Five factors likely in new revenue formula

Mr. Babatunde Raji Fashola

As part of its plans to review the controversial revenue allocation formula, the Revenue Mobilisation Allocation and Fiscal Commission may adopt five factors, it was learnt yesterday.
But the commission may stay action on the review of the 13 per cent derivation because it is not constitutionally empowered to tamper with the principle. Only the National Assembly can review the derivation principle.
RMAFC has tentatively fixed April 29 for the verification of the five factors, which it will use in determining revenue allocation to each of the 36 states, the FCT and the 774 local government areas.
The commission has raised committees for a month-long exercise to verify the five factors.
A document obtained by our correspondent revealed the factors, which may be adopted.
Excerpts from the document reads: “It will be recalled that Section 32(b) Part 1 of the Third Schedule to the 1999 Commission had set the stage for the review of revenue sharing formulae and principles so as to conform to changing realities.
“This, at all times considers such determining factors as diverse geographical or physical configurations, demographic spread and concentration, social development factors, regional revenue drives and efforts among others.
“In specific terms, the purpose is to cause improvement in the economic conditions of the people in the face of changing trends and dynamics of those variable factors. Such changes include, inter alia, the responsiveness to both natural and man-made environmental configurations which clearly here represent changes in Landmass and Terrain.
“It should be noted that the Horizontal Revenue Allocation Formula translates into indices for the sharing of revenue among the states and among the Local Government Councils (including the FCT Area Councils) from the Federation Account. 
A source in the commission said: “Barring last-minute change of mind, RMAFC commissioners and staff have been directed to begin the verification of the factors from April 29.
“We are still trying to sort out issue of funds but we are hopeful that the exercise will start as proposed. We are going to the field to correct raw data.
“These data will eventually assist RMAFC to determine the overall revenue allocation percentage to be allocated to states and local governments in the vertical arrangement.”
At present, the revenue allocation formula is as follows: Federal Government (52%); States (26.72%); and 770 Local Government Areas (20.60%).
But a committee raised by the Nigerian Governors Forum, headed by the Governor of Lagos State, Mr. Babatunde Raji Fashola, has recommended a drastic reduction in the Federal Government’s allocation.
The governors want this new formula: Federal Government (35%); States (42%); and Local governments (23%).
The RMAFC source added: “The field work we are embarking on will assist us to ascertain if the demand of the states and the LGAs is justifiable. It will enable us to know the revenue allocation percentage to recommend for these two tiers of government.
“The five factors will also assist us to determine how revenue should be shared to states, LGAs.”
A highly-placed source in the commission said: “What RMAFC can only do is to advise the President on derivation principle - in the light of the outcome of our field work. It is only the National Assembly that can review the derivation principle.
“We are aware that there are divergent proposals on the review of the derivation principle. Some geopolitical zones have been demanding the review from 13 per cent to 25, 35 and 50 per cent.”