State Govts to Get More Funds as FG Overhauls Revenue Formula

By Ada Samson, Abuja

The Federal Government has initiated a sweeping review of Nigeria’s revenue allocation system, paving the way for state governments to receive significantly larger shares of nationally collected revenue.

Mohammed Bello Shehu, Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), announced the reform process during a press briefing at Abuja’s Yar’Adua Centre, signalling the most substantial potential redistribution of funds since the current formula was established in 1992.

Under the proposed changes, states could see their allocations rise from the existing 26.72 per cent to between 30 and 40 per cent of federal revenue. This recalibration aims to better reflect contemporary economic realities and the growing service delivery obligations shouldered by subnational governments.

The current distribution model allocates 52.68 per cent to the federal government, 26.72 per cent to states, and 20.60 per cent to local governments – figures that have remained largely unchanged for three decades despite Nigeria’s dramatic demographic and economic transformations.

The review process will incorporate extensive stakeholder consultations across all tiers of government, including the presidency, state governors, local government representatives, and civil society groups. RMAFC has committed to employing rigorous data analysis and international benchmarks to develop what Chairman Shehu described as a “fair, just and equitable” sharing mechanism.

The commission particularly emphasised the need to address regional development disparities while strengthening fiscal responsibility frameworks to ensure additional funds translate into tangible improvements in infrastructure and public services.

This overhaul coincides with parallel reforms to public sector remuneration, including potential salary increases for political officeholders from the president to local government chairpersons. Shehu stressed that any adjustments would be balanced by implementing living wages for civil servants, noting that inclusive development requires adequate compensation for workers across all levels.

The review also aims to revitalise local governments as primary drivers of grassroots development, addressing long-standing concerns about their financial and administrative marginalisation.

Analysts view this comprehensive fiscal restructuring as a potential turning point for Nigerian federalism. By rebalancing resource distribution and enhancing subnational financial autonomy, the reforms could reduce over-centralisation of resources while improving service delivery capacity at state and local levels.

However, success will depend on strict accountability measures to prevent mismanagement of increased allocations and ensure citizens directly benefit from the revised system.

The RMAFC has pledged to complete its recommendations within a defined timeline, setting the stage for what could become Nigeria’s most consequential fiscal realignment in a generation.