Finance Minister Taiwo Oyedele says state and local governments receive about 85 per cent of Nigeria’s resources, leaving the Federal Government with just 15 per cent despite its extensive responsibilities.
Oyedele made the remarks on Wednesday at Chatham House in London during a discussion on Nigeria’s economic outlook, the progress of reforms and prospects for inclusive growth.
He described the Federal Government as the most deprived tier of government in terms of resources relative to its responsibilities, which include defence, internal security, foreign affairs and conducting elections.
According to the minister, the Federal Government also supports basic education and primary healthcare, requiring additional resources to fulfil its obligations effectively.
“Based on data, the center is the most deprived of resources yet it has the most responsibilities. Of all Nigerian resources, roughly 85 percent are assigned to subnational. Only 15 percent to the federal government,” Oyedele said.
“In Nigeria, the federal government collects no income tax from individuals.”
He also cited the distribution of value-added tax (VAT), explaining that state governments receive 90 per cent of the revenue, while the Federal Government gets 10 per cent.
Oyedele added that states retain revenue generated from stamp duties, while the Federal Government depends on its share of the federation account.
“When they talk about the formula of 52 point something percent of federal government, what they are not telling you is that 52 point whatever percentage is a percentage of a smaller portion of the federation account,” he added.
Nigeria’s current revenue allocation formula generally gives the Federal Government 52.68 per cent of revenue, state governments 26.72 per cent and local governments 20.60 per cent.
On February 3, the Senate began the process of amending relevant provisions of the 1999 Constitution to increase the Federal Government’s share of revenue by reviewing the existing allocation formula.
The Senate said the Federal Government needed additional revenue to meet its expanding responsibilities despite receiving the largest share under the current formula.
FG plans to transfer some responsibilities to states
Oyedele said the Federal Government intends to transfer some responsibilities to state governments, arguing that they are better placed to handle them. He said the move would also strengthen the centre’s revenue-generating capacity without imposing additional costs on Nigerians.
“That way you have extra resources to influence decisions at the subnational level. It’s called federal transfers,” the minister said.
Under the proposed arrangement, the Federal Government could provide funding to states for improving basic education, supporting agriculture and constructing access roads linking farms to markets.
Oyedele said the transfers could encourage state governments to prioritise projects with direct economic and social benefits instead of allocating substantial resources to other infrastructure projects.