RMAFC begins review of revenue allocation formula

The Revenue Mobilization, Allocation and Fiscal Commission (RMAFC) has begun review of the current revenue allocation formula.

The exercise followed agitations for a review by states and local governments as well as the 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.

Chairman of the commission, Elias Mbam, who disclosed this while briefing the Secretary to the Government of the Federation, Mr. Boss Mustapha, yesterday, in Abuja explained that the consideration for the exercise was informed by the fact that the last general review of the formula was carried out over 29 years ago (1992) and that 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, infrastructure, among others.

Mbam observed that the 1999 Constitution (as amended) empowers the commission to periodically review the revenue allocation formula and principles in operation to ensure conformity with changing realities.

He said: “Paragraph 32 (b), Part 1 of the Third Schedule to the 1999 Constitution mandates the commission to review from time to time the revenue allocation formula and principles in operation to ensure conformity with changing realities, provided that any revenue formula which had been accepted by an Act of the National Assembly shall remain in force for a period of less than five years from the date of commencement of the Act”.

The chairman noted that the commission had made several efforts to actualise the review without its conclusion.

“Such efforts include proposal for new revenue allocation formula for the three tiers of government (federal, state and local governments) that was first made by the commission in August 2001 but the recommendation was withdrawn due to the compelling verdict of the Supreme Court on suit No. SC 28/2001 of 5th April 2002 which recognised the beneficiaries of the federation account as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, it 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 conclusive. However, an addendum to the original report was prepared and resubmitted to the National Assembly in September 2004. The proposed Revenue Allocation Formula Bill passed through several processes both in the Senate and the House of Representatives where a public hearing was conducted on it in 2006. Yet, the proposed formula could not see the light of the day”.

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

According to Mbam, the current revenue sharing formula is as follows: Federal Government (including Special Funds) – 52.68 per cent; State Governments-26.72 per cent and Local Governments – 20.60 per cent.