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Tag: Revenue allocation

  • FG, states set for direct revenue allocation to LGs

    FG, states set for direct revenue allocation to LGs

    • Dedicated unit opens in Accountant-General’s office for disbursements

    A dedicated unit is now in place in the Office of the Accountant General of the Federation (OAGF) to handle direct disbursement of funds to the 774 local governments across the country as the planned financial autonomy for the third tier of government takes effect this month.

    The first meeting of the Federation Account Allocation Committee (FAAC) for this year has been scheduled for Wednesday with operational details for direct fund allocations to the LGs expected to feature prominently, The Nation gathered yesterday.

    Sources at the OAGF said the necessary structures and processes for the new dispensation were ready to ensure a seamless implementation.

    “Most of the 774 LGAs will fully start receiving their allocations from January 2025.

    “Our committee will reconvene later this month to review its progress and finalise measures before the Accountant-General of the Federation (AGF) issues authorisation for the complete rollout,” one of the sources said of the assignment of the Inter-Ministerial Committee set up to enforce the Supreme Court judgment on direct allocation of revenue to the councils.

    The source said the Finance Minister and Coordinating Minister of the Economy Wale Edun had earlier given approval for the direct fund allocation.

    The source said there should be no “challenge to carry out the approval from the Minister to start making the disbursements to the LGAs. There won’t be a challenge because it’s something they (ministry officials) do day in day out for the states.”

    “A whole department is in charge of it, so it’s not going to be a challenge. The structure has been on the ground. I can confirm that,” the source added.

    It was also gathered that the Inter-Ministerial Committee would also “address the actions of some governors attempting to undermine the autonomy of democratically elected LGA chairmen, deputies and councilors.”

    Sources at the Federal Ministry of Justice said separately that the committee set up by President Bola Tinubu to implement the Supreme Court judgment was working round the clock to deliver on its assignment.

    The committee is headed by the Secretary to the Government of the Federation, Chief George Akume.

    One of the sources said: “The essence of the LG financial autonomy is to ensure grassroots development and not to impose a burden on governors.

    “This necessitated the setting up of the committee chaired by the SGF to ensure smooth and charismatic implementation.”

    Most of the states are also ready for the take-off of the LG financial autonomy, having taken steps or in the process of meeting the main condition stipulated by the federal government for their councils to be eligible for the monthly allocation from the federation account: running of the LGs by democratically elected chairmen and councilors.

    Thus, council elections have been conducted in many of the states while Lagos and Ondo are about holding theirs.

    Adamawa State Information and Strategy Commissioner James Iliya told The Nation in Yola that the state government was on the same page with the federal authorities on the issue of financial autonomy for the LGs.

    “We are with the Federal Government over this local council autonomy and we have always been,” he said, describing the councils in the state as some of the freest in the country.

    He added: “Our local governments have long been free. Local council autonomy in Adamawa State came before the autonomy worked out at the federal level rather recently.”

    Delta State Finance Commissioner Fidelis Tilije said the state government was not opposed to the Supreme Court’s decision as the state has a tradition of allowing the LGs to control their allocations.

    He said in addition to that, the state government has been giving subvention to the 25 councils since 2015 and 10 per cent of its internally generated revenue.

    His words: “Delta State under ex-Gov Okowa in 2015 gave grants to local councils of N300 million monthly, which was increased to N500 million to enable them pay salaries in 2020 and meet other assignments required of them.

    “At any point in time, we have never bothered about the revenue going to that tier of government.

    “We have never taken one kobo accruing to them as all funds coming from Abuja has been given to them.

    “In fact, by state statutory regulations, 10% of internally generated revenue (IGR) is paid to local councils in Delta State.

    “With the increased revenue under the current administration, although a decision by Gov Oborevwori has not been made, we may consider stopping these additional sources of income to them.”

    Special Adviser to Ogun State Governor Dapo Abiodun on Information and Strategy, Mr. Kayode Akinmade, simply said “there’s no cause for alarm” when he was contacted yesterday.

    “It is a constitutional matter. What is important is to have elected chairmen in the local government councils, and our elected chairmen are in office to fulfill their promises to the good people of Ogun State,” he said.

