2) of the Constitution of the Federal Republic of Nigeria, 1999, discriminates against the minority ethnic groups of the oil producing areas of the country. We should also note that, this formula is not applicable to other natural resources as iron, hides & skins, cocoa, palmoil which, again coincidentally, are situated primarily in the non minority regions of Nigeria. When these products constituted the mainstay of Nigeria’s economy, the current revenue allocation favored the respective federating units. But the game was changed when oil became the dominant single produce sustaining the Nigerian economy. Who changed the rules of the game? The answer is simple: members of the tripodal conspiracy group! As we say in Nigeria, “monkey de work, bamboo de chop”. Not only did the change violate the principles of federalism as they were when Midwest State was created, it also demonstrates a gross misuse and abuse of the power of the majority to subjugate the minority. As I have argued elsewhere ("The Nigerian Polity." Sunday Observer, Benin City, September 18, 1988, p. 5), the "federal revenue allocation to states should be made to correspond proportionately to the revenue enerated within each state. It is only in this way that states will begin to be serious and strive to be independent and autonomous, instead of waiting for a national cake shared on a wrong formula whereby the bakers get less”. The area that has been greatly misconstrued lately is the alleged adjustment of vertical allocation which does not affect the horizontal formula as it is being insinuated. The horizontal allocation indices are for sharing amongst states and LGCs which include such proxies as Equality, Population, Internal Revenue, Landmass, Rural Road, Inland Water Way , Education, Health and potable water. The vertical allocation to federal, states and local government councils is not changed.


I believe that we should fix the derivation equation once and for all at 13%. Then, I make the following proposals:


Take the entire totally collected revenue and remove the 13% of derivation pool D and distribute that to the state and local governments, and consider dividing the rest as follows by one of the following stipulations:

(i) Federal Government: 50%; State Government:25% Local Government:25%; divide 0.13 D equally to State and Local Government

(ii) Federal Government: 36% State Government: 28% Local Government: 36%; add 0.13D to State Government

(iii) Federal Government: 36% State Government: 36% Local Government: 28%; add 0.13D to Local Government. This is a flip of (ii) between the state and local governments.

Recommendation (i) – (iii) amount to the following allocation formulae being applied to the ENTIRE Federally collected revenue (not just the Federation Account)

(i) (ii)

Federal: 0.5(X-0.13D) 0.36(X-0.13D)

State: 0.065D + 0.25(X-0.13D) 0.28(X-0.13D) + 0.13D

Local Govt: 0.065D...
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