One of the main issues of debate in Nigeria at the moment is that of revenue generation and allocation, or as some will say, fiscal federalism. It has become so serious that it appears to drown other concerns in the nation like; insecurity, huge debt, secessionist cries and many others. In fact, some thinkers believe it is a propelling force to many problems facing the country.
Maybe it is because it is a double edged pole in that it is an end and a means to an end; of controlling state power or of having fiscal autonomy in the federation.
Remember how the PIB raised a storm in our legislative chambers where legislators had to work out of proceeding time and time again, or is it the VAT collection brouhaha between states like Rivers and Lagos against FIRS and the Federal government.
It is in view of this that the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) Chairman, Engr Elias Mbam, met with Civil Society Organizations in Abuja to keep them abreast on what the federal commission is doing to find an amicable lasting solution to revenue sharing controversies. He also informed them that the commission is going round the country at all levels to generate ideas on how to create a revenue formula to tackle the problems facing revenue collection and sharing.
According to him, factors that necessitated the review are among others:
- The last general review of the Revenue Allocation Formula was carried out over twenty – eight years ago (1992);
- 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;
iii. 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 etc.;
- 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; and
vii. Agitation for a review by various interest groups including States and Local Governments.
The current sharing formula is as follows;
Federal Government (Including Special Funds) – 52.68%
State Governments – 26.72%
Local governments – 20.60%
The chairman emphasized the urgency of the review and how important it is for the nation. In his words
“Ladies and Gentlemen, I want to reiterate that the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) is highly determined to produce within the shortest time possible, a new Revenue sharing formulae that will be fair, just and equitable to the three tiers of government. The Commission is determined to complete its review process by the end of 2021. I am glad to observe that the response so far from Nigerians is very impressive and demonstrates the importance the general Public attaches to the exercise”.
After all is said and done, we still must ask why the nation continues to battle with revenue collection and sharing all these years. Reviews like the one being proposed now have been taking place in Nigeria and none of them ever amounted to anything.
A look at the Fiscal Federalism in the United States shows that squabble between states and federal government regarding revenue is not peculiar to Nigeria, other developed states have it too, the worry is that it is a very loud problem in Nigeria, one that threatens the very structure of the state.
How has developed federal countries handled fiscal federalism?
Answering the above question is a difficult task because in reality no federal nation will completely silence the songs of discord, at best there will be whispered murmurings.
Why is revenue collection and sharing not a big issue in developed countries?
The answers are clear. First and maybe last of all is that there is this trust among the tiers of government and the people that tax and the likes are not being syphoned by corrupt individuals. Through the provision of basic amenities, infrastructures and welfare programs doubts are cancelled. Even if there is corruption among public office holders, it is not as pronounced as we have in Nigeria and other developing countries.
A working tax system also contributes positively to healthy fiscal federalism.
Through a dependable democracy and judicial system everyone is encouraged to play their part in contributing to the economy of the nation knowing that there is a fair reward system.
From the RMAFC Chairman’s speech, we hear that in August 2001, December 2002, 2006 and in 2014 robust discussions and plans were made to produce new sharing formula, but none of them saw the light of day. One can only imagine the resources, time and energy spent on these deliberations and others like them which did not get into the books.
These persistent ramblings reminds us of the cold war era and the theory of MAD (Mutual Assured Destruction) it brought about; where an attack from one side will necessitate a counterattack from the other side and lead to the destruction of both parties. In our case it is still MAD (Mutual Assured Dependence).
Fiscal Federalism has left the place of policy and principle to clearly become a weapon for political bargaining in Nigeria, state actors and non-state actors from divergent angles use it to throw tantrums as much as they can. If Nigeria must move forward then this weaponisation must be corrected.
This is part of what the RMAFC should consider even as it seeks to produce a FAIR, JUST and EQUITABLE revenue formula to guide the country called Nigeria.