THE DYNAMICS OF FISCAL FEDERALISM IN NIGERIA 1999 - 2011
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Date
2021-01
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UNIVERSITY OF ILORIN
Abstract
Fiscal federalism in Nigeria has been a source of intense political contestation for many decades. The contentious issues are equitable distribution and utilisation of revenue among tiers of government and inadequate legal instrument for revenue generation. The frustration arising from this fiscal dilemma has given rise to strident calls for political and economic restructuring of Nigeria. This study examined the dynamics and challenges of Nigerian fiscal arrangement under the Fourth Republic. The objectives of this study were to (i) examine the changing pattern of fiscal federalism in Nigeria between 1999 and 2011; (ii) analyse the challenges of Nigeria’s fiscal federalism; and (iii) assess the extent of the application of the revenue allocation principle.
The study adopted decentralization theory which explained the extent to which subnational governments were given autonomy to determine the generation, allocation and utilization of their own revenue. Data for this study were sourced from both secondary and primary sources. Secondary data were derived from government official publications along with journal articles and books. Primary data were sourced from interviews with twenty respondents who were key stakeholders in the area of study. The study utilized qualitative research methodology for the analysis of data. The descriptive and historical aspect of qualitative analysis was adopted as the major tool of analysis.
The findings of the study were that:
(i) there was a noticeable concentration of governmental functions at the federal level thereby making it to dominate major tax nets to the fiscal disadvantage of the other tiers of government. The 1999 constitution (as amended) lend credence to this observable phenomenon.
(ii) there was lack of transprency on the part of federal agencies generating revenue to the distributive pool;
(iii) visible inequality exists in national revenue distribution as a result of wide disparity in the per capital allocation between states generating bulk of the Value Added Tax revenue vis-à-vis states contributing little to the pool.
(iv) with the lopsided nature of Nigeria’s fiscal federalism, virtually all the tiers of government were dependent on the allocation from the Federation account. This suggest that the federal structure has almost been transformed into a unitary form; with allocation formula in the ratio of 52.68%, 26.6% and 20.60% for federal, state and local governments resectively. This has led to a serious agitation for a review of the extant revenue allocation formula.
The study concluded that in Nigeria, an urgent fiscal reform that would redress the existing mismatch through the increase of the taxing powers of lower level governments is very necessary. The study recommended the linking of equity and accountability in revenue allocation, effective government and balanced development to the core issue of national integration. This in essence can lead to resolving the problem of fiscal federalism and the national question in Nigeria.
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Keywords
DYNAMICS, FISCAL FEDERALISM, NIGERIA, 1999 - 2011