Fiscal federalism is a fundamental part of a true federal state; it has to do with how states with more than one order of government organize themselves for the purposes of collecting revenues and financing expenditures. The capacity of the federal, state and local governments to assume their responsibilities hinges on the balance between decentralization of revenues and decentralization of government spending, the scale of transfers between orders of government, the conditions attached to those transfers, the differences in the respective capacity of the states and local governments to provide comparable public services at comparable levels of taxation and tax collection arrangements within the country.
A Prominent Investment Banker and Former Chief of Staff to the Abia State Governor, Chief Mascot Uzor Kalu has lent his voice to the issue of Fiscal Federalism in Nigeria. He stated that – ‘’ Several concerns have been raised regarding the sharing of government revenue. While many are of the opinion that the major providers should enjoy a larger chunk of the money, some believe it should be based on needs of the states. But whichever way, it is paramount that the allocation made to the states should be large enough to cater for the expenses of the state to enable it perform its statutory functions.’’
For the avoidance of doubt, Federalism presupposes a political system that is non-adversarial, and in which there is equitable power sharing among the different components. The government under such a system usually consists of at least two orders: a central or federal government and the separate governments of the constituents units, or states, as in the case of the Federal Republic of Nigeria. Each order of governments has defined limits of autonomy and receives a share of financial resources tailored to their specific requirements as defined by the mandate of legislative competence, their actual situation and the statutory indices of calculation.
In performing its constitutional responsibilities, the RMAFC (Revenue Mobilisation and Fiscal Commission) has submitted different proposals to the executive on the need to review the revenue sharing formula in Nigeria (46.63%, 33% and 20.37% in 2003; 47.19%, 31.10% and 15.21% in 2005) among federal, states and local governments respectively.
Why the recommendations of the RMAFC have not been adopted is a question for another day. As it stands, the federal government gets 52.68%, while 36 states and the 774 local governments get 26.72% and 20.60% respectively. Section 4 of the 1999 constitution clearly lists items on the exclusive list, on which only the federal government can act on; concurrent list which contains responsibilities shared by the federal and state governments; and the residual list which is reserved for the state governments.
The composition of the Nigerian state is diverse in resources and advantages. While some are endowed with crude oil, others are endowed with a large mass of arable land. Derivation, Need, and overall national interest have been the basis for sharing national wealth.
In the light of this development, Chief Mascot Uzor Kalu stated that – ‘’ We must begin to work towards creating a level playing ground in order to embrace the positive impact that economic freedom can avail the states if true fiscal federalism is enthroned in Nigeria. Fiscal responsibility and federalism is key to financial independence and financial independence is key to the future of Nigerian democracy’’.
