The Federal Government has thrown its weight behind the clamour for the review of the vertical revenue allocation formula for the Federal Republic of Nigeria.

The Muhammadu Buhari-led administration is proposing a cut in the revenue allocation of the federal and state governments, but an increase in the allocation to the local governments.

The present vertical Revenue Allocation Formula is: Federal Government 52.68%; State Governments 26.72%; Local Governments 20.60% and Derivation Formula 13%.

As an interim and immediate measure, the Federal Government is, therefore, proposing the following: Federal Government 50.65%; State Governments 25.62 %; Local Government 23.73% and Derivation Allocation 13 %.

Secretary to the Government of the Federation (SGF), Boss Mustapha, spoke on behalf of the Federal Government at a Public Hearing on the review of the Vertical Revenue Allocation Formula in Abuja on Tuesday.

The SGF explained why the Federal Government wants more resources for the local governments.

According to him, “The Federal Government has taken cognizance of the growing clamour for a review of the present vertical revenue allocation formula, President Muhammadu Buhari’s commitment to ensuring resources for development get to the poorest of the poor in our rural communities, imperative to incorporate local communities in our security architecture as well enhancing equitable and inclusive national development.

“Alongside the above, other considerations that informed the Federation Government’s position on the review of the present vertical revenue allocation formula included Federal Government’s increasing visibility in sub-national level responsibilities due to weaknesses at that level e.g. Primary health care, basic primary education; Increasing level of insecurity and increased remittances to State and Local Governments through the Value Added Tax sharing formula, where the Federal Government has only 15 % and the States and Local Government share 50% and 35% respectively.”

Mustapha assured Nigerians that the Federal Government will implement the final outcome of the public hearings as soon as the National Assembly enacts the relevant legislation to complete the process.

“We are all agreed, as Nigerians, that the present revenue allocation formula, both vertical and horizontal, is long overdue for a review not only because the last one was done in 1992 but most importantly, contemporary issues since then, such as heightened insecurity, decaying infrastructure, need for appropriately matching statutory functions and tax powers, need to be taken into consideration.

“All over the world, revenue and resource allocation has always being a function of the level of responsibilities attached to the different components or tiers of government. It is therefore important that this Current exercise rests squarely on the 1999 Constitution (as Amended).

The Federal Government, however, noted that it spends most of its resources on and for the state and local government levels.

“In order to appreciate the position of the Federal Government, it is also necessary I share with us the vertical disbursement of the Federal Government’s share of 52.68%, which is as follows: Disbursement of the FGN Share of 52.68%; Consolidated Revenue Fund (CRF)48.50%; Federal Capital Territory (Like a State)1.00%; Natural Resources Development Fund (States are the beneficiaries)1.68%; Ecological Funds 1.00% (45% to NEMA, NEDC, NALDA and NAGGW, 55% addressing ecological challenges at Sun-National levels); Stabilisation Account 0.50% (25 % – 0.125 to NSIA and 75% 0.375 managed by OAGF and mostly utilized for emergency requests by States).

“Similarly, within the Consolidated Revenue Fund, disbursements are made for Debt Servicing, Statutory Transfers, Salaries, Pension and Gratuities, capital supplementation amongst others.

“It is, therefore, clear from the above that the Federal Government spends most of its resources on and for the state and local government levels. When you juxtapose this with the equally greater number or responsibilities on the Exclusive Legislative List, you would even want to make a case for greater allocation to the Federal Government,” the SGF said.



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