Fiscal Federalism: Lagos seeks special status in revenue formula
…advocates 42 per cent for 36 States RMAFC’ allocation
By Moses Adeniyi
As moves towards fiscal federalism continue to attract stronger attention in Nigeria, the Government of Lagos State has commenced the collation of averments ahead of an intended Zonal Southwest Public Hearing, to deliberate moves on reviewing the perceived imbalance in the subsisting revenue formula in the Federation.
Nigerian NewsDirect has gathered that stakeholders to be led by key delegates and government functionaries would in October (4th and 5th) meet to deliberate on the need to review the subsisting revenue allocation formula in the Federation.
The Government of Lagos State has in preparation towards the meeting commenced the collation of submissions to build a robust memoranda justifying why the review is important.
The move was on Tuesday strengthened with the convening of a stakeholders’ meeting, seeking the review of formula and a special status for the State in the revenue allocation formula in the Federation.
The Stakeholders which met at the State Capital, Ikeja, argued that the time for a review of the subsisting revenue sharing formula was long overdue.
The Stakeholders who converged with representatives of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) of the Federal Government, included members of the State Executive Council, Lawmakers, Permanent Secretaries, Heads of Ministries, Departments and Agencies (MDAs), and Local Government Chairmen, among others.
The stakeholders’ session was organised in line with a recent call in a publication made by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) under the caption: “Call For Memoranda on the Review of the Revenue Allocation Formula.”
The forum’s areas of attention were focused on the areas of responsibilities of each level of Government – Exclusive Lists (Federal Government); Concurrent Lists (Both Federal and State Government) and the Residual List (State Government only), as well as the functions of Local Government.
Others were Special Status for Lagos State; Special Funds including FG share of Derivation and Ecology, Stabilisation Fund, Development of Natural Resources, FCT Criteria for assigning weight; Other Responsibilities/Functions that can influence allocations; Expenditure Profile (as it affects responsibilities and Allocation) and the 13 per cent Derivation Principles.
Arguments against subsisting revenue formula
In his keynote address at the Pre South-West Stakeholders’ Sensitisation Meeting, the State’s Commissioner for Finance, Dr. Rabiu Olowo, mentioned that the effort was a proactive move to gather submissions towards the upcoming Southwest regional stakeholders’ public hearing on the review of the subsisting Revenue Allocation formula.
He argued that the revenue allocation formula inherited from the military was skewed largely towards the Federal Government which, according to him, is inconsistent with present realities.
Arguing that the last review dated back to 1992, and all efforts made for updates in last 29 years have been stalled, he mentioned that the prevailing situations have outgrown the subsisting provisions with variables which call for a review of the allocation formula.
According to him, “at this point in the national life,” it is important that contributions be made to raise courses to justify why review should be effected in articulating positions for fairer allocation formulas.
Olowo argued that with the status of Lagos as the economic nerve centre of the Country, demands for a special status for Lagos had been long overdue.
He argued: “We will all recall that when Nigeria returned to democratic rule in 1999, we inherited (from the military) a Revenue Allocation Formula (RAF) that arrogates enormous economic powers and excess service delivery responsibilities to the Federal Government.
“Since the establishment of RMAFC in 1989, the last time we had a successful review was in 1992 and several other attempts to review it within the last twenty nine (29) years have proven abortive!
“The current revenue allocation formula is far from being realistic. For instance, the number of states have increased from 30 to 36 states, number of local government increased from 589 to 774 local governments and, in Lagos, 37 LCDAs have been created to bring government closer to the grass root. The Constitution prescribes a minimum limit of 5years to operate an agreed formula before further review.
“From the publication credited to the RMAFC, Stakeholders at all levels and sectors are expected to participate and express their views which are expected to be the representatives of the views, concerns and yearnings of their all constituents across the country.”
In Olowo’s assertion, the need to corroborate objective responses from MDAs with subjective views from other stakeholders was important to come up with justification for the review.
