Suspicion, lack of political will main headache – Chairman

Emma Ujah, Abuja Bureau Chief

The Chairman of the Revenue Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Engr. Elias Mbam, and his team of Commissioners face a herculean task in giving Nigerians a new Revenue Sharing Formula, which will ensure fairness and equitable distribution of nation’s resources.  The last review was undertaken 28 years ago.

Two key factors have held down the passage of a new revenue formula that could have guaranteed greater equity in the sharing of federation revenue among the three tiers of government (federal, states and local Governments), as well as, among the federating states.

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At last week’s briefing on the commencement of a fresh exercise towards a new formula, Engr. Mbam identified suspicion and lack of political will as the two factors militating against the efforts of the commission to give Nigerians a greater sense of belonging in resources allocation.

The last formula review was conducted under the military regime of General Ibrahim Babangida, in 1992. 

The 1992 revenue sharing formula was as follows: FG 48.5%, States 24%, LGCs 20% and Special fund 7.5% (which was distributed: FCT 1%, Ecology 2%, Stabilisation 1.5% and Natural Resources 3%).

Upon return of civil administration in 1999 under former President Olusegun Obasanjo, state governors began agitations for an increase in the federation revenue allocation to state governments.

Thus revenue commission commenced a review of the formula inherited from the military era, with a view to increasing the share going to state governments, which of course, would reduce the share to the federal government.

The RMAFC’s first proposal reduced the federal government’s share from 48.5 % to 41.3%, States’ share was moved to 31%, with LGs’ allocation reduced to 16% and Special Funds’ share raised to 11.7% (i.e. FCT 1.2%, Ecology 1%, Natural Resources 1%, Agriculture and Solid Mineral Development 1.5% and Basic Education 7%).

However, before the National Assembly could even debate the proposed formula, the Supreme Court verdict on the Resources Control Suit in April 2002 nullified provisions for Special Funds in the Revenue Allocation, thus creating a totally new scenario. 

According to the Supreme judgment in the famous Resource Control suit instituted by the federal government against the 36 states of the federation, Federation Revenue could only be enjoyed by the three tiers of government and that Special Funds were unknown to law, in that respect.

Then president Obasanjo, therefore, quickly took advantage of the situation and came out with the an Executive Order in May 2002 to redistribute the federally collected revenue in which he pushed up the federal government share to 56% and reduced those of states and local government to 24% and 20%, respectively.

President Obasanjo’s action elicited an outcry from the public which made him to issue a second Executive Order, two months later, in July 2002, in which he re-adjusted the distribution.

In that second Executive Order, he gave federal government 54.68%, States 24.72% and LGCs 20.60%.

In March 2004, under the then Minister of Finance, and current Director-General of the World Trade organization, Dr. Ngozi Okonjo-Iweala, the second Executive Order was slightly modified by reducing the federal share from 54.68 % to 52% and slightly increased that of the states from 24.72% to 26.72% and local government remained at 20.60 %.

The revenue commission made many attempts to give the nation a new revenue formula but was unsuccessful. At a point then President Obasanjo had to withdraw a formula from the National Assembly on the excuse that there were fake Revenue Formula Bills in the legislature.

Details of past attempts

Mbam told journalists last week, “Proposal for new Revenue Allocation Formula for the three tiers of government (Federal, State and Local Governments) was first made by the Commission in August, 2001 but the recommendation was withdrawn due to the compelling verdict of the Judgment of the Supreme Court on suit No. SC 28/2001 of 5th April 2002 which recognized the beneficiaries of the federation account as Federal, States and Local Governments.

“In December 2002, another proposal for a new Revenue Allocation Formula was presented to the then President, Federal Republic of Nigeria. That Formula got to the verge of being passed, but again, the bill elapsed with the expiration of the tenure of the then National Assembly in May 2003.

“Furthermore, in 2003, attempts were made by the National Assembly to reconsider the Revenue Formula bill initially submitted, but the efforts were not successful. However, an addendum to the original Report was prepared and resubmitted to the National assembly in September 2004.

“The proposed Revenue Allocation Formula passed through several processes both in the senate and especially at the House of Representatives, where a public hearing was conducted in 2006 on the subject. Yet, the formula could not see the light of the day.

“Similarly, the Commission in 2014, made concerted effort to review the Formula. All necessary processes required of the Commission were concluded. However, the final process was inconclusive.”

Under the current revenue sharing formula, which became effective in 1992, the Federal Government   (Including Special Funds) takes 52.68 per cent; State Governments receive 26.72 per cent; while the 774 Local Governments take 20.60 per cent.

The RMAFC boss said that his team was determined to give Nigerians a new formula that would reflect current realities in the nation.

Engr. Mbam said that the current review would focus on the vertical formula which deals with the allocations to the three tiers of government, describing it as “less controversial.”

The chairman’s words, “The Commission has commenced the process of the review. The review is focused on the vertical allocation of the revenue allocation formula.” 

What we ‘re doing differently

On what would be done to avoid a situation where the commission would submit a new formula and the president would reject it or the national Assembly refuses to pass it, the RMAFC boss said that a lot of sensitization would be carried out to secure the buy-in of various critical stakeholders, across the country.

According to him, “We have decided to sensitise more people that the revenue formula review does not imply reduction.  It simply implies that we look at the responsibilities of each tier of government and what percentage of the federation revenue would be appropriate for the type of responsibilities of that tier of government.

“Because of what we have learnt from past efforts, we have decided to first handle the vertical formula, that is the sharing among the federal, states and local governments. This is not among states and local governments and we think that this will be less controversial.”

Why we are reviewing Formula 

On the review imperatives, the chairman said, “the political structure of the country has since changed with the creation of six additional States in 1996, which brought the number of states to 36. 

“Correspondingly, the number of Local Governments also increased from 589 to 774.

“There have been some considerable changes arising from the policy reforms that altered the relative share of responsibilities of the various tiers of Government including the controversies over funding of Primary education, Primary health care.

 “Inadequate/decaying infrastructure and heightened widespread internal security challenges across the country.

“Ecological challenges like global warming, desertification, flooding and population explosion.

“Inability of the current vertical formula to adequately address the apparent mismatch between statutorily assigned functions and tax powers of each of the three levels of government.

“Agitation for a review by various interest groups including States and Local Governments.

“In view of the above the Commission has commenced the review of the current vertical revenue sharing arrangement with a view to producing a fair, just, and equitable revenue sharing formula that will be acceptable to majority of Nigerians.”

Reacting to a question on why the commission needed to embark on holistic review, rather than re-present the one that was not passed in 2014, Engr. Mbam said, “we cannot use the same 2014 formula  because a lot of things have changed.

“If not for anything about security, security problems have changed, ecological problems have changed, there are so many factors that have changed between 2014 and now.  So it may not be right to adopt fully what was obtained in 2014 and apply it fully by 2021.we need to look at it again and then come up with the current realities in the review.”