The Lagos State Governor, Babajide Sanwo-Olu has called for a 42% revenue share model to states from the Federation Account.
The Governor disclosed this on Monday at the two-day South-West Zonal public hearing on the Review of Allocation formula by the Revenue Mobilization Allocation and Fiscal Commission (RMADC).
The Governor added that the increased formula would enable states handle their finances, as the present model only gives states 26.72%, while the FG takes 52.68%, citing that the model needs to be reviewed.
What the governor said
Governor Sanwo-Olu said, “Nigerian fiscal federalism should be adjusted to develop more expenditure responsibilities with appropriate revenue allocation to lower levels of government.
“So that federal government will focus on matters of national concern like security and defense, among others.
“The Lagos State Government proposed revenue allocation formula: Federal government: 34 per cent, State government 42 per cent, local government councils: 23 per cent and Lagos State (Special Status, 1 per cent).
“The solution is to diversify and strengthen the fiscal base of the state government.
“The need to reverse the age-long fiscal dominance by the federal government in order to re-establish a true federal system is strongly recommended.”
He added that Lagos State’s position requires for it to be granted the highest share of 42%, while the share of the local government be increased to 23% since both tiers of government are closer to the people, citing that “this will help in nurturing strong, transparent, efficient and independent fiscal institutions that will also help in nurturing strong transparent, efficient and independent fiscal institutions.”
“This will further ensure accountability and proactively address emerging fiscal challenge in the public sector.
“It is the position of Lagos State Government that State Governments should share 42 per cent of revenue accruing to the Federation Account,” he added.
He stated that in addition to the existing items on the concurrent legislative list, the Federal and State government should collectively share the responsibilities including; “Regulation of labour, mines and mineral, social security and statistical system (census, birth and death etc). Guidelines and basis for minimum education, business registration, price control, national parks, fishing and fisheries.”
He also urged that the Derivation and Ecological fund should be de-centralised such that each federation unit will have access to its own reserve whenever the needs arise.
“In other words, the 1% allocated to the Federal Government in respect of the Derivation and Ecological Fund should be deducted from the Federal Government’s share of Derivation and Ecological Fund will now stand at 1.72%.
“The proportion allocated to Stabilization Fund should be increased from 0.5 to 1%. This amount should be deducted from the percentage hitherto allocated to special fund on the development of natural resources,” he said.
He added that the FG’s focus should be solely on defence, external affairs, international trade, currency and banking, exchange control and federal trunk roads, as it reviews its share to 34%.
What you should know
The 26 states of the federation including the Federal Capital Territory shared a sum of N1.84 trillion in 3 years as part of the federal VAT collections. This is according to data extracted from various FAAC reports, released by the National Bureau of Statistics (NBS) and compiled by Nairametrics Research.
Lagos, Kano, and Oyo States were the highest recipients during the period under review, jointly accounting for 25.6% of the total gross VAT allocations to the entire states. According to data from the NBS, the Federal Inland Revenue Service (FIRS) on behalf of the federal government generated a sum of N3.82 trillion as VAT between 2018 and 2020.
Lagos received a sum of N342.2 billion between January 2018 and December 2020. This represents 18.6% of the total amount shared by the 36 states and the FCT.