FG, States, LGs To Get New Revenue Allocation Formula Next Year – RMAFC
Barring any last minute change in plans, the Revenue Mobilisation Allocation and Fiscal Commission will release a new formula that would guide the allocation of revenue to the three tiers of government.
The new formula, expected to be released 18 years after the last one was reviewed in 2002, would be used by the Federation Account Allocation Committee to distribute revenue to the Federal, States and Local Government Councils.
The RMAFC Chairman, Elias Mbam, who confirmed the development during an interview with journalists, said already, work has reached an advanced stage on the new allocation formula.
He said the agency is diversifying the sources of revenue with the solid mineral sector, noting that for the first time, the solid mineral sector is contributing to the federation account.
Mbam said: “We are working on the new revenue sharing formula. We have started the process and all things being in equal, we expect that the new formula will be out in 2021.
“We are diversifying the sources of revenue with the solid mineral sector. For the first time, the solid mineral sector is contributing to the federation account and we are closing up leakages.
“We are ensuring that revenue leakages are closed up or minimised so that more revenue will be accrued to the federation account.
“The Commission is ever determined to use all its constitutional powers to ensure that all revenue accruable to the federation account is transparently remitted to the federation account and on time.”
The Federation Account is currently being managed on a legal framework that allows funds to be shared under three major components.
They are statutory allocation, Value Added Tax distribution; and allocation made under the 13 per cent derivation principle.
Under statutory allocation, the Federal Government gets 52.68 per cent of the revenue shared; states, 26.72 per cent; and local governments 20.60 per cent.
The framework also provides that Value Added Tax revenue be shared thus: FG, 15 per cent; states, 50 per cent; and LGs, 35 per cent.
Similarly, extra allocation is given to the nine oil producing states based on the 13 per cent derivation principle.
State governors, operating through the Nigerian Governors’ Forum, have in recent times renewed their clamour for a radical review to tilt more of the funds their way and less to the Federal Government.
They have made strong representations on the imperative of this to the federal parliament and to President Muhammadu Buhari.
The current formula has been described as not only inequitable because it gives a huge chunk to the centre, but also bizarre by allotting funds directly to the third tier as if, like the states, they were federating units.
The sharing formula, according to stakeholders is also overdue for review after being adopted in 2002.