CHAPTER ONE
GENERAL INTRODUCTION
1.0 INTRODUCTION
Revenue allocation in Nigeria, a central theme in government has a chequered historical antecedent. Many commissions/committees have been set-up at different times in the Nigeria national history and were saddled with the responsibility of examining various fiscal issues and recommend the best principles and formulas in sharing national revenues to meet-up the challenges of the time. Some of these Commissions/Committees include; The Phillipson Commission (1946), The Hicks-Phillipson Commission (1951), The Chicks Commission (1968, The Raisman Commission (1958), The Binns Commission (1964), The Dina Interim Committee (1968), the Aboyade Technical Committee (1977), The Okigbo Commission (1980), the Revenue Mobilization Allocation and Fiscal Commission (1989) and various military decrees (revisions) particularly 1970, 1971, 1992, etc.1 It is worthy of note that all the Commissions/Committees listed above were adhoc in nature except for the Revenue Mobilization Allocation and Fiscal Commission which was established as a legal and permanent entity to deal with fiscal matters on a more regular basis as the need arises.2
1 Lukpata V. I., “Revenue allocation formula in Nigeria: A continuous search”, Vol. 2. No. 1, 2013. International Journal of Public Administration and Management Research. 32
2 Ibid.
One of the perennial problems which has not only defiled all past attempts at permanent solution, but also has a tendency for evoking high emotions on the part of all concerned (each time it is brought forth for discussion or analysis) is the issue of equitable revenue allocation in Nigeria.3 It is an issue which has been politicised by successive administrations in Nigeria both military and civilian regimes. Indeed, in virtually all federations in which the constitution shares power between the central and regional or state governments and, for each level to be “within a sphere co-ordinate and independent,”4 enough resources need to be allocated to each government to justify their survival. In the words of James O’Connor, allotments of money (and resources) must reflect “social and economic conflicts between classes and groups”.5 It is not surprising therefore, that the basis of federal statutory revenue allocation has always been one of the most controversial and unsuccessful factors in the Nigerian polity.
It needs to be emphasized that whatever may be the foundation of a federation, whether aggregation or devolution, its establishment at once raises three main problems: “how to allocate functions rationally; how to allocate taxing powers; and how to share revenue between the governments of that federation”.6
3 Ojo, E., “The Politics of Revenue Allocation and Resource Control in Nigeria: Implications for Federal Stability”, Vol. 7, No. 1. 2010. Federal Governance. P. 15
4 Wheare, K. C., Federal Government (London: Oxford University Press. 4th Edition, 1963) P. 93
5 O’Connor, J., The Fiscal Crisis of the States (New York: St. Martin’s Press. 1993) P. 276
6 Phillips, A., “Nigeria’s Federal Financial Experience”, Vol. 9, No. 3, 1971. The Journal of
Modern African Studies. P. 398
Revenue allocation must be accomplished through: (i) national unity; (ii) economic growth, (iii) balanced development, (iv) self-sufficiency and (v) high standard of living for the citizens.7 The setback however in Nigerian context is how best to resolve these complex revenue allocation problems that will achieve the abovementioned objectives. Thus, on several occasions, successive governments have been revising revenue allocation formula till date. So far, an acceptable formula is yet to be arrived at; in view of the agitations here and there for an acceptable formula. Meanwhile, it is crucial to note that Nigeria’s revenue sharing debates have revolved basically around three issues namely: (i) the relative proportions of federally collected revenues in the federation account that should be assigned to the centre, the states, the localities and the so-called ‘Special Funds’ (vertical revenue sharing), (ii) the appropriate formula for the distribution of centrally devolved revenues among the states and among the localities i.e. local governments (horizontal revenue sharing) and (iii) the percentage of federally collected mineral revenue that should be returned to the oil-bearing states and communities on the account of the principle of derivation and compensation for the ecological risks of oil production.8 Furthermore, since the oil boom in the early 1970s, the revenue allocation formula has been plagued by time inconsistencies – a tendency of one of the parties in a consensual agreement to change the terms after the negotiations have been completed. The formula has been continually manipulated in the service of interregional and inter-ethnic cross-subsidization.9
