Revenue means income. Allocation means to divide. Revenue allocation is defined as the division of available resources within an organisation or company. At a broader level, it is the process of assigning a cost to the amount of services and products generated. Government revenue is obtained from taxes, licenses and fees and allocated to public facilities. Because of the current revenue allocation formula in Nigeria, though there is a great deal of wealth in the country from the oil industry, 64% of the population lives below the poverty line. While the federal government takes over half of all the money in the Nigerian federal account, little has been done to promote welfare and development projects that would benefit the general public. According to the Nigerian Revenue Mobilization Allocation and Fiscal Commission, a new revenue allocation formula is in the works, but it remains to be seen if these measures are enough to remedy the problem. When Nigeria’s maverick CBN Governor recently in an interview justified the sadistic, sub-human and horrific terrorist activities going on in the North of Nigeria by attributing it to the fact that oil revenue was being unfairly shared on the basis of derivation primarily instead of population which is the North's competitive advantage, I was shocked that such a flawed argument could come from such a respected Nigerian whose controversial reform of the Nigerian banking sector has won him praises and awards locally and internationally. SLS traced the root cause of terrorism in the North to grinding poverty in the North which he claims was caused by Nigeria’s use of the derivation principle instead of population as the primary yardstick for allocating revenue among the states. He believes that this preference for the derivation principle has short-changed the North and disadvantaged it.
I totally disagree with SLS and will articulate in this article my reasons for disagreeing with him and my suggestions on the way forward for Nigeria using history as a guide to arrive at what I believe is a just solution that will be favourable to all. In the 1960 Constitution that ushered in independence, extensive provisions were made in Section 130-139 for revenue allocation. The most striking is section 134 which reads:
"134. (1) there shall be paid by the federation to each region a sum equal to fifty per cent of - (a) The proceeds of any royalty received by the federation in respect of any minerals extracted in that region; and (b) Any mining rents derived by the federation during that year from within that region. (2) The federation shall credit to the distributable pool account a sum equal to thirty per cent of - (a) The proceeds of any royalty received by the federation in respect of minerals extracted in any region; and (b) Any mining rent derived by the federation from within any region. (3) For the purposes of this section the proceeds of a royalty shall be the amount remaining from the receipts of that royalty after any refunds or other repayments relating to those receipts have been deducted therefore or allowed for. (4) Parliament may prescribe the periods in relation to which the proceeds of any royalty or mining rents shall be calculated for the purposes of this section. (5) In this section 'minerals' includes mineral oil.
(6) For the purposes of this section the continental shelf of a region shall be deemed to be part of that region."
In the 1963 Constitution, a provision, verbissima verbis with section 134 outlined above was section 140; this section also contained sub-section (6) which allowed for the revenue derived from mineral mining activities in the continental shelf to be paid to the Region Contiguous to it. There was clearly no justification for NOT Retaining these sections of the 1960 & 1963 Constitutions in subsequent Constitutions such as the 1979 Constitution and the subsisting 1999 Constitution which gave a 74.5% hair cut to the 1960 derivation formula by...
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