States right to demand review of revenue sharing formula — RMAFC

FAAC meeting
FAAC meeting

The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) says state governments are right to demand a review of the revenue sharing formula of the Federation Account.

Shettima Abba-Gana, the outgone acting chairman, said this while speaking with the News Agency of Nigeria (NAN) in Abuja.

He, however, said that reviewing the formula was not the solution to states and Local Government Areas’ (LGAs) quest for increasing their revenue.

Under the current sharing formula, the federal government takes the lion share of 52.68 per cent from the Federation Account.

The 36 states are allocated 26.72 per cent, while the balance of 20.60 per cent is given to the 774 LGAs.

“Reviewing the formula is not an easy process and I am not particularly sure whether the review of the revenue sharing formula is the best solution for states.

“This is because the formula itself is based on a foundation and that is the constitution that has given the federal exclusive functions and states and LGAs concurrent functions.

“Unless you move functions from one tier to another, it will be very difficult to just transfer funds boldly to another tier.”

According to him, the magnitude of what the states are requiring may not be necessarily easy without some constitutional amendments to look at what the concurrent and exclusive functions of the states, LGs and Federal Governments are.

Mr Abba-Gana, however, said that what the RMAFC always advocated was getting more revenue that would be enough for the three tiers to share.

He added that even the federal government itself required more funds, especially with the current security situation in some parts of the country and the demand for infrastructure which also required funding.

“So what the RMAFC has always advocated for is to get more revenue, we have always been pushing that the Product Sharing Contracts (PSCs) be reviewed to increase the government’s take.

“We have always pointed out that production from Joint Venture Contracts (JVCs) has gone down from one million barrels per day to about 800,000 barrels per day.

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“It is the most profitable venture and that one has gone down, we need to get it back to be able to improve the funding to the federation account which definitely will benefit all tiers of government.”

The former chairman said that through the review of the PSCs and enhancement of the JVCs, and the states going to do some more work on their Internally Generated Revenue (IGR), it would uplift revenue across board.

This, he said, was more important than trying to share from a cake that was presently not enough or was shrinking.

On the review of the PSCs, Mr Abba-Gana said it was an ongoing process that had been done in the past and was last reviewed in 2008.

“In 2014 we did one and former President Goodluck Jonathan did not grant us leave to present it to him as should be done constitutionally and since then we have not done another one.

“Though we have indicated that we need funds to do another one because we need to update it and do some travelling and research to be able to get current economic social realities before we can make anything like the new revenue-sharing formula.

“That is being considered now and whenever funds are available, the commission will start the process again to review what was done in 2014 and from what I am hearing, the present administration is serious about it.”

PSC is an arrangement used in the upstream sector for the exploration and development of petroleum resources and was adopted by Nigeria for the exploration and development of the offshore and inland basin.

The RMAFC had said in 2018 that the nation lost about 21 billion dollars in revenue in the last 20 years to non-review of the PSCs.

Also, President Muhammadu Buhari gave approval to the Nigerian National Petroleum Corporation (NNPC) to enable it to undertake a review of all PSCs between it and its various partners to reflect the current realities in the industry.

RMAFC was established to monitor accruals into and disbursement of revenue from the federation account, review from time to time, the revenue allocation formula and principles in operation to ensure conformity with changing realities. (NAN)

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