New Telegraph

Revenue: Reps probe 10yrs’ disbursements to states, LGs

PHILIP NYAM reports that the House of Representatives is trying to ascertain how much the Federal Government has disbursed to states and local governments since 2012

One issue, which has bothered many stakeholders over time, is the existence of a joint account system for the states and local governments in the country. Several efforts have been made in the past to amend the constitution to correct the anomaly but to no avail. The joint account system was reintroduced into the constitution of the Federal Republic of Nigeria in 1999. Section 162 (5) of the constitution provides interalia.

“The amount standing to the credit of Local Government Councils in the Federal Account shall also be allocated to the State for the benefit of their Local Government councils on such terms and in such manner, as may be prescribed by the National Assembly.” Also, section 162(6) provides that “Each state shall maintain a specific account to be called “State Joint Local Government Account” into which shall be paid all allocations to the Local Government Councils of the State from the Federation Account and from the government of the state.” These sections of the constitution proscribe direct allocation to the councils and put it under the supervision of state governments. Against this backdrop, direct allocation to the councils was no longer possible as money allocated to the local authorities and now paid into the State/Local Governments Joint Account.

This scenario has been attributed to the near-absence of government presence in the majority of the 774 local government councils across the country. Many state governors do not allow the local councils to access the funds meant for them from the Federal Account. Rather, commissioners for local governments or special advisers on local government and chieftaincy affairs as the case may be have become the conduit pipes through which many governors’ corner local council funds and deny development to the people at the grassroots.

It was in the light of this development that two weeks ago, the House of Representatives resolved to investigate the actual amounts disbursed to the 36 states and 774 local government areas of the federation between 2012 and 2021 from the Central Bank of Nigeria (CBN) and the Federal Ministry of Finance.

The decision was taken following the adoption of a motion sponsored by Hon. Mark Terseer Gbillah (LP, Benue). The motion was titled “Call to investigate the statutory functions of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) in the areas of revenue allocation, data collection and verification, provision of indices for disbursement to states by the Accountant General of the Federation and alleged infraction of administration of the Federal Ministry of Finance.” The investigation, which is being carried out by the House Committee on Finance is to last for two months.

The committee among other things is expected to test the accuracy of data provided to RMAFC by the 36 states and 774 local government areas of the federation that was used to compute the indices utilised for vertical and horizontal revenue allocation including 13 per cent derivation from 2012 to 2021 and the current nature of maintenance of this data. Other areas to be determined by the investigation include “the indices computed for each of the 36 states and 774 local government areas of the federation by RMAFC from 2021 to 2021 that were transmitted to the Accountant General of the Federation for revenue disbursement to the states from 2012 to 2021 including the parameters utilised to compute the indices.

“The indices utilised by the Accountant General of the Federation for revenue disbursement to the 36 states and 774 local government areas of the federation from 2012 to 2021 including details of the actual amounts disbursed to each state for this period.

“The allocation principles utilised by RMAFC in the proposal of new vertical allocation formula and consider efficacy and suitability of same in line with current and changing realities and the proposed principles for a new horizontal allocation formula. “Total remittance to the federation account by related agencies of the Federal Government from 2012 to 2021, the “cost of the collection” deducted for the entire period, statutory backing for same and utilisation from 2012 to 2021.

“The violation or otherwise by the Federal Ministry of Finance, CBN and other members of the FAAC in the administration of the federation account, considering provisions of section 162(3) (4)(5) and (7) of the 1999 Constitution (as amended) and report back within eight weeks for further legislative action. “The actual amounts disbursed to the 36 states and 774 Local Government Areas of the federation from 2012 to 2021 from the Central Bank of Nigeria (CBN) and the federal ministry of finance.”