    Ukoha Kalu Ukoha, Chief Press Secretary (CPS) to Abia State Governor Alex Otti, said that soon after the Supreme Court judgment, the governor directed local government chairmen in the state to open a Treasury Single Account (TSA) for the financial transactions of their councils.

    Also speaking, Plateau State Local Government and Chieftaincy Affairs Commissioner, Ephraim Usman, said the state government has always given the LGs a free hand to run their finances.

    He said: “The Governor has never tampered; he has never for once tampered with their subvention.

    “I as commissioner have never been called to give report of financial transactions.

    “Here on the Plateau, we have not experienced what we hear some governors do.

    “Without mincing words, Plateau is ready and prepared. Whatever instructions the federal government gives, we will go by them.”

    Ebonyi State Information Commissioner, Jude Okpor, said Governor Francis Nwifuru has always been an advocate of LG autonomy even before the Supreme Court judgment.

    Read Also: How states shared N5.3tr Fed. allocation in 2024

    Government sources in Kaduna State said the state government fully aligned with the position of the federal authorities.

    The apex court, in its July 11, 2024 landmark judgment, affirmed the financial autonomy of the local governments as it upheld the suit brought by the federal government to strengthen the independence of local governments in the country.

    A seven-member panel of the court said in the unanimous decision that local governments should immediately receive their allocations directly from the Accountant-General of the Federation.

    Justice Emmanuel Agim, who read the lead judgment, said it was illegal and unconstitutional for governors to receive and withhold funds allocated to local governments in their states.

    He said: “It is the position of this court that the federation can pay local governments allocations directly to the local governments or through the states.

    “In this case, since paying them through the states has not worked, justice demands that local governments’ allocations from the federation account should henceforth be paid directly to the local governments.”

    He described the states’ retention of local government funds as unconstitutional.

    However, the governors reached out to the federal government to allow for a gradual evolution of the new process, arguing that an unplanned financial autonomy might create more problems for the councils.

    The federal government subsequently warned that revenue allocation would be denied states that failed to have democratically elected officials run the local governments.

    The development prompted the states to conduct LG elections..

  • Use revenue performance in revenue allocation to states, NBS tells Fed Govt

    The National Bureau of Statistics (NBS) has urged the Federal Government to use performance indices of Sustainable Development Goals (SDG) instead of population to allocate revenue to states.

    Statistician-General of the Federation Yemi Kale made the recommendation during a public lecture to commemorate the 2018 African Statistics Day in Abuja yesterday.

    Kale was represented by Mr. Isiaka Olanrewaju, a Director and Programme Analyst at the NBS.

    He said: “We should stop using only the population to allocate revenue to states; rather, performance through measurement of Sustainable Development Goals in relationship with Nigeria should be used.”

    Kale He urged relevant government agencies to provide government with a comprehensive, reliable and timely data to ensure the formulation of policies and monitoring of key government programmes.

     

    He charged users, producers and suppliers of statistics to take advantage of the occasion to re-engineer their efforts in the production and usage of high quality statistics.

    According to him, several methods of generating quality data should be explored to enable Nigeria join the comity of nations with well-developed statistics.

    “Development statistics at all levels requires that all hands must be on deck and we are determined to achieve this in the nearest possible time,” Kale said.

     

    However, Alphonsus Onwuemeka, Food and Agricultural Organisation’s (FAO) Programme Officer, who represented FAO’s Country Representative in Nigeria, Suffyan Koroma, decried the quality of data generated by government agencies.

    He said a lot of such data being generated in Nigeria were not harmonised and therefore not useful to end users.

     

    “The challenge facing Nigeria (data) is brought about by officials and statistical systems that are less optimal,” Koroma said.

  • Revenue allocation: Ayade cries out over injustice to Cross River

    Revenue allocation: Ayade cries out over injustice to Cross River

    Cross River State Governor Ben Ayade yesterday decried what he described as injustice meted on the state by the Federal Government in terms of revenue allocation.

    Ayade spoke when he received the Chairman of Revenue Mobilisation, Allocation and Fiscal Commission, Alhaji Aliyu Ahmed, who led members of the commission to his office in Calabar.

