Politics of Revenue Allocation in Nigeria: a re-Visitation

Abstract

Revenue sharing or allocation in federal political system is prone to a number of problems rooted in politics. Federalized
system essentially places emphasis on cooperation and compromise. Revenue allocation in a federal system is one such area that call for a
great deal of consensus built on meaningful compromises. Of the many problem that have always arisen with regard to revenue sharing in
all federations, two stand out with respect to Nigeria. The first is how to deal with the problems arising from inequalities in size and
wealth among federating units. The second is how to ensure that growth of any unit does not suffer because some other unit(s) shows
inability to catch up with the more progressive one(s). These problems have been variously tackled in Nigeria through the instrument of
fiscal review Commissions. These Commissions had operated under very charged atmospheres given the highly emotive and volatile nature
of the politics of revenue allocation. The nature and outcome of the efforts of these Commissions remain ad hoc arising questions over their
utility in dealing with the ever-controversial and polemical issue of revenue allocation. This paper is an attempt at an inquiring into the
forces at work in the politics of revenue sharing in Nigeria. Have the various formulas served the purpose of ensuring equitable fiscal
federalism? It is argued in this paper that the dream of equitable and acceptable revenue sharing in Nigeria is yet to be realized, and will
remain far-fetched as long as political calculations govern the choice of formula to the virtual exclusion of sound economic and public
finance practice based on optimal allocation efficiency and distributive equity.