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  1. 32. Allocation of Revenue
    SINCE 1949, discussions on allocation of revenue in Nigeria have been excessively confused by sectional sentiments and unhealthy partisan political considerations. Various non-objective and non-quantifiable principles have been paraded and propounded over the years. The high watermark of this protracted exercise in subjective muddle was reached recently when a body of Nigerian experts—The Interim Revenue Allocation Review Committee appointed by me in 1968-agreed in their report (page 82) ‘to temper our objective analysis by some practical non-quantifiable commonsense.’ We must not allow this kind of unscientific method, which is only a pedantic variant of the sectional approach of yester-years, to continue to bedevil and becloud our efforts and thinking on revenue allocation.

The purpose of this commentary, therefore, is to translate the four principles enunciated under this paragraph into objective and quantifiable criteria for revenue allocation purposes. We will now take these principles in turn.


  1. National interest: Three things must be done in order to satisfy this principle. First, the functions which the Federal Government is charged to perform in its exclusive jurisdiction must be settled; second, the national objectives which the Governments must pursue permanently and/or in the next plan period must be formulated; and third, the country’s revenue must be allocated in such a manner as to provide the Federal Government with sufficient funds to enable it to perform its exclusive functions efficiently and satisfactorily, to fulfill the national objectives as directed and in the time stipulated, and, in addition, to come readily to the aid of any State in need.


  1. Even progress: This principle can be materialised only if we -first and foremost formulate national objectives which all the Nigerian Governments and their Agencies must pursue permanently and periodically. These objectives must be:

(i) Full employment,

(ii) Free education at all levels,

(iii) Free health services throughout the length and breadth of the Federation,

(iv) The implementation of primary and” secondary projects in every State in accordance with the current periodic plan, and

(v) The prosecution of a countrywide programme of road and waterway sufficiency. The Federal Government, as we have said, and indeed all the other Governments in the Federation, must be put in sufficient funds to enable them to carry out these objectives in strict accordance with the country’s perspective and operative plans.


  1. Deed and need: Under this principle, every Government in the Federation is enjoined to exploit to the fullest and with efficiency and thoroughness, all the fiscal and monetary spheres allotted or available to it either by express provisions, or by residual implications, and to manage and utilize its financial and other resources with blameless prudence and economy. If after all these have been done, a State is still unable to procure sufficient funds to meet its needs in respect of the functions vested in it, other than those specified in the national objectives, it would be the bounden duty of the Federal Government, after it has satisfied itself, through appropriate channels, that the State has scrupulously fulfilled the criterion of Deed, to come to the aid of such State. To this end, the Federal Government should set up a permanent Commission of experts which would be independent and impartial, and whose main task would be to tender advice to the Federal Government as to whether or not a State, which declares itself in need, deserves assistance from Federal coffers. The overriding consideration in a case such as this would be whether or not the State concerned has satisfied the criterion of Deed. For it is possible that if it did, it would not be in need.


  1. Derivation: This principle is the most controversial. It has been the subject of unbridled and, I dare say, unreasoning strictures. Why, it is asked, should a rich State in the Federation be allowed to keep all that accrues to it, especially as the revenue imputable to it, under this principle, cannot be ascertained with absolute mathematical precision? Consequently, where the opponents of the principle believe that they have the advantage of numbers, they insist on all revenues being collected into a common pool and then shared out on the basis of population. Where this advantage is absent, they still insist on a common purse from which allocation to all concerned should be made on the basis of equality, or of a mixture of both population and equality.

In discussing this principle, I would like to make only six observations.

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Firstly, in a capitalist society, whether it is a Federation or not, it is untenable and dishonest in the extreme, to insist on sharing another person’s or another State’s wealth on any basis other than that which the rules of the capitalist game allow. In this kind of society, every State is perfectly entitled to keep any wealth that accrues to it either by the sweat of its brow, by cunning, or by the unaided bounty of Nature. And to accuse a rich State of lack of fellow-feeling or patriotism, because it insists on keeping practically all that comes to it by whatsoever means, is unreasonable and unrealistic. For, it must be remembered that, in a capitalist society, the overriding code of conduct is naked self-interest. As long, therefore, as we remain under this system, the principle of derivation would remain paramount, and legitimately so, however much we may try to suppress it. It would remain more so in the future, so long as the discovery of petroleum, and hence its exploitation, is confined only to some parts of the country.