    He said the loss of 76 oil wells by the state was a direct consequence of the ceding of Bakassi by the Federal Government and that rather than find a permanent solution to the fiscal challenges that arose from that action, the Federal Government inflicted incalculable pain on the people.

    Ayade said: “You took our land, took our oil wells, took us out of 13 per cent derivation fund and reduced us to a weeping child in the Niger Delta Development Commission (NDDC). The pain is incalculable. We are a captured people by the Federal Government. We have no say because it does not matter. We practise ethnocracy and so it does not matter how the people of Bakassi and Cross River as a whole are in pains.

    “Today we have NDDC, whose projects are based on percentage of oil production. So, look at what we have lost from the perspective of NDDC which keeps us as a crying child who is just in NDDC by geography not by production as the sharing formula here is by quantum of oil production coupled with the fact that today also , we no longer benefit from the 13 percent derivation.”

    “If not for President Buhari, I am sure that even the superhighway and Bakassi Deep Seaport (being developed by the state) would have been killed by now. But how can a people feel like captives in a place they call their own?”

    Wondering what indices are used by the Federal Government in deciding allocations for the state, he said: ” If I have to link two villages in Cross River State, the minimum kilometers you are going to do is 5 to 6kilometers because that state’s landmass is 21,000 sqkm while you are dealing with sister states in the Niger Delta with 3,000 sqkm. You need to put six states together to give you our land mass.”

    He urged the commission to use the opportunity of the visit, which is a fact-finding one, to write a report that would right the wrongs done to the state.

  • Politics of revenue allocation

    Politics of revenue allocation

    Revenue sharing has generated controversy across the country. Assistant Editor LEKE SALAUDEEN examines the politics of revenue allocation and implications of the ccurrent formula for federalism.

    There have been calls for a review of the revenue sharing formula, which according to the proponents, lopsidedly allocates more money to the Federal Government at the expense of states and local governments. Similarly, the Northern governors have launched, a campaign for the removal of the 13 per cent derivation, which accounts for the additional funds to the oil-producing states.

    The revenue sharing formula is as follows: Federal Government 52.68 per cent; States 26.72 per cent and 774 Local Government Areas 20.60 per cent.

    A cursory look at the history reveals that the agitation for revenue sharing is not new. It was a subject of controversy, even before independence. For example, the Richard’s Constitution of 1946 introduced the principle of derivation, granting autonomy to the regions based on their natural resources. In 1954, Sir Louis Chicks Commission recommended that the total revenue available to Nigeria be allocated according to the derivation principle, for the purpose of meeting the reasonable needs of the centre and the regions. Sir Arthur Richards adopted the recommendation, only for it to be replaced with another formula produced by another commission headed by Jeremy Raisman in 1958.

    Raisman Commission ignored the principle of derivation. Instead, it placed greater emphasis on the population, which it regarded as an approximate index of fiscal need. The fiscal review commission headed by Binn also emphasised the application of the principle of fiscal need. The principle tilted in favour of the Northern Region because it was more populous than the rest of the country.

    The military incursion into government led to a major shift from the tradition equitable distribution of National wealth and principle of derivation. The military government promulgated the Distributive Pool Account Decree 13 which granted States 60 per cent share of export duties instead of 100 per cent, 50 per cent of duty on motor fuel and 50 per cent of the excise duty revenue leaving the rest to the Federal Government. The Federal Government also got additional five per cent from the previous 50 per cent of the share of states on mining rights and royalties. The non-oil producing states benefitted more from this arrangement.

    But, in the Second Republic, President Shehu Shagari signed the Revenue Allocation Act, which granted the Federal Government 55 per cent; States 30.5 per cent and Local Government Areas 10 per cent while 4.5 per cent goes into special funds with the derivation principle not getting a mention.

    In the 1990s, the Niger Delta people stepped up, agitation for resource control. A major breakthrough was achieved in 1992, when the Ibrahim Babangida-led military government established, Oil Mineral Producing and Development Commission (OMPADEC) to address the ecological problems caused by oil exploration in the region.

    The present derivation regime emanated from the constitutional conference set up by the late General Sani Abacha in 1995, headed by Justice Nikki Tobi, which recommended a 13 per cent derivation to the oil producing states. Subsequently, it found its way into the 1999 Constitution and became operational in April 2000.