7 Nigerian Tribune Friday, 11th August, 1995. P. 1
8 Suberu, R. T., “Federalism, Ethnicity and Regionalism in Nigeria”, Revised draft of paper presented at the conference on the Dilemmas of Democracy in Nigeria, University of Wisconsin -Madison, U.S.A. 10-12 November, 1995. P. 8 – 9
9 Olopoenia, A. A., Political Economy of Corruption and Under-Development (Ibadan: Vantage Publishers Limited. 1998) P. 51
The aim of this work therefore, is an in-depth analysis of the revenue allocation and resource control in Nigeria with reference to the country’s bid to attain a better allocation of resources. Following this introductory remarks, which forms part of the first chapter, the work continues in chapter two with a short theoretical postulation bothering on federalism and a comparative perspective of fiscal federalism in Nigeria. Chapter three is on the concept of revenue allocation, its principles and formula and also the revenue allocation committees. Chapter four is based on the influence of taxation on revenue generation in Nigeria. The fifth chapter considers achieving a better allocation of resources in Nigeria and the ways of improvement through different approach. This has been well discussed taking the future of Nigeria’s federal state into consideration. The last chapter of this work is on the way forward by way of recommendations if Nigeria’s federal state may not go the way of the former Soviet Union (USSR) that disintegrated in the early 1990s principally as a result of Russian control in virtually all ramifications.
1.1 DEFINITION OF TERMS
Quite a number of terms have been used in the course of writing this project. Among these terms and their usages in the study are:
Allocation: A designation or apportionment for a specific purpose; esp., the crediting of a receipt or the charging of a disbursement to an account.10
Autonomy: The right of self government, and the freedom that an organisation has to govern or control itself by being independent.
10 Blacks’ Law Dictionary, 2009 (9th edition) P. 88
Commission: A body of persons acting under lawful authority to perform certain public services.11
Federalism: The legal relationship and distribution of power between the national and regional governments within a federal system of government.12
Fiscal: relating to money, taxes, debts, etc. that are owned and managed by the government.
Formula: A method or set of principles that is used to solve a problem or to make sure that something is successful.
Reform: To improve a system, law, etc. by making a lot changes to it, so that it operates in a fairer or more improved.
Resource: Something such as useful land, or minerals such as oil or coal, that exists in a country and can be used to increase its wealth.
Revenue: Money received from tax by the government or generated as a result of exchange of resources.
Taxation: The imposition or assessment of a tax; the means by which the state obtains the revenue required for its activities.13
1.2 BACKGROUND TO THE STUDY
Over the years, the issue of revenue allocation remains very volatile and constitutes a major source of political and governmental tension in Nigeria.14 However, it cannot be over-emphasized that the concept of revenue allocation is a
11 Ibid. 306
12 Ibid. 687
13 Ibid. 1598
14 Francis, O. etal “Advocating for direct revenue allocation to Nigerian Local Governments: A catalyst for National development”, Vol. 5, No. 6, 2013. Journal of Public Administration and Policy Research. P. 133
subtle item in the appraisal of our present Government. It is relevant to mention that an improved situation will be well – suited if the administration of governance is predicated on better resource sharing. It is interesting to affirm that Nigeria is more than fifty years as an independent nation and has practiced federalism constantly for a long time coming. In essence, this research work extols the reformation of allocation of revenue to the various tiers of government as proper allocation of revenue will enhance the efficiency and effectiveness of these governments, provision of good social services, reduction in rural-urban migration, speeding – up development in all sectors of the economy (most especially in agricultural sector which is the mother of all sectors of the economy) and it is imperative to note that we still have not got it right. It is the misery in the development of the Nigerian society due to lack of proper revenue allocation and the way forward that forms the background of this project.