Some stakeholders have warned states and local councils against complacency in the new revenue sharing formula proposed by the Revenue Mobilization, Allocation and Taxation Commission (RMAFC).
Welcoming the revenue increases accruing to states and local councils, they were however unanimous in calling on both levels of government not to sit and wait for Abuja’s allocation.
On Thursday, RMAFC Chairman Elias Mbam presented the report of the vertical review of the revenue sharing formula produced by his commission to President Muhammadu Buhari at the State House in Abuja.
In the split formula proposed by RMAFC, the federal government is to take 45.17%, the states 29.79% and the local councils 21.04%. This is an upward revision to state and local council allocations of 3.07% and 4.4% respectively, while the federal government allocation fell by 3.33%.
Under the existing sharing agreement, the federal government takes 52.68%, the states get 26.72% while the local councils 20.6%
The Chief Executive of the Center for Promoting Private Enterprise (CPPE), Dr Muda Yusuf, described the proposed distribution of revenue to states and local councils as a step in the right direction.
He said: “One of the shortcomings of our federation is the extreme weakness of sub-national entities. Yet they are closest to people. I wish the percentage in the states was even higher. The fragile budgetary situation of most states has contributed to perpetuating dependence on the centre. This diminished the states’ ability to assert themselves as a self-governing level of government.
Rounding out this laudable initiative, he added, “We should see a system of fiscal federalism where states are rewarded based on their creativity and ingenuity. States should commit to developing their investment profiles.
For his part, an economist and public policy analyst, Dr. Terfa Abraham, said the proposed sharing formula, which reduced the federal government’s share and increased that of the states and local councils, “is a call to government federal government to increase its efforts in independent income generation.
He said: “While the proposal is a welcome development, we need to grant autonomy to local councils to enable development at the bottom of the pyramid.
“Increasing revenue sharing alone without anchoring it to certain conditions would also make many states lazy in improving their efforts toward internally generated revenue (IGR).”
He added that the proposed formula still asserts that the federal government is the dominant level of government, which reflects the country’s federal system which places many responsibilities on the center; hence, requiring more funding for its implementation.
“While the proposed formula has the potential to deliver better development outcomes to a larger portion of the population at the state and local council levels, effective local council autonomy entailing transparent and efficient public financial management It would also be important at this stage to uphold the autonomy of the houses of assembly and local councils in order to allow effective checks and balances at all levels of government through effective oversight and functioning of the institutions of ‘audit,’ he said.
Financial Reporting Council (FRC) Chairman Dr. Sam Nzekwe also claimed that the proposed revenue sharing formula was a good move as they are closer to the people.