    Governors from the 19 Northern states are pushing for a review of the revenue allocation formula to reflect what they described as current realities in the country. The Chairman of the Northern Governors Forum, Governor Babangida Aliyu of Niger State, described as unfair the current revenue sharing structure that offer, states from the Northern Region lesser allocations than their counterparts from the South.

    Aliyu argued that the amount received from the federal allocation monthly are spent on payment of salaries and other overheads. Adding most northern states funds to provide infrastructure and tackle poverty the region.

    According to him, “the revenue allocation formula should be looked at. We were hoping that there would be discussions and review of the allocation formula. But there are other issues that would come. For example, there were oil wells that were over 200 kilometres away of the shore of the country. Those ones were supposed to be oil wells for the whole country.

    “But now, they are given only to the contiguous states, in addition to the 13 per cent derivation. So, if you look at that, you will say that it will not serve everybody well if certain parts of the country are not doing well while some part are doing exceptionally well. So, the pressure will continue, until we are able to find a solution.”

    The Northern Legislators Caucus in the House of Representatives published statistics from the 2012 budget. According to the figure, the South-south geo-political zone got the highest allocations in the budget with N116.5 billion, representing 29.65 per cent of the total votes allocated to the six geo-political zones. Followed by the Southwest, which got N65.52 billion (16.67 per cent) and the North Central, including the Federal Capital Territory (FCT), which received N63.92 billion (16.27 per cent). The Northwest got N56.96 billion followed by the Southeast with N49.2 billion and Northeast which had the lowest amount of N40.89 billion or 10.4 per cent of the total N392.96 billion allocated to the six zones.

    A social critic, Hazan Modibo, linked the rising violent crimes in the North, especially the terrorist activities of the Boko Haram, to the uneven distribution of the country’s wealth. He said the government’s amnesty programme to redress the grievances of the militants in the oil-rich Niger-Delta had inadvertently helped create the conditions for the Islamic insurgency.

    “There is a clear direct link between the uneven nature of the distribution of resources and the rising violence. When you look at the figures and the size of the population in the north, you can see that there is a structural imbalance of enormous proportions. Those states do not simply have enough money to meet basic needs while some states have too much money”, Modibo said.

    Incidentally, the latest country’s Poverty Profile Report published by the National Bureau of Statistics (NBS) ranked the northern region, specifically the troubled North-East geo-political zone, as the poorest region, with 69.1 per cent and 76.3 per cent as absolute and relative poverty levels respectively.

    Expectedly, the argument of the Northern Governors Forum has drawn the ire of their counterparts from the South zone described as unfortunate and misplaced the attempt by Northern political leaders to blame the rising terrorism and poverty in the region on the derivation funds as well as the criticism of 13 per cent derivation funds due to the oil producing states in the Niger-Delta. They said that the Southsouth needed an upward review of the derivation principle and the introduction of fiscal federalism.

    The governors insisted that, on the contrary, the issue to be addressed is environmental degradation and pollution in the Niger-Delta created by the oil exploitation, which has adversely affected fishing and farming activities. This makes it imperative for an upward review of the derivation principle and introduction of fiscal federalism.

    They questioned the rationale for exploiting other mineral deposits in other parts of the country while depleting oil and gas reserves of the Southsouth . The said that the introduction of fiscal federalism and resource control will encourage each state to control its resources and develop, in accordance with its capability.

    The Southsouth leaders also faulted the request of their northern counterparts on the ground that it is against the principle of true federalism. According to the Niger-Delta activist, Annkio Briggs. It is unfair for northern states that are not bringing anything to the table to make such demands. “The people from the Niger Delta region are bringing the oil that God has given them. The oil is in our land and it belongs to us. It is unfair that there are 36 states in Nigeria and only nine states are actually contributing something; and people who are not contributing anything at all are now talking about injustice,” she argued.

