Revenue Allocation Formula in Nigeria

Topics: Petroleum, Federal government of the United States, Nigeria Pages: 7 (2396 words) Published: July 23, 2010
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 division of Nigeria into six geo-political zones) insists at this confabulation that in order to address past anomalies in the allocation scheme that it should be given 25% instead of 13% (or 17%) as a first step toward boosting the percentage to 50%. The request made to the conference flowed from the environment devastation of the region and for development befitting the area that "lays the golden egg." Having personally flown over the South-South zone and traveled by road in the region, I can attest to the lamentable condition in the area. In spite of the empirical evidence to support the claims of the South-South at the confab, the north, as represented by some of its oligarchs argue against a change in the formula that would address the needs of the ethnic minorities whose territory houses the country's bread winner-crude oil. The north argues for a 17% derivation for the oil-producing area. The attitude (and expression) of Umaru Dikko, representing the interest of the north at this conference, is analogous to that which he was alleged to have affirmed in 1994. Indeed, he noted, proverbially, his concern regarding the inauguration of a National Conference set up by the late Abacha administration-a conference that was intended to work out the modalities for the formation of the Nigeria state. He said: No man becomes a hero by selling his father's house to buy a land (West Africa, February 14-20, 1994, p. 251)." What Dikko was implying, arguably, was that Abacha (a Northerner) was, by the nature and scope of the National Conference that he had set up, selling off the northern interests without being cognizant of what he would get in return for the north. Indeed, Dikko is determined at this meeting to represent the interest of the north come hell or high water. He and his northern colleagues should be aware also that the South-South zone should and must defend the area's interest. But the issue of revenue allocation formula is so serious that it really calls for a...

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