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REVENUE MOBILIZATION ALLOCATION AND FISCAL COMMISSION AS A TOOL TO NATIONAL INTEGRATION

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ABSTRACT

This study examines the impact of revenue mobilization allocation and fiscal commission as a tool for national development. The study strongly advocates for a direct revenue allocation to Nigerian local governments; it also identifies roles/functions capable of playing by local governments in national development; and showcases the operational and tactical roles of local government in enhancing national development. Typology of this research work is basically descriptive. Its research method is qualitative. Data was from both primary and secondary sources such as articles, textbooks, lecture notes, journals, newspapers and academic research projects. The contents of numerous data gathered are fittingly analyzed. The study reveals the following facts: grassroots’ development is a forerunner of national development; basic social services are mostly needed at grassroots level; local governments afford citizens the opportunities for political participation, political socialization and political education; and local governments are capable of solving the perpetual problems of rural-urban migration, rural transformation and development.

 

                                     CHAPTER ONE
                                    INTRODUCTION

1.1 BACKGROUND OF THE STUDY
Revenue allocations is a dynamic process which has been changing with the historical and political condition of the country. The issue of revenue sharing came to sharp focus with granting of the internal autonomy to the regions- North, West and East under the Richardson constitution of 1946 and the subsequent sharing of responsibilities between the federal, state and local governments.
The Federal Government use to declare revenue according to the proportion of its contribution to the central revenue derivation principle, Adebayo (2008). Thus, the origin of federation in Nigeria had brought a lingering problem of how best to find a permanent solution to equitable revenue allocation formula in Nigeria which had been politicized by successive administration both military and civilian regimes.

Taxation has been one of the most important and easy sources of revenue to any government, as the government possesses inherent power to impose taxes and levies. Nigeria tax system has been weak due largely to inadequate data of the tax base and heavy reliance on oil revenue. With the volatility in oil prices and excruciating impacts of the recent global financial crisis, taxation deserves more attention now than ever before in Nigeria. One issue that is critical to domestic resource mobilization and utilization is the issue of fiscal federalism. Nigeria operates three tiers of government; Federal, State and Local Governments with separate revenue, expenditure, and assigned responsibilities each. However, all decisions including resources are controlled from the center and the vertical revenue allocations tilt more towards the direction of federal government, contrary to the tenets of federalism the country is practicing. Both vertical and horizontal revenue in Nigeria is engulfed in controversy.
According to Philips (2007), the three important problems are as follows:-

  1. How to allocate functions rationally.
  2. How to share revenue between the government of the federation
  3. How to allocate taxing powers.

Since 1970 to 2010, there had been a continuous review manipulation and time inconsistence of revenue allocation formula in Nigeria that prompted me to research into a permanent and equitable revenue allocation formula.

The different commissions established to provide equitable revenue allocation formula include:-

  1. Two post-independence ad-hoc revenue allocation commissions.
    1. Binns Commission (1964)
    2. Dina Committee (1969)
  2. Four military government issued decrees, all during Gowon’s regime.
    1. 1997
    2. Decree 13 of 1970
    3. Decree 9 of 1971 and 1975
  3. Two comprehensive revenue allocation commissions
    1. Aboyade Committee (1977)
    2. Okigbo Commission (1980)
    3. Two revenue allocation Legislation Acts
  4. Allocation of revenue Act (Federation Account) (1981)
  5. Allocation of revenue amendment Decree (1984) and finally established a permanent National Revenue Mobilization Allocation and Fiscal Commission (RMAFC) through Decree 49 of 1989, a commission which continues with us today even in the 1999 constitution.

This commission was also inaugurated by His Excellency, President Obasanjo, on the 20th of September, 1999 in line with paragraph 31, part 1 of the third schedule to the 1999 constitution. Indeed, the history of revenue allocation and fiscal responsibility commission in Nigeria in connection with derivation principle and the Niger Delta problems has been quite intriguing.

The origin of a federation established at once raises three important questions we’ll look into in the course of this study namely:
1.       How to allocate functions rationally
2.       How to allocate taxing power
3.       How to share revenue between the governments of the federation. (2007).
Drastic reduction on the principle of derivation in revenue allocation from 100% in 1953 to 13% presently resulted to restiveness in Niger Delta Region of the country which has negative impact on Nigerians GDP/Foreign exchange earnings.