    The National Secretary of the Ijaw National Congress, Mr Robinson Esitei, said that the country would continue to stagnate, unless it reverts back to true fiscal federalism. “In fact, we are proposing to the Constitutional Amendment Committee that Nigeria should revert back to the regional arrangement where each region would control its resources and pay tax to the centre.” The present formula is disadvantageous to the Niger Delta people who are suffering degradation and other hazards that go with oil exploitation.Unlike their northern counterparts, the governors of the Southwest had requested for the devolution of more powers to the states and practice of fiscal federalism. They said, instead of bickering over allocations from the Federation Account, states should be empowered to generate their own resources to relieve the Federal Government of too many responsibilities. Although, the Southwest governors deplored the imbalance in the resource allocation, especially to states that make up the old Western Region, they insist the solution lies in the devolution of powers.

    The Minority Leader in the House of Representatives, Mr Femi Gbajabiamila, supported the position of the Southwest governors, saying Nigeria would tackle its development challenges faster, if the states generate their own resources, rather than depending on the federal allocations. “We always clamour for a review of the revenue allocation formula, in line with the principle of federalism. We want a situation where the states will be stronger than the government at the centre. Let each state develop at its pace. The time has come and it is long overdue”, he added.

    Renowned economist Mr Henry Boyo blamed the problem on the fraudulent constitution: According to him, under the Republican Constitution, Nigeria was practising true federalism, whereby each region controlled its resources and paid tax to the Federal Government.

    Boyo made reference to Sections 136 to 145 of the 1963 Constitution, recalling that funds in the Distributable Pool Account were divided among the regions in shares proportionate to the respective amounts of goods consumed in the regions. He said 50 per cent of proceeds from mining royalties and rents, including mineral oil, were retained by the regions. “This was the golden era of true, equitable federalism. The Constitution encouraged the regions then to engage each other in healthy economic competition,” he said.

    A university don and fiscal policy analyst, Dr Tunji Ogunyemi, criticised the current sharing formula. The formula, according to him, has emasculated the states and local governments.

    Ogunyemi called for the amendment of Section 162 of the 1999 Constitution and suggested a new formula of 20 per cent for the Federal Government; 60 per cent for states and 20 per cent for councils. For derivation, he recommended 50 per cent and a tax of 10 per cent payable to the Federal Government on resources produced by the states.

    He said that the bulk of national revenue should go to the states and local governments because they are the centre of development. Ogunyemi said that state governments are carrying out the Federal Government’s responsibilities in their respective states. According to him, most of the federal roads in the states are maintained and even reconstructed by state governments. He cited the case of the Federal Police that rely solely on state governments for logistics such as patrol vehicles, bullet proof vests, fuelling and maintenance of patrol vehicles and special allowance paid to motivate the police personnel.

    Ogunyemi mainkind that the centre should be less attractive. “We shold de-emphasise the centre. There should be devolution of powers; states should be given more powers, more responsibilities and commensurate additional funds,” he added.

  • Revenue allocation, federalism and state of the nation

    The issue of revenue allocation has remained a contentious and very volatile subject in Nigeria generating very strong reactions from each side of the divide anytime it is up for debate. Central to the issue is the whole question of over concentration of enormous financial resources at the federal government at the expense of other federating units.

    The current revenue formula in use is tilted in favour of the federal government, which takes a whopping 52.68 per cent of allocation from the Federation Account. The 36 states have a combined share of 26.72 per cent, while the 774 local government areas in the country take 20.6 per cent. Oil-producing states share 13 per cent in accordance with the principle of derivation.

    However, of late, there have been clamours for a review of the status quo by cutting the federal government’s lion share to make more funds available to states and local governments. State governors, through the Governors’ Forum, have led the clamour, claiming that development in their domain was being stifled due to inadequate funds. The financial realities in the states and local governments at present had made the need to review the formula very urgent. Without mincing word, the present revenue formula is not realistic.

    In fairness to all the states in the country, with, perhaps, few exceptions, most of them are making efforts, despite their limited resources to deliver the dividends of democracy to their respective states. In Lagos, for instance, the state government has continued its relentless pursuit of ambitious projects such as the redevelopment of the Lagos-Badagry expressway into a 10- lane road incorporating light -rail and BRT lanes, the expansion of the Ketu-Ikorodu road, the construction of more inner roads across the state, the Eko Atlantic City project, Independent Power Projects, construction of 16 Mother and Child Centres for easy medical access, environmental regeneration in addition to 1,960 other massive infrastructural renewal projects scattered across the state. This is, indeed, why allusion is currently being made to the evolvement of a new Lagos in many circles. But, in view of the reality of limited capacity to fund capital projects, most of the states in the federation have had to opt for the option of either borrowing from banks or raising bond from the capital market to finance capital projects. This is because the money they receive monthly from Abuja is barely enough to settle the salaries of workers as well as other overhead costs.