He said the vertical provisions from Federal to State was much more clear while the issues relating to the horizontal provisions, such as population, in the revenue formula appear to be more controversial.
According to him, the contributions were essential to prepare the State to pose justifiable arguments and submissions for a fair and just allocation, as well as a special status for Lagos.
“Let me add that the ministry of finance had earlier sent Questionnaires together with a request for Memoranda to all stakeholders. We commend the efforts of those who have submitted and appeal to those yet to submit, to do so before the end of the week.
“In addition, the Lagos State Government will soon be hosting the regional stakeholders meeting of delegates from all the six (6) states that constitute the Nigeria’s Southwest Geo-political zone where these issues would further be examined extensively,” Olowo added.
Permanent Secretary, Ministry of Finance, Ayoola Oyeyemi, said since its introduction for a number years, stakeholders have never come under a forum for deliberation to review the revenue formula.
According to her, it is important for stakeholders’ contributions to take course for a review of the prevailing order.
Speaking, the Lagos State Commissioner to the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Dr. Adekunle Wright, said in view of the changing situation and demands, the Commission has been prompted to host stakeholders across the Federation towards reviewing the revenue formula in the Country.
According to him, the Commission was desirous to “within the shortest possible time” come up with a feasible review for a workable formula that reconcile with present realities.
Explaining the expectations from the stakeholders in respect of the proposed review formula, the Director, Inland Revenue Service, of the RMAFC, Udodirim Okongwu, said the Commission looks towards arriving at a fair, just and equitable revenue formula.
She mentioned that the biggest challenge was that there is an absence of explicit vertical sharing factors in the constitution, against the horizontal factors, which according to her, makes it problematic to come with fair, just and equitable formula.
According to her, the Commission has deployed a composite approach looking at objective data (collated from the Agencies of Governments) and subjective data (submissions by stakeholders outside the expenditure profile).
Speaking on the review yardstick, she said after collation of data, weight would be attached to the categories of submissions by 70 per cent to the objective and 30 per cent to the subjective.
She submitted that it is important for the State to bring up robust memoranda for onward submission towards the upcoming zonal public hearing.
In his submission, the State’s Commissioner for Economic Planning and Budget, Mr. Sam Egube, said “Lagos is a significant national asset,” not just for Lagosians but for national development.
Egube said with such indices as Lagos’ extremely high population density; a home to economic drivers; hosting 70 per cent of sea and air movements in the Country, the State deserves a special status.
He further argued that the continental free trade agreement holds bearing to the status of Lagos for its effectiveness.
“If it is good for Lagos, it certainly will be good for Nigeria,” he said, arguing that the call for special status for Lagos supersedes native expression but the national character of the State.
He argued that leaving the State with challenges without special attention would pose problems for the entire Country, mentioning that the State needs more funds for infrastructures and policing, among several other demands.
He further argued that the current composition of the State’s Cabinet consisting persons from other parts of the Country, expresses that the State structure has gone beyond native character to national inclusiveness.
He argued that with over N50billion Infrastructure deficits, fund constraints have continued to pose challenges for running the economy efficiently.
In his submission, the State’s Commissioner for Local Government and Community Affairs, Dr. Wale Ahmed, adopted the assertions of his Economic and Budget Counterpart, arguing that the foundation of the problem was traceable to the centralisation of power.
Arguing that it was important not to be caged by the subsisting constitution, he said the first step towards reviewing the formula is to reduce the items on the exclusive list for the Federal government, which can be shared to the States and Local Governments (LGs).
According to him, true federalism and devolution of power would find expression by the delisting of such items.
Taking comparative position, he said the Central Governments of leading Federal political systems around the world control majorly defence, immigration, foreign relations, customs and excise, currency and banking, submitting that if Nigeria’s Federal Government limits itself to these, the system will be decentralised to States and LGs.
According to him, this would make them more accountable with power which gives ability to reach the people more effectively and efficiently.
