Discuss the principles considered in the allocation of revenue in Nigeria.

Answer Details

Revenue allocation is the sharing of nationally collected revenue among the tiers of government (federal, state and local) and among the component states. Over the years several principles have guided this exercise in Nigeria.

1. Derivation: Revenue is shared partly on the basis of the contribution each state makes to the national purse; a state that produces resources such as oil receives a percentage of the revenue derived from it.
2. Population: States with larger populations receive a larger share, since they have more people to cater for in terms of services and amenities.
3. Equality of states: A portion is shared equally among all the states regardless of size or population, to promote a sense of belonging and unity.
4. Need: Allocation takes account of the developmental and social needs of each unit, so that less developed areas receive support.
5. Even development / balanced development: Revenue is shared so as to reduce inequalities and promote balanced growth across all parts of the country.
6. Landmass and terrain: States with large land areas or difficult terrain requiring greater spending on infrastructure receive consideration.
7. Internal revenue effort: States are rewarded for their effort in generating internal revenue, to encourage financial responsibility.
8. National interest: Some revenue is reserved to meet national obligations and emergencies in the overall interest of the country.