By: Tunji Okunlola
Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele says subnational governments receive about 85 per cent of Nigeria’s resources, leaving the federal government with 15 per cent despite its wide range of responsibilities.
He spoke on Wednesday at Chatham House in London during a discussion on Nigeria’s economic outlook, reform progress and prospects for inclusive growth.
“The most deprived tier”
Oyedele said the federal government is the most deprived tier in relation to its duties, which include defence, internal security, foreign affairs and the conduct of elections. It is also involved in basic education and primary healthcare, he said, and needs more money to carry out these tasks effectively.
“Based on data, the center is the most deprived of resources yet it has the most responsibilities. Of all Nigerian resources, roughly 85 percent are assigned to subnational. Only 15 percent to the federal government,” he said. “In Nigeria, the federal government collects no income tax from individuals.”
He pointed to value-added tax (VAT), saying 90 per cent goes to states and 10 per cent to the federal government. States also keep revenue from stamp duties, he added, while the federal government depends solely on its share of the federation account.
He also took issue with the way the federal government’s headline share is usually presented. “When they talk about the formula of 52 point something percent of federal government, what they are not telling you is that 52 point whatever percentage is a percentage of a smaller portion of the federation account,” he said.
The formula and the Senate
Under the current revenue allocation formula, the federal government generally receives 52.68 per cent, states 26.72 per cent and local governments 20.60 per cent.
On 3 February, the Senate began the process of amending the 1999 Constitution to raise the federal government’s share by reviewing the formula upward. It said the federal government needs more revenue for its growing responsibilities, even though it receives the largest share.
Proposed changes
Oyedele said the federal government plans to hand some responsibilities to states, which he said are better placed to perform them, while strengthening its own ability to raise revenue without adding to Nigerians’ burden.
“That way you have extra resources to influence decisions at the subnational level. It’s called federal transfers,” he said.
Under that arrangement, he said, the federal government could fund states to improve basic education, support agriculture and build access roads linking farms to markets. Such transfers, he argued, could push states to prioritise projects with direct economic and social benefits over heavy spending on other infrastructure.
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