The allowance of income and the Fiscal Commission (RMAFC) has announced the beginning of a new review of the Nigeria Revenue Exchange Formula, but interested parties require more funds for the States, since the commission points to a new framework before the end of 2025, writes Joseph Inokotong.
In what many analysts describe as one of the most significant fiscal reforms in recent decades, the income mobilization allocation and the Fiscal Commission (RMAFC) have initiated a new review of the Nigerian income allocation formula. The year is expected, which the Commission promised to conclude before the end of 2025, remodel how the income of the Federation account will be shared between federal, state and local governments.
At a press conference in Abuja, president of RMAFC, Dr. Mohammed Bello Shehu, framed the review as a constitutional responsibility and a need issued by changing socio -economic and political realities. He reminded the Nigerians that paragraph 32 (b), part I of the third time of the 1999 Constitution requires the commission to “review, from time to time, the formula for allocation of income and the principles in operation to guarantee the conformity with changing realities.”
“In line with this responsibility, the Commission has resolved to initiate the process of review of the formula to reflect emerging socio -economic realities,” said Dr. Bello. “The objective is to produce a fair, fair and equitable income exchange agreement that reflects the current responsibilities, needs and capabilities of the three levels of the government.”
The announcement has already caused a broad debate, with interested parties, from state governors to academics, civil society organizations and policy experts, which demonstrates a more balanced formula that enables subnational governments to fulfill their growing obligations.
A very late review
The current formula for income allocation has been maintained greatly unchanged since 1992, despite the significant changes in demography, economy and governance structure of Nigeria. Currently, the Federal Government takes 52.68 percent of the income from the Federation account, states receive 26.72 percent, while local governments share 20.60 percent. It reserves additional 13 percent as a derivation for oil producing states.
Although successive administrations have issued executive orders that adjust aspects of the framework for sharing, a comprehensive review has not been carried out in more than three decades.
“This is one of the longest periods that Nigeria has passed without a review,” said Professor Hassan Usman, a political economist at the University of Abuja. “When he considers how much has changed since 1992, the creation of new states, population growth, the debate of economic diversification and constitutional amendments, the urgency of this review becomes obvious.”
In fact, the population of Nigeria has triggered approximately 88 million in 1992 to more than 230 million today, creating massive tax pressures on education, health, infrastructure and security systems, particularly at the subnational level.
Changing responsibilities, reduced resources
One of the main justifications for the review is the recent return of powers of the Ninth National Assembly. Constitutional amendments transferred certain responsibilities, such as the generation of electricity, transmission and distribution; Railways; and correctional services, from the exclusive legislative list. This change means that states can now perform more active roles in the sectors once monopolized by the federal government.
While these changes were acclaimed as milestones for federalism, they come with financial implications. It is now expected that states assume additional responsibilities without the corresponding fiscal autonomy.
“That is why the assignment formula must change,” said Dr. Bello. “Subnational governments cannot comply with expanded obligations if the fiscal structure remains unequal in favor of the center.”
The Association of Academics of the Capital Market of Nigeria (Acman) reinforced this opinion. Its president, Professor Uwaleke, requested more of the income for the states, but warned that these funds should be fenced for development projects. “Assignments must be linked to infrastructure and human capital investments to guarantee responsibility and impact,” he said.
Federalism, Fiscal Justice and the question of equity
In the center of the debate is the issue of fiscal federalism: how resources must be equitably shared in a several level government system. Nigeria’s income allocation system has historically been a controversial issue, often causing political tensions and agitations.
During the First Republic, regional governments retained up to 50 percent of the income generated from their territories under the principle of derivation, sending the rest to the center. However, the successive military regimes for gradually centralized income control, which culminate in the current formula that gives the federal government more than half of the distributable income.
Critics argue that this imbalance stifles subnational development, encourages excessive dependence on federal assignments and undermines responsibility.
“The states have been reduced to mere administrative units instead of federation entities,” said Lagos -based government analyst Ayo Olumide. “They come with the limit every month to Abuja instead of building sustainable internal income bases. A revised formula that gives them more resources could change the game, but only if it coincides with fiscal discipline.”
The dilemma of oil dependence
The income assignment debate cannot divorce the great dependence of Nigeria in the oil. Petroleum income represents a large proportion of distributable funds, although the volatility in world oil prices has repeatedly exposed the vulnerability of the current fiscal structure.
Petroleum producing states, under the derivation principle of 13 percent, already enjoy additional assignments. However, non -oil states have often argued that the formula should support greater national equity and solidarity. The current review is expected to reopen old debates on how to balance derivation, equity and efficiency.
Some experts have even suggested a gradual change back to a stronger principle of derivation to encourage states to exploit their natural resources, including solid minerals and agriculture. “If we want real federalism, states should retain most of the income they generate while contributing to the center,” said Professor Usman. “This will encourage innovation and tax independence.”
The Connection of the Orsanyaye report
Beyond the income allocation, Dr. Bello also used the occasion to request the implementation of the Orsanye report on public sector reforms. Among other recommendations, the report advocates the rationalization of overlapping government agencies and the return of the Salary and Salaries Commission to RMAFC. “The implementation of the golden report would reduce recurrent expenses and release funds to pay public officials a decent salary,” he said.
Analysts see this as part of a broader strategy to address the fiscal challenges of Nigeria, where a swollen bureaucracy consumes a disproportionate proportion of income at the expense of development expense.
An advisory and data -based process
RMAFC has promised that the review process will be inclusive and transparent. The consultations are expected to involve the Presidency, the National Assembly, the State Governors, the Association of Local Governments of Nigeria (Algon), Judiciary, Ministries and Agencies, Civil Society Groups, Traditional Rulers, Organized Private Sector and Development Partners. The Commission has also promised to trust empirical data, avant -garde research and international best practices. This is crucial, experts say, because income allocation is both a technical and political exercise.
“The credibility of the process will depend on the quality of the data, the transparency of the consultations and the ability to generate consensus between the interests in competition,” said Dr. Ifeoma Nwachukwu, a fiscal policy researcher in the group of the Nigerian Economic Summit (NESG).
Implications for government and development
If you succeed, the review could remodel Nigeria’s fiscal landscape deeply. States can obtain more resources to invest in infrastructure, education, health and security, while local governments could be more empowered to offer base development.
But success will also depend on governance at the subnational level. Concerns about bad financial management, weak responsibility and corruption in many local states and advice are abounding.
“Giving more money to states without strong responsibility mechanisms could make waste worse,” Olumide warned. “We need institutional reforms at the state level (control legislatures, active civil society and solid audit systems) to ensure that additional income is used well.
Looking to the future
As RMAFC embarks on this ambitious review, Nigerians are watching closely. For some, it is an opportunity to correct historical imbalances in the Federation. For others, it is a proof of political will and institutional capacity.
What seems safe is that the result will shape the country’s fiscal federalism in the coming years. It remains to be seen if it results in a more equitable and sustainable formula or simply in another round of political trade in horses.
For now, expectations are high. “This review should not fail,” insisted Professor Uwaleke. “It is essential for the stability, development and survival of our federal government system of Nigeria.
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