What Are the Principles of Revenue Allocation in Nigeria?

As of 2014, revenue allocation in Nigeria is a highly controversial and politicized topic that the federal government claims is geared toward limiting intergovernmental competition, allowing different levels of government to meet obligations to the public and fostering balanced economic growth. Critics maintain that the allocation system exists to centralize money and power in the hands of corrupt federal officials.

All revenue accrued from Nigeria’s natural resources is dispersed from the centralized government holding known as the Federal Account. As of 2014, the guidelines for revenue allocation in the country are set by the Revenue Mobilization Allocation and Fiscal Commission, a permanent and autonomous body constitutionally charged with reviewing the nation’s fiscal authority. The organization reviews and advises the formulas and principles of allocation to adjust for changing fiscal circumstances. However, the final allocation is set by the nation’s legislative body, the National Assembly.

Broadly speaking, the distribution is as follows: the federal government receives 56 percent, the state governments receive 24 percent and the local governments receive 20 percent.The formulas further dictate the allocation to state and local governments by land mass and terrain. Finally, strict limits are placed on the utilization of all revenue accrued from natural resources.