The debate

Leading debate on the motion, Gbillah noted that paragraph 32 of Part 1 of the Third Schedule to the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and section 6 of the Revenue Mobilisation Allocation and Fiscal Commission Act, 2004, outline the powers of the commission, which amongst others include “review, from time to time, the revenue allocation formulae and principles in operation to ensure conformity with changing realities” paragraph 32(b) of Part 1 to the Third Schedule to the 1999 constitution (as amended) further states that “provided that any revenue formula which has been accepted by an Act of 188 Tuesday 11 October 2022 No.47 the National Assembly shall remain in force for not less than five years from the date of commencement of the Act.” He said that in performing its statutory mandate, the Revenue Mobilisation Allocation and Fiscal Commission is responsible for the provision of a horizontal and vertical revenue allocation formula, the collection, verification, maintenance and usage of data utilized for the computation of indices for disbursement of revenue from the federation account with regards to the horizontal and vertical revenue allocation formula and indices for disbursement of 13% derivation funds by the Accountant General of the Federation. According to him, “This data is required to be obtained from the 36 states and 774 Local Government Areas of the federation by RMAFC” The lawmaker said he was “worried about Nigeria’s current utilisation of the same vertical and horizontal revenue allocation formula and allocation principles instituted during a military regime three decades ago in 1992 when 6 states and 185 local government areas were created and Nigeria’s population rose from 88 million to over 200 million, and the current national clamour for restructuring, devolution of powers and true federalism amid the obvious changing realities of insecurity and socio-economic hardships across the country contrary to the above mentioned statutory provisions including Section 162(2) of the 1999 Constitution (as amended). “Also worried that RMAFC’s new proposal to the President in April 2022 for a revenue allocation formula is for vertical revenue allocation alone and is alleged to have utilized the over thirty (30) years old allocation principles and recent data that is inaccurate and unverified with no consideration being made at the moment for the more contentious horizontal allocation formula, which determines the actual impact on the lives of Nigerians in the federating units.” He alleged that the allocation formula was currently being implemented with inaccurate and unverified data from which flawed indices are computed and utilized by the Accountant General for revenue disbursement other allegations are that the actual indices utilised by the Accountant General for revenue disbursement to the states are sometimes at variance with those provided by RMAFC because of inducement from the states. According to him, there are other allegations that the actual indices utilised by the Accountant General for revenue disbursement to the states are sometimes at variance with those provided by RMAFC because of inducement from the states.

“We are also aware that the last time RMAFC claimed to have undertaken a comprehensive review of the vertical and horizontal revenue allocation formula which entailed collection and verification of data from the 36 States and 774 local government areas of the federation was in 2012, which exercise was fraught with speculations about the accuracy and comprehensiveness of the exercise considering allegations that several states were not visited at all because of the lack of RMAFC’s capacity to do so,” he said. Arguing further, Gbillah submitted that there are doubts about the comprehensiveness of the recent exercise embarked upon by RMAFC in 2021 (almost 10 years later) that culminated in the submission of the new revenue allocation formula proposal to the President in April 2022.

The lawmaker noted that his major concern was the inability of RMAFC and the Presidency to provide a new and acceptable vertical and horizontal revenue allocation formula for adoption and enactment by the National Assembly at the intervals envisioned by the constitution.

He reasoned that the failure to do so appears to have resulted in the administration of the Federation Account by the Federal Ministry of Finance, RMAFC and other FAAC members in breach of statutory provisions of section 162(3)(4)(5) and (7) of the 1999 Constitution (as amended), which implies that infractions have been committed and might require appropriate sanctions. Gbillah also observed that there were allegations that certain states unduly influence the RMAFC and the Accountant General of the Federation to their advantage in the provision and utilisation of data and computation of indices and the utilisation of indices for revenue disbursement respectively.

He stressed that the agitation by several states in the country about being shortchanged in revenue allocation considering the present realities in their communities and the significant deduction from remittances to the Federation Account by certain agencies of the federal government (which RMAFC has statutory power to obtain related information from) under the guise of “cost of the collection” does not appear to be statutory or properly monitored and determined by RMAFC and the National Assembly.

It is expected that the finance committee will turn in the report of the investigation before the House, which is currently on a working recess and will proceed on the Christmas and end of year holiday in December. Questions are being asked by analysts as to whether the outcome of the investigation could usher any positive change and attract development to the third tier of government.

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