REVENUE 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. In fact, Nigerians are poorer today than they were in the pre-oil
boom days. This is mainly because of the methodology of sharing the oil revenue. The
struggle for the control of the oil wealth has led to an unfortunate shift from a
revenue-oriented principle to an expenditure-oriented principle of revenue allocation.
According to a former Governor of one of the oil producing states:
It is an act of self-deception for anyone to argue that there is nothing wrong with the
revenue formula. We have had basically two systems of revenue allocation in Nigeria. The
first system which we practiced during the First Republic allowed the North to keep the
proceeds from its groundnut and cotton, the West to keep the proceeds from its cocoa, and
the East to keep the proceeds from coal and oil produce. Then we changed the system so
that the Federal Government got its hands on the proceeds from on-shore and off-shore
crude petroleum proceeds, and yet we dont expect the minorities in the oil-producing areas
to perceive that is an injustice done to them. The oil-producing minorities have a point that
the rule of the revenue allocation game was changed to disfavor them (Professor Bolaji
Akinyemi, COMET, June 6, 2001).”
It is against the backdrop of the preceding assertion, delivered by a Nigeria academic and a
delegate to the National Political Reform Conference, that the complicated discussion
regarding the revenue allocation formula at the National Political Reform Conference
might be visualized. The South-South zone (in the imagined or putative division of Nigeria
into six geo-political zones) insists at this confabulation that in order to address past
anomalies in the allocation scheme that it should be given 25% instead of 13% (or 17%) as
a first step toward boosting the percentage to 50%. The request made to the conference
flowed from the environment devastation of the region and for development befitting the
area that “lays the golden egg.” Having personally flown over the South-South zone and
traveled by road in the region, I can attest to the lamentable condition in the area. In spite
