In a federal system, there are different levels of government, each with its own set of constitutional responsibilities. Because the corresponding expenditure obligations are often different from the allocation of tax, powers and revenue sources, a system of revenue allocation is required as a mechanism for redressing the consequent mismatch between expenditure, obligations and revenue sources. The overall objective of such a system of revenue allocation would be to enhance economic development while simultaneously minimizing intergovernmental conflicts.
The granting of internal autonomy to the regions under the Richards Constitution of 1946 and the subsequent sharing of responsibilities between the federal and regional governments provided the starting point for what has continued to be a persistent and often controversial national debate on revenue allocation. The need for new searchlight on revenue enhancement and mobilization, overtime and space, also provides another sound justification for the establishment of a permanent commission.
In the course of time and in view of policy instruments for the achievement of national objectives, there were periodic reviews, on ad hoc basis, on the fiscal jurisdiction of the various tiers of governments and the assignment of revenue allocation. These reviews were carried out by eight ad-hoc revenue allocation Commissions, viz: Philipson Commission (1946), Chick’s Commission (1953), Raisman Commission (1958), Binns Commission (1964), Dina commission (1966), Aboyade Committee (1977), and Okigbo Commission (1980). All these Commissions, excluding the Aboyade and Okigbo Commissions, were able to ensure the establishment of region/state government autonomy over certain revenue sources (e.g. personal income tax) and the establishment of federal government’s exclusive control of some revenue sources (e.g. Armed forces income tax). Also, they were able to ensure the creation of a Distributable Pool Account into which other revenue (including import & export taxes, mining rents and royalties, etc) were paid and which was subsequently distributed between the federal and regional/state governments and the development of revenue allocation principles, such as derivation, population, even development, etc on the basis of which fund in the Distributable Pool Account were shared among regions/states. The Aboyade and Okigbo Commission on the other hand fine-tuned the works of the previous Commissions toward equitable justification.
The government of General Ibrahim B. Babangida, guided by the desire to depart from the narrow and transient objective of devising populist revenue sharing formulae, inaugurated the then National Revenue Mobilization Allocation and Fiscal Commission, on September 6th, 1988, which was statutorily established by Decree No 49 of 1989. Equally, the 1999 Constitution Section 153-subsection (1) provides for the establishment of the Revenue Mobilization Allocation and Fiscal Commission. President Olusegun Obasanjo inaugurated the new Commission on September 20th, 1999 with 37 Commissioners representing each State and Abuja.
The establishment of a permanent body, going by the issue in Nigeria’s fiscal finance which have generated heated public debate, which intensity has been a manifestation of the complexity of the issues involved, and the demand by Nigerians for an equitable revenue sharing formula, is invariably a novel attempt by Government towards ensuring prudent, efficient and stable revenue sharing formula and fiscal policy for the nation.