1.2     STATEMENT OF THE PROBLEM.
The Origin of the problems of the revenue mobilization allocation and the fiscal responsibility commission in Nigeria can be traced back to the onset of “Federalism or Fiscal Federalism” is in name only rather than in deed and in truth. In our current revenue allocation formula, where since 1970, the Federal governments have been playing “Musical Chairs” with the lower levels of state and Local government over distribution of the total collected revenue resulting to lack of development according to book “Revenue Sharing and the Political Economy of Nigerian Federalism” by T.Y. Danjuma, (2006). The fiscal federalism in Nigeria has not been able to contribute optimally to social and economic development because of its ad-hoc policy measures adopted the federal government, transferring federally-collected revenue to itself and effectively neutralizing the statutory allocation formula thereby reducing the statutory allocations that are received by state and local governments. These ad-hoc measures including the use of dedication accounts, stabilization funds, petroleum (special) trust fund and AFEM intervention surplus etc: CBN annual report (December 2008)
There has been an upsurge of economic nationalism in the oil rich areas. This has involved rigorous demand for wide ranging institutional and distributional reforms, including the amendment of the Nigerian constitution to make mining and minerals a joint federal-state, rather than exclusively federal responsibility thereby neglecting the ecological problems and risks of oil exploration and exploitation at the expense of the host communities. It is argued that oil prospecting and production activities have been systematically destroying the environment of the oil bearing areas, pollution and continuous flaring of associated gas create health hazards and render fishing and other farming activities almost impossible, Osagie, (2009) and this gave rise to militancy and kidnapping in recent times in the Niger Delta Region.
One of the major problems of Revenue Mobilization Allocation and Fiscal Responsibility Commission (RMAFC) is undue interference by politicians (National Assembly Members) and non-implementation of commission’s recommendation which resulted to jumbo salary of Law Makers who worked out their own salary and allowances irrespective of what the commission approved.
It could be recalled that Late Yar’Adua had mandated that RMAFC in 2008 to review the remunerations of Lawmakers in order to reduce national aggregate expenditure due to the wake of the global economic crisis between 2007 to 2009, however, after the review, the former chairman Harman Tukur recommended N11.5 Million as Basic salary and allowances for a senator and N9.5 Million for house of Representative Members but the Lawmakers had in January 2009 turned down on executive bill that sought to out down all political officers emolument. Financial standards August, 23 (2010).
Consequently, the newly appointed chairman of the commission, Engr. Elias Mbam had promised to initiate a plan to give the nation a new revenue sharing formula which is still in the pipeline subject to President Jonathan’s approval.

1.3 OBJECTIVES OF THE STUDY
From the above analysis, the following objectives were outline by the researcher for in-depth research:

  1. To ascertain if the present revenue association formula is acceptable and equitable in fostering national integration.
  2. To examine if there are possible solutions to the problems that emanate from revenue allocation that will enhance national development.
  3. To ascertain if the federal government interference affects the performance of the commission.
  4. To examine if there are suggestions on the more appropriate percentage allocation of revenue from excess crude oil to the Ministry of Niger Delta Affairs against ecological problems.
  5. To cross-examine if the problem of fiscal commission can affect the taxing power and responsibilities of states in revenue generation.

 1.4 RESEARCH QUESTIONS

  1. To what extent have the unfaithfulness in tax paying as at when due affected the growth of tax collection and revenue mobilization in local governments in Nigeria
  2. To what extent has corruption/sharp practices on the part of the tax collector and revenue generator affected the local government council?
  3. To what extent has enforcement or failing to enforce tax on people in local government level affected revenue generation?
  4. To what extent has inadequate administration services affected the growth of the local government council?
  5. To what extent has political instability affected tax collection and revenue generation in local government council?

1.5 RESEARCH HYPOTHESES

H0: there are no possible solutions to the problems that emanate from revenue allocation that will enhance national development

H1: there are no possible solutions to the problems that emanate from revenue allocation that will enhance national development

H0: the present revenue association and fiscal commission is not acceptable and equitable in fostering national integration in Nigeria.

H2: the present revenue association and fiscal commission is not acceptable and equitable in fostering national integration in Nigeria.

1.6 SIGNIFICANCE OF THE STUDY

This study is contemporaneous, that is, timely, because of the urgent need for ethnic groups, policy makers and implementers to understand the nature, scope and dynamics of the current agitation for resource control and practice qf true federalism. Also, the study relates to practical problems of Nigerian corporate existence, and it affects over 60 per cent of the population who are marginalized, deprived, alienated, neglected and dissatisfied with the current revenue sharing formula and federal structure. The study will help to guide and sharpen the focus of the Obasanjo government on its option for “political solution” to the issues of resource control in face of Supreme Court verdict. And in many ways, it will complement the theoretical platforms that had been erected in books on federalism. It will be a useful literature in understanding the struggle for resource control. Finally, the topic is unique, sensitive and controversial in the allocation of revenues between federal and the states, as it will illuminate gray areas.

1.7 SCOPE AND LIMITATION OF THE STUDY

This study focuses on revenue mobilization and fiscal commission as a tool to national integration in Nigeria. In the cause of the study, the researcher encounters some limitations which limited the scope of the study;

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

Inadequate Materials: Scarcity of material is also another hindrance. The researcher finds it difficult to long hands in several required material which could contribute immensely to the success of this research work.

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.8 DEFINITION OF TERMS

Revenue: In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover. Some companies receive revenue from interest, royalties, or other fees.

Mobilization:  Mobilization, in military terminology, is the act of assembling and readying troops and supplies for war. The word mobilization was first used, in a military context, to describe the preparation of the Russian army during the 1850s and 1860s. Mobilization theories and techniques have continuously changed since then. The opposite of mobilization is demobilization.

Revenue allocation: Revenue allocation is the distribution or division of total income, or revenue, in a business, corporate or government structure. It involves a complex process that entails how and where to allocate revenues in order to ensure the viability of departments and maintain the operating structure of the organization.

Fiscal commission:

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