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Economists fault FG on revenue sharing formula, say proposal negates true federalism

By Joseph Chibueze, Abuja
15 November 2021   |   4:06 am
Some Nigerian economists have faulted the recent Federal Government’s proposal of marginal increase in revenue allocation to local councils, saying it goes against the tenets of true federalism.

Boss Mustapha

‘Taxation now mainstay of global economies after COVID-19 disruptions’

Some Nigerian economists have faulted the recent Federal Government’s proposal of marginal increase in revenue allocation to local councils, saying it goes against the tenets of true federalism.

The government, last week, during a town hall meeting, organised by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) in Abuja for the review of revenue allocations to the federal, state and local governments, proposed a 3.13 per cent increase in local council votes and at the same time, marginal cuts in state and federal portions.

Secretary to Government of the Federation (SGF), Boss Mustapha, in his speech at the event, said the new revenue sharing formula would see the Federal Government’s share of the revenue dropping from 52.68 to 50.65 per cent while that of states would also come down from 26.72 to 25.62 per cent, while the allotment to local councils will increase from 20.60 to 23.73 per cent.

The Chief Executive Officer (CEO), Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the proposition by the government fell short of expectations, given the mood of the nation regarding true federalism.

Yusuf, who is a former Director-General of the Lagos Chamber of Commerce Industry (LCCI), stated that the desire of the generality of Nigerians was to see much stronger sub-nationals and local governments.

He said: “We need to see devolution of powers with better resources to states and local governments and a less attractive centre.

“This should come with a corresponding increase in responsibilities to the sub-nationals.

“We need much more resources at the state and local government levels. This is very critical for social and political stability. It is also a good strategy to manage our diversities as a nation.”

In his remarks, President of the Association of National Accountants of Nigeria (ANAN), Prof. Benjamin Osisioma, said while the Federal Government should be commended for voluntarily agreeing to let go of a part of its share of the revenue, it, however, does not address the core challenge of fiscal federalism.

“It is not a matter of the Federal Government handing down a decision it has made on allocation of funds to the different tiers of government, it is a matter of the federating units coming together to look at the realities on ground and decide on what is the ideal allocation of funds,” he noted.

The professor of economic said rather than reduce allocation to states, he would have loved a situation where the states get higher allocations “because that is where governance actually takes place.”

To the CEO of RTC Advisory Services Limited, a leading strategy and business advisory firm, Opeyemi Agbaje, “it is absolutely necessary to review the revenue allocation formula in order to realign distribution of federal revenue with contemporary realities and enhance fiscal equity in Nigeria.

He added: “I support reduction of federal share from 52.68 per cent, but I would have loved to see a larger reduction perhaps to a range of 40-45 per cent instead of 50.65 per cent.

IN a related development, the Executive Chairman of Federal Inland Revenue Service (FIRS), Muhammad Nami, said due to the negative effects of the COVID-19 pandemic, taxation had become the mainstay of global economies to fund governance.

He made the submission at the weekend in his acceptance speech as the 15th President of the Commonwealth Association of Tax Administrators (CATA), according to a statement issued by his Special Assistant on Media and Communications, Joannes Oluwatobi Wojuola, in Abuja.

He thanked the members for the confidence reposed in him by electing Nigeria as president of the body.

The statement quoted him as saying: “Today, taxation has become the mainstay of every economy around the globe. The COVID-19 pandemic has greatly affected the earnings of most economies, especially those whose revenue sources were fetched from activities such as recreational tourism, medical tourism, minerals exploration and commodity exportation, among others.