FG may lose 7% revenue to states, LGs under new formula

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Jonathan-360x225The Federal Government may lose about seven percent of its current share in the Federation Account to states and local governments in the revenue sharing formula slated to be released within the next 60 days, barring last minute hitches.

Although the agency charged with the responsibility for adjusting the formula as may be required from time to time, the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), is yet to speak on the structure of the new formula, a source in the know of workings within the Commission, told Sunday Mirror that the Federal Government may under the proposed formula get about 45.68 per cent in the Federation Account, 7 per cent lower than the 52.68 per cent it enjoys now.

The source said the 7 per cent slash in the Federal Government’s allocation would be shared by the states and local governments with the former raising its share to about 30 per up from the current 26.72 per cent while the local governments may have the balance of 24.32 per cent up from the old 20.60 per cent they have been sharing for years.

Investigations by our correspondent indicated that the new formula may not be significantly different from the above ratios and that the concern of some members of RMAFC, who already are aware of the likely reactions to the formula of the Federal Government, is to ensure that the grassroots become the hub of socio-economic development of the governments.

She said: “I can tell you on that the Federal Government may lose 7 per cent of its current allocation to the states and local governments when the new formula is out. The Commission is committed to grassroots development and therefore doing everything reasonable to ensure this through a sharing formula that would support grassroots development and poverty alleviation”

Despite the desire of the RMAFC to deliver a new formula that would ordinarily help the states and local governments to get more funds for development, a major problem that may scuttle its intention has to do with immense pressures at the highest level of government on the Commission to make the adjustments very marginal. According to an insider to the exercise, intense lobbying by Federal Government is said to be going on as the last stage of the compilation and reports and recommendations of the Commission draws close to an end.

Specifically, the Federal Government is said to be pushing for at least 48 per cent of the allocation based on the increasing challenges it is contending with to fulfil its financial commitments on recurrent budget.

According to the senior official in one of the agencies under the Ministry of Finance, who pleaded that his identity should be veiled, since the revenue sharing formula remains a major fiscal tool for allocating resources to all areas in the political economy, it requires a special approach even when it means to change the formula by the slightest percentage.

“For the Federal Government that has been battling with deficit financing in over the years and when the need for more funds is now growing in the face of some emerging responsibilities such as in the area of security, a major restructuring of the formula may be damaging to its developmental agenda.

So, it will be desirable to have a slight change in the ratio” The Federal Government currently takes 52.68 per cent of the allocations from the Federation Account while the States and the Local Governments share the balance in the ratio of 26.72 per cent and 20.60 per cent.

 

Information from National Mirror was used in this report.

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