Revenue Allocation System in Nigeria Pre- Independence.

Introduction Nigeria is Africa’s leading producer of oil and the seventh largest producer of crude oil in the world, and equally endowed with other numerous natural resources. But rather than utilizing its resources for maximum development, the country is unfortunately bedevilled with how to efficiently and effectively distribute oil revenues in an equitable manner. The revenue allocation phenomenon in Nigeria is basically the issue of distribution of national (resources) revenue, mobilized by the central federal government. And as far as the revenue allocation debacle is concerned, the haggling is between those who bake the national cake (major contributors to national revenue) and those at the helm of affairs to allocate it. There†¦show more content†¦The logic is that, in areas where the revenue generation capacity is high, a relative higher tax is imposed vice versa to ensure stability. This transfer is called â€Å"equalization transfer†. The implication is that high taxation in relatively low revenue generated areas will drive away business investments and also cause further depression of the economy of such areas. To avoid this, the federal government has to inject more funds to such areas to create stability. Nigeria is a federal state. Whereas federalism guaranteed the existence of two or more levels of government, the health of the federal state is seen in the character of the relationship between the various layers of government. One critical aspect of such relationship is the crucial issue of finance which defines the politics of revenue sharing in a multi ethnic society like Nigeria. Finance, no doubt is very critical in Federalism, especially in federal state formed via the devolution method. The idea is that, it determines the extent of autonomy allowed to sub-national governmental units and the citizens in a federation in particular. Key aspects of fiscal federalism include: the nature of mobilization and collection of revenues, the manner of allocation and distribution, and the level of autonomy enjoyed by each level in dispensing with its resources. There areShow MoreRelatedRevenue Allocation Formula in Nigeria2406 Words   |  10 PagesREVENUE ALLOCATION FORMULA IN NIGERIA INTRODUCTION Prior to the discovery of oil in Nigeria, other sectors of the economy thrived. Agriculture, for instance, was a major source of revenue for the Western Region. The Eastern Region that was less endowed devised other sources of revenue. All this has however changed since the discovery of oil in the country. This has led to the demise of the other productive sectors of the economy. 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