By Andrew Haruna

Federal Government Begins Review of Revenue Allocation Formula

The Federal Government has commenced an inclusive and data-driven review of Nigeria’s revenue allocation formula, signalling a major shift in how national resources are shared across the three tiers of government.

Announcing the commencement of the review at a press conference in Abuja, the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Mohammed Bello Shehu, explained that the exercise is aimed at producing a fair and equitable revenue-sharing framework that reflects the current responsibilities and fiscal capabilities of the federal, state and local governments.

“This review will be inclusive, data-driven, and transparent. It will involve broad-based consultations with critical stakeholders, including the Presidency, National Assembly, state governors, ALGON, the judiciary, MDAs, civil society organisations, traditional rulers, the organised private sector, and development partners,” Dr Shehu stated.

There are strong indications that the new revenue formula will allocate more funds to the states, with sources revealing that the government is considering increasing state allocations to between 30–40%, up from the current 26.72%.
Under the present arrangement, 52.68% of revenue goes to the Federal Government, 26.72% to the states, and 20.60% to the local governments.

Stakeholders at the briefing emphasised the need for greater resources at the sub-national level, especially to address critical infrastructure projects such as electricity, healthcare and transportation.

The recent National Tax Laws have already begun reallocating 5% of federal tax revenue to the states as part of initial steps to adjust the fiscal structure.

The RMAFC also reaffirmed its commitment to applying empirical research and international best practices in shaping a formula that matches Nigeria’s current socio-economic realities.
This marks the first comprehensive review of the formula since 1992, despite a number of Executive Orders issued between 2002 and now to reflect emerging challenges.

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