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Federalism And Revenue Allocation In Nigeria: A Critical Evaluation Of The Derivation Principle
CHAPTER ONE -- [Total Page(s) 3]
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CHAPTER ONE
1.1 Introduction
Federation implies the existence of more than one level of government in one country each with different expenditure responsibilities and taxing powers. Nigeria is a federation consisting of states and federal capital territory, federal government, 36 states and 774 local governments. Among the different levels of government, fiscal arrangement ought to be worked out properly to ensure fiscal balance in the context of macro economic development and stability.
Federal systems by their nature are complex administrative designs because they involve multiple levels of government. The Nigerian federal system is thus beset by a lot of complex challenges. One of such challenges is the seemingly implacable and intractable Niger Delta crisis arising from lopsidedness in revenue allocation and sharing in the country (Omotoso, 2010).
The fiscal arrangement among the different tiers of government in a federal structure contends (Osisioma and Chukwuemeka, 2007) is often referred to as fiscal federalism; in other types of political structure it is known as inter-tier or intergovernmental fiscal relations. The capacity of the federal, provincial and territorial governments to assume their responsibilities hinges on the balance between decentralization of revenues and decentralization of government spending. This decentralization refers to the portion of total revenue collected and expenditures allocated to both state and local governments. The degree of decentralization argues Okoro (2006) is the extent of independent decision making by the various arms of the government in the provision of social and economic services. It connotes the degree of autonomy of state and local governments in carrying out various economic tasks.
Prior to the discovery of oil in Nigeria, other sectors of the economy thrived. Agriculture, for instance, was a major source of revenue for the Western Region. The Eastern Region that was less endowed devised other sources of revenue. All this has however changed since the discovery of oil in the country. This has led to the demise of the other productive sectors of the economy. In fact, Nigerians are poorer today than they were in the pre-oil boom days. This is mainly because of the methodology of sharing the oil revenue. The struggle for the control of the oil wealth has led to an unfortunate shift from a revenue-oriented principle to an expenditure-oriented principle of revenue allocation (CyberEssays, 2010). According to Edevbie (2000), the unity of our country has always been fragile. A potent threat to our unity and democracy is injustice. Every part of the Nigerian nation feels the pinch of the unjust union. Almost everyone feels marginalised or at least claims to be marginalised but curiously, no one takes responsibility for the marginalisation.
The growth and development of any economic system, be it capitalist, socialist or a mixed economy depends significantly on the ways resources are being allocated or revenue distributed among the constituent units. Resources allocation or revenue allocation has been the cardinal goal of any such economy even in the capitalist economy where resources are allocated through the market mechanism, it should be efficiently and systematically allocated to achieve optimal profits or benefit.
The issue of revenue allocation depends largely on the political background and system being operated by a country. However, Nigeria offers a good example of federation by devolution, and one where sharing has been a strong but contentions instrument of addressing regional economic disparities and fiscal imbalances. It went through a costly and traumatic civil war partly because of perceived spatial injustice, but federalism has survived all the political streams as the best system of conducting regional development in the context of a coherent national development process. Hitherto, Nigeria has followed the practice of ad hoc review of its revenue sharing arrangement and has hitherto not established a constitutional or permanent commission system. Since the end of the Second World War, it has appointed eight such review bodies, reflecting more or less different turns in the country’s contemporary political history.
Up to the end of the Second World War, the country was run administratively since 1914 by the colonial power as a unitary system. The impending establishment of three components regions was the background to the setting up of the first revenue allocation study group – the Phillipson-Adebo Commission of 1946. The constitutional movement towards still greater regional autonomy in the early 1950s was also paralleled by the Hicks-Phillipson commission of 1951. A new realignment of constitutional functions, between the centre and the region, brought into being in 1953, the Chick Commission. By the mid-1950s, internal self-government had come to the regions even though, the nation as a whole was still under the British Colonial rule, and the Raisman Commission of 1958 was in recognition of the new fiscal problems posed with the granting of independence in 1960 and the experience of working a fully-fledged federal constitution. The Binns Commission was appointed in 1964 to reflect the lessons of accumulated fiscal experience. Then came the take-over by the military in 1966 and the splitting up of the four regions into 12 states in 1967 as the civil war approached. The Dina Committee of 1968 was set up to address that problem at least on an interim basis.
CHAPTER ONE -- [Total Page(s) 3]
Page 1 of 3
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