Secondly, whilst population is a fair index of need, it does not follow that, in the absence of stated and defined national objectives, the amount of money allocated on this basis would be utilized for the good of the entire masses of the people in the State concerned. Numerous experiences in the past have shown that, more often than not, the money allocated on this basis has been expended on useless projects which benefited only the few ruling and wealthy classes.

Furthermore, in a country where the accuracy of the census figures is so much in acrimonious dispute; it is gross and aggravating provocation to urge that population should be used as a basis of sharing what belongs to others who are much fewer in number.

Thirdly, the best that can be said for the novel principle of equality is that it is conclusive evidence of the burning desire of some States to flourish without exerting themselves to the utmost, and at the expense of others.

Fourthly, the most objective way of judging and encouraging good and maximum performances on the part of any person or State, under any system be it socialist or capitalist, is to ascertain what such a person or State has contributed into the common pool, and to give appropriate rewards accordingly. For, it is by ascertaining individual contributions and giving adequate and appropriate rewards that initiative, and maximum efforts and exertions, can be evoked and encouraged. What the size and nature of these rewards are will depend on whether the economic system under which the country is operating is socialist or capitalist.

It is, therefore, imperative, whatever the economic system, that the proportion of the wealth of the country derivable from each State should, from time to time, be ascertained with as much accuracy as possible, and published. This procedure would encourage and incite the industrious to greater efforts, and rouse the complacent into action.

Fifthly, whilst it is not easy to obtain absolutely accurate figures for the areas of consumption of goods distributed locally, there has never been any dispute as to the origins of exported primary commodities. If the problem, therefore, is only in regard to locally distributed goods, it would be a damning commentary on our claim to maturity to throw up our hands in despair and refuse to find a solution for it. It is quite clear that all we need to do is to perfect our instruments for the collection of relevant data. Even now, with the crude instruments at our disposal, all impartial experts, including Hicks and Phillipson, are agreed that the margin of error in the present determination of the final destination of locally distributed goods is not so wide as to warrant the intemperate assaults which have, from time to time, been leveled by partisan politicians and even more partisan academics on the principle of derivation.

Sixthly, in assessing the contributions of an individual or State in a capitalist society, it is reasonable and just to take everything into account. That is to say everything, including what the individual or State contributes either from the sweat of its brow or as a result of windfall, such as in the case of the individual, the winning of a lottery, or, in the case of the State, the fortuitous receipt of premium, rent, and royalty on the exploration and exploitation of petroleum, or uranium, or other minerals, in the area under its control.

Under the socialist system which we advocate for the people’s republic of Nigeria, however, the contributions of each State would be assessed by what it is able to produce by the physical and mental efforts of its subjects. And it is on this basis that it will get its rewards, both in cash and by the award of trophies, shields, cups, and other honours and decorations. In other words, in the people’s republic of Nigeria, the principle of derivation would still enjoy prime of place.

For, after the Federal Government has been provided with enough funds (1) to discharge the functions exclusively vested in it, and (2) adequately to fulfil the obligation imposed upon it to come to the aid of any State which is unavoidably and excusably in need; and after all the States shall have received sufficient allocations to enable them, under the vigilant surveillance of the Federal Government, to finance the implementation of the declared national objectives in their respective territories, the residual allocation to each State would have to be on the basis of derivation. To put it arithmetically, allocation to each State would be equal to FULL DERIVATION minus NATIONAL INTEREST minus EVEN PROGRESS minus NEED. In calculating the full revenue derived from each State, anything in the nature of unearned income, like premium, rent, and royalty on mines and minerals, should be totally discounted.


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