In her submission, the State’s Commissioner for Education, Mrs. Folashade Adefisayo, represented by the Permanent Secretary of the State’s Ministry of Education, Abosede Adelaja, said the forum was timely giving new realities in the State.
She lamented that trucks loaded with children, teenagers and youths have been trooping into the State, to crowd up the State’s public schools.
She added that with education being on concurrent list, most of the responsibilities in Lagos were borne by the State with support from the LGs.
She added that with about 1017 primary schools and 683 secondary State owned schools which largely overwhelm Federal Government’s schools, the sharing formula should be reviewed to give expression to the burden of needs.
The Secretary, Chair of Chairmen of Local Governments in the State, Ajala Razak of Odi Olowo LGA, said though the fundamental necessity of the LGs was to bring government closer to the people, the subsisting order defies the realities.
Arguing that amendments have not been made to reflect the increase of LGs in the Country to 774, he mentioned that the wide gap between the “haves (privileged) and have nots (less privileged)” was too wide and demands deliberate efforts to address the situation to avoid socio-economic nuisances.
He mentioned that security problems in the Country have gone beyond the Federal Government watch, calling for a joint concurrent system including the three tiers of government.
The Lagos State Attorney General and Commissioner for Justice, Mr. Moyosore Onigbanjo, SAN, represented by a Director in the State’s Ministry of Justice, S.A. Qadri, said the State remains at the forefront of canvassing for fair and just revenue formula in the Federation.
Arguing that the subsisting 54.8 percent Federal share, 24.72 for States, 20.6 for LGs and 4.18 percent for special funds, is unfair for meaningful development, demanding for a reviewed formula of 34 percent – Federal; 42 per cent – State Government; 23 per cent LGs and one percent for Lagos special status.
Calling for a revenue allocation formula giving expression to population and equity, he further called for autonomy for States and LGs in the Federation to generate revenue on their own and make contributions to the Central government by quota.
In her submission, the Special Adviser to the Lagos State Governor on Works and Infrastructures, Engr. Aramide Adeyoye, lamented that fund constraints have remained a challenge limiting the State from bridging the infrastructure deficits in the State.
Mentioning that there was no escape route for road usage regardless of class, which makes road infrastructure indispensable, she called for a special status, saying Lagos is a huge burden bearer than other States of the Federation.
The Permanent Secretary, Ministry of Establishment, Training and Pension, Biodun Bamigboye, said issues relating to staffing are centralised while the burdens on the States and LGs continue to compound.
The Special Adviser to Lagos State Governor on drainage and water resources, Joe Igbokwe, said the huge population in the State has been posing environmental impacts with depth of burdens on the State — a development which he said demands a special status for the State as the economic hub of the Country.
In his submission, the Permanent Secretary, Ministry of Health, Dr. Segun Ogboye, said a major challenge for the State is that because of its better health system, patients from other States troop into the State for medical attention which has crowded the State’s health system.
He said a large chunk of the State’s health insurance is being used by migrants from other states which poses huge burdens on the State.
It would recalled that as at 1999 at the onset of the fourth republic, the Revenue Allocation Formula was: Federal Government, 48.5%; 36 State Governments 24%; Local Government 20%; Special Fund, 7.5%.
However, in year 2002, the Supreme Court declared the 7.5% Special Fund illegal and the President then issued an executive order adding the 7.5% to Federal Government’s share of the Allocation while States and Local Governments remained the same.
Following, contention from State Governments, another executive order was issued in the same year which spread the 7.5% proportionally among the three tiers of government – thus, changing the RAF to the subsisting Federal Government, 52.68%; 36 State Governments, 26.72%; 774 Local Governments, 20.60% arrangement.
The constitutional mandate to review the Revenue Allocation formula is vested in the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC). Moves by State Governments in the South recently have continued to centre on seeking stronger channels for Internally Generated Revenue, which have been against the position of the Federal Government. Some States including Lagos have made moves for the collection of VAT through legislations – a development that has generated controversies.
