Nearly sixty years ago, a book titled: “Planning without Facts: Lessons in Resource Allocation from Nigeria’s Development” was written by Wolfgang F. Stolper, with contributions from Nicholas G. Carter, and published by Harvard University Press in 1966. The book deals with the complexities of resource allocation in Nigeria’s development, using an input-output analysis of the Nigerian economy from 1959 to 1960.
Specifically, “Planning without Facts” highlights the challenges faced by Nigeria’s policymakers during that period, who had to make decisions without reliable data or statistics. The book provides valuable insights into the country’s development strategies and the obstacles encountered in allocating resources effectively.
Six decades down the line, the obstacles and complexities highlighted by Stolper and Carter in “Planning without Facts” have become even more pervasive and deeply entrenched in Nigeria. This is why resource allocation (especially revenue sharing) remains a very sore point in the geo-political and socio-economic life of Nigeria.
It is against this background that the proposed review of Nigeria’s extant revenue-sharing formula by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) assumes critical importance and deserves focused analyses. According to Mohammed Shehu, chairman of the RMAFC, the review became necessary following current economic realities since the last review of the formula 33 years ago in 1992.
Speaking at a news conference in Abuja, Shehu said the proposed review aims to “produce a fair, just, and equitable revenue-sharing formula that reflects the current responsibilities, needs, and capabilities of the three tiers of governments in line with their constitutional roles.”
Under the current revenue allocation formula, the federal government gets a share of 52.6 percent, 26.7 percent goes to the states, and 20.6 percent is allocated to the local governments. One percent each is also allocated to the Federal Capital Territory (FCT), Ecological Fund, Natural Resources, and Stabilisation Fund under the vertical revenue allocation.
The RMAFC is mandated under Paragraph 32(b), Part One of the Third Schedule of the 1999 Constitution of the Federal Republic of Nigeria (as amended) to “review, from time to time, the revenue allocation formula and principles in operation to ensure conformity with changing realities.”
Shehu said: “In line with the constitutional responsibility and in response to the evolving socio-economic, political, and fiscal realities of our nation, the Commission has resolved to initiate the process of reviewing the revenue allocation formula to reflect emerging socio-economic realities,” pointing out that some recent constitutional amendments by the National Assembly had devolved certain responsibilities to the sub-national governments.
Specifically, generation, transmission, and distribution of electricity; railways and prisons (correctional centers) have been moved from Exclusive List to Concurrent Legislative List, placing more financial and administrative burdens on the state governments.
Shehu promised therefore that RMAFC would “carefully assess the needs, service delivery obligations, fiscal performance and developmental disparities of the sharing entities,” adding that the review would be inclusive, data-driven, and transparent.
While apposite and fittingly politic, the review of the revenue-sharing formula evokes the debilitating challenges that have stifled the much-desired rapid socio-economic development of Nigeria. On population, for instance, as one of the principles of revenue allocation: are there accepted population figures for the country and/or the sub-nationals? Or, for the crucial job of resource allocation, will a guesstimate or extrapolation suffice? Or, will the figures be conjured?
Census exercises have been some of the most contentious and controversial socio-economic initiatives in Nigeria — from colonial to contemporary times — leading to no reliable population data till date. It is therefore going to be part of the maze for RMAFC to wade through as it executes the proposed review.
How will RMAFC handle the issue of revenue allocation to some states on the basis of their landmass and terrain? In today Nigeria, what weight would be attached to ordinary land space vis-à-vis human population in trying to arrive at a “fair, just and equitable” share of the national revenue? Would a state with a large land mass get more revenue than one with a large population but small land space? This is part of the kernel for RMAFC to crack.
Under the subsisting arrangement, Lagos State which is believed to have the thickest population of over twenty million, has only 20 local governments that get allocations from the national pool. On the other hand, Kano State which (perhaps) comes next to Lagos in population, has over 40 local governments that get allocations. How the proposed review would address situations like this will be of interest to many.
Without a doubt, the principle of derivation has remained the most contentious in Nigeria’s revenue allocation efforts. What portion of the ‘national cake’ would an entity get based on the revenue being generated from its domain? Here, the Niger Delta imbroglio comes to mind. The oil-producing states’ challenge: what constitutes fair and equitable allocation to them? How would other locations where other minerals are mined be treated?
Will the principle of equality and even development have a place in the review of the revenue allocation formula? Equality in terms of what? Population? Land mass? Or, natural resources endowment? Can there be ‘even development’ through revenue sharing? Given the wide disparity in socio-cultural, educational, and human resource composition and make-up of the states, will RMAFC attempt to bring all to par?
What about allocation based on needs? Will this nebulous concept still have a place in RMAFC’s proposed revenue-sharing formula? Will allocation of more revenue to some states, for instance, truly lift them from perpetual ‘underdevelopment’? What about the motley extraneous factors that stifle the growth and development of so many of the states?
It will be very interesting to know the position of the federal government regarding RMAFC’s proposal. This is because even though there has been some devolution of responsibilities to the sub-nationals (via constitutional amendments), the government at the center has for long been hard put in terms of revenues.
Even with an allocation of 52.6 percent in the current revenue-sharing formula, the federal government has been contending with lingering fiscal deficits year-in-year-out. This is why the government at the center has practically been going cap in hand, borrowing money from within and outside the country.
For quite some time now, the federal government’s search for funds in the money and capital markets has largely crowded out not a few private sector fund raisers. Whether through bond issuance, treasury bills or other financial instruments, the federal government looms large in all segments — borrowing to deal with budgetary deficits.
The RMAFC’s proposal is also coming at a time when Nigeria’s National Assembly is pushing to create 31 new states. This proposal aims to increase the country’s states from 36 to 67. The proposed states are spread across the six geo-political zones of the country. How RMAFC will factor in the ‘emerging’ states will be of interest to all Nigerians.
The issue of population (of the country, the existing states, the ‘new’ states, etc.) will also be very intriguing for RMAFC and all stakeholders. The Bola Ahmed Tinubu administration seems to be expeditiously pursuing the conduct of a population and housing census pretty soon. The president had in April this year set up an eight-man high level committee led by the minister of budget and economic planning to work out the modalities and funding means for the census.
The committee was given a three-week deadline to turn in its ‘interim’ report, which will contain the census timeline, and funding readiness. So, which one will come first: the national population and housing census or RMAFC’s review of the revenue allocation formula? Or, would the revenue-sharing formula be reviewed “without accurate facts”?
Believing that neither RMAFC nor the President is merely flying a kite by the revenue-sharing formula review proposal or the national census initiative, Nigerians are waiting with bated breath. Will the cart go before the horse or vice versa? Or, will both end up as failed proposals? Time shall tell.
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Marcel Okeke, a practising economist and consultant in Business Strategy & Sustainability based in Lagos, is a former Chief Economist at Zenith Bank Plc. He can be reached at: obioraokeke2000@yahoo.com; +2348033075697
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