The Federal Government has officially launched the process to review Nigeria’s revenue allocation formula, in what may become the most significant change to the country’s fiscal structure in over three decades. The move could result in more funds going to state and local governments.
The Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Mohammed Bello Shehu, announced the development at a press conference held at the Yar’Adua Centre in Abuja on Monday. He explained that the review is aimed at making the sharing formula more fair, just, and reflective of the responsibilities of each tier of government.
According to the current revenue allocation formula, the Federal Government receives 52.68%, states receive 26.72%, and local governments get 20.60%. However, insiders at the commission disclosed that the Federal Government is considering reducing its share to allow states receive between 30% and 40% of the national revenue.
This is the first time in many years that a full review of the revenue formula is being undertaken. The last formal review was done in 1992, over 30 years ago. Since then, adjustments have only been made through executive orders, particularly between 2002 and the present, to accommodate pressing issues or temporary policy shifts.
The RMAFC Chairman said the aim now is to develop a long-term, sustainable, and constitutionally sound formula that reflects the current economic and governance realities in Nigeria.
“The objective is to produce a fair, just, and equitable revenue-sharing formula that reflects the current responsibilities, needs, and capacities of the three tiers of government,” Dr. Shehu said.
He added that the Commission would take into account the service delivery roles, fiscal performance, developmental gaps, and other critical responsibilities handled by federal, state, and local governments.
At the press briefing, several stakeholders called on the federal government to push more resources to the states and local governments. They argued that state and local governments are closer to the people and better positioned to handle critical infrastructure projects, such as electricity, roads, water, and education.
This push has been backed by recent policy changes, including a new national tax law that mandates the Federal Government to hand over 5% of its tax revenues to state governments.
Observers say this move aligns with the broader push for decentralisation and fiscal federalism. Over the years, state governments have complained that their current allocation is too small to meet the rising demand for infrastructure and social services in their respective regions.
Dr. Shehu said the review would be data-driven, transparent, and inclusive. The Commission plans to consult widely across different sectors and regions.
He listed the stakeholders to be consulted, including the Presidency, National Assembly, state governors, the Association of Local Governments of Nigeria (ALGON), the Judiciary, Ministries, Departments and Agencies (MDAs), civil society groups, traditional rulers, the organised private sector, and development partners.
“Let me state clearly that this review will be inclusive, data-driven, and transparent,” he emphasized. “The inputs of all Nigerians will be valuable.”
The Commission also assured that it would integrate modern research, empirical data, and international best practices in the review process.
Policy experts have long argued that Nigeria’s current revenue sharing system is outdated and centralised, leaving states and LGs with too little autonomy to address pressing local issues.
“This review is long overdue,” said a Lagos-based economist, Dr. Nkechi Okafor. “States need more resources, especially as many of them are struggling to pay salaries and fund basic infrastructure. The current formula does not reflect the challenges on the ground.”
In the North-East, where insurgency and displacement have ravaged communities, state officials also welcomed the news. “We are dealing with security and humanitarian challenges. A fairer formula would mean we can respond faster to the needs of our people,” said a senior official from Borno State.
However, some analysts have cautioned that increased revenue must be matched with accountability and transparency at the state and local levels. “Throwing more money at subnational governments without strong monitoring could lead to waste,” warned a public policy analyst.
With consultations expected to begin shortly, the RMAFC said it will hold public hearings and invite written submissions from Nigerians. A final proposal will be submitted to the President, who will then send it to the National Assembly for approval.
