Federal Government Agrees To Collect Less Federation Revenue


The federal government has agreed to accept less federation revenue, with a proposal to collect 50. 65% of federation earnings, down from 52. 68 percent now.

Mr. Boss Mustapha, Secretary to the Government of the Federation (SGF), presented the federal government’ s perspective during a Town Hall on the New Revenue Formula held in Abuja yesterday.

State Government’ s Allocation To Be Reduced

According to the SGF, state government allocations should be reduced by 25. 62 percent, while local government allocations should be increased to 23. 73 percent and derivation allocations should be kept at 13 percent.

Federal Government 52. 68 percent, State Governments 26. 72 percent, Local Governments 20. 60 percent, and Derivation Formula 13 percent is the current vertical Revenue Allocation Formula.

Mr. Mustapha, who was represented by Mr. Andrew Adejoh, the Permanent Secretary for Political and Economic Affairs, stated that the current administration will execute whatever formula the National Assembly approved.


” On behalf of President Muhammadu Buhari, I want to reassure all Nigerians that the Federal Government would execute the final outcome of this exercise as soon as the National Assembly passes the necessary laws to conclude the process, ” he said.

The SGF, on the other hand, stated that the responsibilities of each tier of government should direct the Revenue Mobilization Allocation and Fiscal Commission in developing the new formula.

Mr. Mustapha claims that the federal government spends a large portion of its budget on services that are the responsibility of state governments.


Revenue Allocation Formula

” We are all agreed, as Nigerians, that the current Revenue Allocation formula, both vertical and horizontal, is long overdue for a review, not only because the last one was done in 1992, but also because contemporary issues since then, such as heightened insecurity, deteriorating infrastructure, and the need for appropriately matching statutory functions and tax powers, must be taken into account, ” he said.


” The Federal Government has closely monitored every step of the geopolitical consultation process, and it is critical that we remember that revenue review must and should not be an emotional or sentimental conversation, and it cannot be done arbitrarily. ”

” Revenue and resource distribution has always been a function of the level of responsibility assigned to the various components or tiers of government around the world. As a result, it is critical that the current exercise is based solely on the Constitution of 1999. (as Amended).


” The Exclusive Legislative List, which is found in the Second Schedule of the Nigerian constitution, contains sixty (68) items in which the Federal Government is intended to employ resources coming to the federation to deliver services and related development needs. The Concurrent Resolution’ s thirty (30) items, on the other hand, must be addressed by both the federal and state governments.

It is evident, then, that in order to have a satisfying vertical review of the current revenue allocation system, we must first agree on the tasks that must be carried out by all levels of government.


In order to understand the Federal Government’ s stance, I’ d like to share with you the vertical dispersion of the Federal Government’ s 52. 68 percent share, which is as follows: Disbursement of the FGN Share of 52. 68 percent; Consolidated Revenue Fund (CRF)48. 50 percent; Federal Capital Territory (Like a State)1. 00 percent; Natural Resources Development Fund (States are beneficiaries)1. 68 percent; Ecological Funds 1. 00 percent (45 percent to NEMA, NEDC, NALDA, and NAGGW, and 55 percent addressing ecological challenges at Sun- National levels); Stabilisation Account 0. 50 percent (25 percent– 0. 125).

Disbursements are made for Debt Servicing, Statutory Transfers, Salaries, Pension and Gratuities, and capital supplements, among other things, within the Consolidated Revenue Fund.


As a result of the foregoing, it is apparent that the federal government spends the majority of its resources on and for state and local governments. When you compare this to the equally large number of obligations on the Exclusive Legislative List, it’ s easy to see why the Federal Government should be given more resources.


Reviewing The Allocation

However, the Federal Government has taken note of the growing call for a review of the current vertical revenue allocation formula, President Muhammadu Buhari’ s commitment to ensuring that development resources reach the poorest of the poor in our rural communities, the need to include local communities in our security architecture, and the importance of enhancing equitable and inclusive national development, ” the statement said.


Along with the foregoing, other considerations that informed the Federation Government’ s position on the review of the current vertical revenue allocation formula included the Federal Government’ s increasing visibility in Sub- national level responsibilities due to weaknesses at that level, such as primary health care and basic primary education; increasing levels of insecurity; and increased remittances to State and Local Governments through the Value Added Tax sharing formula, where the remittances to State and Local Governments through the Value Added Tax sharing formula

As a temporary and expedient solution, the Federal Government proposes the following: ” 50. 65% goes to the federal government, 25. 62 percent to the state government, 23. 73 percent to local government, and 13% to derivation allocation.


It is critical to emphasize that, in the face of a shrinking national revenue base and the need for states to generate IGR, revenue allocation should be done constructively. The fact that this review should result in improved national development is also critical.

Mr. Bello Mohammed, the Minister of the Federal Capital Territory, requested for more funds in his remarks, citing the Federal Capital Territory’ s significant development demands.


” Because of the huge expansion, we need an unique funding status to be able to build the city to match the population expansion, ” he added. ” That is our petition to the commission, and I am confident by the grace of God they will work towards it. ”

Engr. Elias Mbam, Chairman of the RMAFC, stated his team was working on a formula that would be ” directly related to the duty of each tier of government. “

Source: Mcebiscoo.com

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