Every month, the representatives of the three tiers of government in Nigeria gather to share the revenue accrued to the federation account. For a significant number of the states in Nigeria, without these handouts they cannot fund their expenses like payment of salaries or embark on any developmental project.
In a recent days, Investogist has published the Internally Generated Revenue per state for 2019, and that the share of revenue from the federation account accruable to the state has dropped by over 50%. A holistic look at both publications, paints a picture that should deny any right thinking governor his or her sleep at night.
That a majority of states in Nigeria do not pay salaries to the state employees, is a problem as old as the wanton corruption at the state levels, that sees the state’s share of the revenue bounce off the state accounts and into the private accounts of the politicians and their cronies.
Read; Only 4 States Generated Internal Revenue Greater Than its Federation Account Allocation in 2019
How did Nigeria arrive at this impasse, where the most important week in the calendar for the politicians at the Federal, State, and Local Government Councils is the middle of the month? The week they all gather to share the national cake!
The purpose of this discuss today is not to critically review this anomaly, but to look at the system the leaders of Nigeria has devised to share this revenue.
The Nigerian government financial system operates a structure, where funds flow to the three systems of government from what is termed the FEDERATION ACCOUNT. This Federation Account serves as the central pocket through which the Governments – Federal, State and Local Government – fund developmental projects as well as maintain their respective workforce.
Section 165 of the Constitution of the Federal Republic of Nigeria 1999 and the Allocation of Revenue (Federation Account, etc.) Act No.1 1982 stipulates that, the revenues generated by the federal government should be credited into the Federation Account and disbursed monthly among the three tier of government as defined in the Revenue Act of 1982.
Read; States and LGAs Federal Allocations in April Drop by Over 50%
The Allocation of Revenue (Federation Account, etc.) Act 1982 established for the Federation, a body to be known as the Federation Account Allocation Committee which shall comprise of the following members;
- The Federal Minister of Finance to be the chairman
- The Commissioner for Finance of each State in the Federation
- Two persons to be appointed by the President
- The Account-General of the Federation
- The Permanent Secretary of the Federal Ministry of Finance or Such officer as may be designated by the Finance Minister shall be the Secretary of the Committee.
The functions of the committee shall be to ensure that, allocations made to the States from the Federation Account are promptly and fully paid into the treasury of each state on the basis and terms prescribed by the Act. They also function to report annually to the National Assembly in respect of the function specified above.
Read also; Nigeria Headed for a Deeper Recession, to Shrink by 8.9%: Finance Minister
The Act also established for each state in the Federation, a body to be known as the State Joint Local Government Account Allocation Committee which shall comprise the following member;
- The Commissioner charged with the responsibility for Local Government in the State to be the chairman
- The Chairman of each Local Government Council in the State
- Two persons to be appointed by the Governor of the State
- Two representatives of the Accountant-General of the Federation
- The Accountant-General of the State
- The Permanent Secretary of the State Ministry charged with responsibility for local government or such officer as may be designated by the said Commissioner shall be the Secretary to the Committee.
The functions of the Committee shall be to ensure that, allocations made to the Local Government Councils in the State from the Federation Account and from the State concerned are promptly paid into the State Joint Local Government Account and distributed to Local Government Councils in accordance with the provisions of any law made in that behalf by the House of Assembly of the State.
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Having established how the system was formulated and structured, in the next publication, we will look at the revenue sharing formula used in deciding the size of the cake to be given to the Federal Government, Individual States and Local Government Councils.
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