    Sadly, however, while most of the states are doing all they could to improve the standard of living of their people, same cannot really be said of the federal government which ironically corners the bulk of the country’s resources. This, of course, is not peculiar to the present administration of President Goodluck Jonathan. Succeeding federal administrations in the country have always left the country worse than they met it. From the ill- fated Shehu Shagari administration till date, the country has been wobbling and fumbling with no clear -cut sense of direction. Most federal roads are still bad, as they have always been; power remains evasive; major industries are folding up at an alarming rate; federal universities have become sorry sights while federal hospitals are not even good enough for senior government officials who would rather embark on medical tourism abroad at a great cost to the country. The rate at which federal infrastructure across the country rot away leaves much to be desired.

    The question then is: what does the federal government do with the huge state resources at its disposal via the favourable revenue allocation it gets from the system? If the federal government gets so much and yet is doing so little, where then is the justification for the current lopsidedness in the revenue allocation system ?After all, to whom much is given, it is said that much is expected but in the case of the federal government, the reverse is the case.

    Isn’t it time then for an urgent need to review the current revenue sharing formula in consonance with the needs of the other federating units? It is quite clear that of all the three federating structures making up the federation, it is the states and local governments that are really touching the lives of the people as they are the closest to them. The National Assembly needs to really emphasise fiscal federalism when it comes to the issue of constitutional amendment. The federal government should devolve more powers to the states or regions that make up the federation. Equally, some of the items on the exclusive legislative list of the current constitution such as customs, ports, police etc should go to the residual legislative list. For instance, the current trend of insecurity in the country requires state police that would normally be in a better position to curb crime using the community policing model. How can the governor of a state be held liable for the insecurity being experienced in his domain when the commissioner of police only reports to the Inspector General of Police and not the state governor?

    The federal government makes enormous financial gains from the Tin Can Island and Apapa Ports in Lagos and Calabar respectively from import and export duties but this is not supposed to be the case since these revenues should normally accrue to the Lagos and Cross River states’ governments who should in turn pay taxes of 20% of the revenues to the federal government. The collection of revenue by the Nigerian customs at these ports negates the principles of true federalism because these coastal states own these port resources and thus should not be deprived of the benefits accruing from its exploitation.

    True federalism implies a compromise between the extreme concentration of power (the current case in Nigeria) and a loose confederation of independent states, for governing people usually in a large expanse of territory. For instance, if we get rail into the Concurrent List and ensure the amendment of the Railway Act, it will not only be for the benefit of all the states and regions, but the country as a whole. In the same spirit of true federalism, it is also important to decentralize the control of power. Undoubtedly, without energy, every effort at development, including the drive will be hampered.

    In the spirit of justice and fairness, we need to reverse the status quo where the federal government holds as much power and influence as it currently does over the revenue sharing formula as well as other critical sectors in the country because it has little to show for it. We need to revert to the practice of true federalism in its true sense as it is being done in other advanced democracies of the world. Indeed, for us to reduce the pressure and tension associated with governance at the centre, this is the time to tilt towards the evolvement of a weak centre with stronger federating units. This is a main feature of a true federation.

    The solution to the myriad of problems currently confronting the country is to address the distorted federalism that the country currently runs. For us to move forward as a nation, grow economically, experience peace and attract the necessary foreign and local investments that would ensure real development, the restructuring of the polity to reflect true federalism is non-negotiable. The earlier we put an end to the current brand of federalism which the Deputy Senate President, Ike Ekweremadu, recently termed ‘feeding bottle federalism, the better for the whole country. The arrangement is grossly un-progressive and misleading. It should be discontinued.

    • Ibirogba is Honourable Commissioner for Information and Strategy, Lagos State