RMAFC begins comprehensive review of revenue allocation

…to deliver revised formula before year-end

The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has officially launched the long-anticipated review of Nigeria’s revenue allocation formula, with a new framework expected before the end of 2025.

The initiative aims to realign fiscal allocations to the evolving financial demands of Nigeria’s three tiers of Government—Federal, State and Local—amid deepening socio-economic and constitutional shifts.

At a Press Conference held Monday in Abuja, Mohammed Bello Shehu, Chairman, RMAFC said the Commission is fulfilling its constitutional mandate under Paragraph 32 (b), Part I of the Third Schedule of the 1999 Constitution, to “review, from time to time the revenue allocation formulae and principles in operation to ensure conformity with changing realities.”

The current formula, which has remained largely unchanged since 1992, allocates 52.68% of federally collected revenue to the Federal Government, 26.72% to states, and 20.60% to Local Governments. It was last modified by executive orders in 2002, but experts and policymakers say it is no longer suited to Nigeria’s current realities.

Recent constitutional amendments by the 9th National Assembly, which devolved critical responsibilities such as electricity, railways, and correctional services to subnational governments, have expanded the administrative and fiscal burdens on states and local councils.

Shehu acknowledged this shift, noting the need to “reevaluate the structure of fiscal federalism in order to foster economic growth in individual states, enabling them to become independent from the central government and ensuring equity, responsiveness, and sustainability.”

The review, he said, seeks to deliver “a fair, just, and equitable revenue-sharing formula that reflects the current responsibilities, needs, and capacities of the three tiers of government.” It will assess service delivery obligations, fiscal performance, and development disparities, and will be “inclusive, data-driven, and transparent.”

Beyond the vertical formula, Shehu explained that RMAFC is also reviewing the full structure, including horizontal allocation—the mechanism for revenue sharing among states and local governments. “These are where the indices of school enrollment, social development index, hospital beds, and other things [come in],” he said.

He also addressed concerns around the management of special funds within the federal share. “Like the 1.68% that was in trust for the federation… What had happened over the years? From 1999 to date, the story is not too good,” Shehu said, referring to funds intended for sectors like tourism, agriculture, and solid minerals. “We are trying to make amends and as a Commission, we’ll be able to do it.”

Within the 52.68% federal share, Shehu highlighted that 4.18% is allocated to special funds: 1% for the FCT, 1% for ecological projects, 1.68% for the Natural Resources Development Fund, and 0.5% for stabilisation.

The current review is not RMAFC’s first attempt at reform. In 2022, then-Chairman Elias Mbam presented a proposed vertical revenue formula to the late President Muhammadu Buhari, recommending 45.17% for the Federal Government, 29.79% for States, and 21.04% for Local Governments. However, no action was taken before Buhari left office.

Mbam had defended the proposal, saying, “We consulted widely with major stakeholders, public hearings in all the geo-political zones, administered questionnaires and studied some other federations with similar fiscal arrangements like Nigeria to draw useful lessons from their experiences.”

Also speaking at the event, Uche Uwaleke, a Professor of Finance and Capital Market at Nasarawa State University, advocated stricter controls over new allocations to States. “If we find a way of ring-fencing… the more money we are going to push to subnationals, [then] when they now come into the coffers of States and Local Governments, they are not looked at as discretionary funds,” he said, urging that such funds be earmarked for infrastructure, particularly in sectors like electricity and rail.

On the horizontal allocation formula, Uwaleke suggested a rethink of the weightings. “We have inequality—40%, population—30%, landmass—10%, IGR effort—10%, social development effort—10%,” he said, proposing that a reduction in the population component could be redirected to social development indicators like health and education.

He also noted the impact of new tax laws, which will see the federal government relinquishing 5% of its VAT share to states. “It’s important that when we push money to states… we ensure that the monies are ring-fenced so they can be targeted to specific things, particularly infrastructure.”