Prior to the establishment of the Commission as a permanent body to handle issues of revenue allocation and fiscal matters on continuous basis, various Commissions and Committees were set up by different regimes at the Federal level to handle these issues on temporary basis.

Formal Revenue Allocation started in Nigeria in 1946 when the Regional Governments were granted internal autonomy by the Richard’s Constitution which also shared responsibilities between the Regions and the Federal Government. Correspondingly, a system of revenue allocation was introduced to redress possible disparity between the  constitutional responsibilities and available resources. The objective was to make available to all levels of government independent sources of revenue, which would be adequate to enable them undertake their constitutional functions.

As further constitutional changes were taking place, a number of Ad-Hoc Fiscal Commissions were subsequently appointed to recommend acceptable formulae in conformity with the changes at that time. Several Decrees were equally promulgated during the Military regimes to bring the revenue formula in line with the economic and political situations on ground. A summary of the revenue allocation reports made in Nigeria are hereby presented:

(A)     Philipson Commission (1946)

The Philipson’s Commission recommended three (3) principles, namely: Derivation, Even Progress and Population. In the absence of statistical data, only the population principle was applied.

Regional revenue were divided into two (2) classes namely, declared and non-declared revenues. The declared revenues were those collected by the regions. The non-declared revenues were those collected by the Central Government and shared in the following horizontal ratio:

  • Northern Region – 46%
  • Western Region – 30%
  • Eastern Region – 24%

(B)     Hicks — Philipson Commission Report (1951)

In its search to arrive at a progressively more equitable allocation formula, the Commission introduced some general principles, namely Independent Revenue, Derivation, Need and National Interest.

On Independent Revenue, the regions were given powers to impose direct taxes such as jangali (cattle) tax,          motor, liquor and other licenses, etc. The Regional Governments had complete control over these taxes.

The Derivation principle for the regions was applied as follows:

(i) 50% of the import and excise duties on tobacco;

(ii) 100% of the import on motor spirit.

(c)  In terms of need, the Commission gave capital grants to the Region using the 1931 Population figures as a measure of need.

On National Interest, the Regions were given the following special grants:

100% of the cost of maintaining the Police Force in the Regions;

50% of the cost of maintaining the Native Authority Police of the Region; and

100% of the grants given by the Regional Governments to Voluntary Agencies and local authorities on education.

(C)     Chicks Commission Report (1953)

The Chicks Commission applied mainly the principle of Derivation, while recommending 50% of Revenue from certain items to the Federal Government; the remaining 50% was to be allocated to the Regions as follows:

(a)      Import and Export Tax-On the basis of consumption

(b)     Import duty on Motor Spirit — On the basis of Consumption

(c)      Import duties on other goods — North 30% (except tobacco and motor spirit; West 40% Spirit)

(d)     Export Tax on Hides and Skin – All to the North

(e)      Mineral Royalties    – 100% to the Region of extraction

(f)      Company Tax          – 100% to the Federal Government

(D)     The Raisman Commission Report (1958)

The highlight of the Raisman Commission was the creation of a Distributable Pool Account into which should be paid 30% revenue from the following:

  •     Mining rents and royalties;
  •     Revenue from imports other than duties on tobacco, motor spirits (including diesel oil), beer, wine and       potable spirits.

On mining rents and royalties, the allocation was as follows:

(i)      Central Government              — 20%

(ii)      Regions                               — 50%

(iii)     Distributable Pool Account  — 30%

On import duties other than those specified above, the allocation was as follows:

(i) Central Government               — 70%

(ii) Distribution Pool Account       — 30%

What went to the Distributable Pool Account was shared among the Regions as shown hereunder, using the general principles of continuity of government service, minimum responsibilities, population and balanced development as follows: –

(a)    Northern Region               —                40%

(b)    Western Region                —                24%

(c)     Eastern Region                 —                31%

(d)    Southern Region               —               5%


(E)     Binns Commission Report (1964)

The highlights of the Binns Commission Report was its recommendation of an increase from 30 to 35% of duties on general import and revenue from mining rents and royalties, payable to the Distributable Pool Account. Correspondingly too, it recommended a decrease of the percentage share of the Central Government. Revenue ¡n the Distributable Pool Account was to be allocated among the regions on the principle of “financial comparability ‘using the following formula:

Northern Region                 — 42%

Eastern Region                   — 30%

Western Region                  — 20%

Mid-Western Region           — 8%

(F)      The Dina Interim Revenue Allocation Review Committee Report (1968)

Among the recommendations of the Committee were:

(i)   That the Distributable Pool Account should be renamed “State Joint Account”; and

(ii)  That there should be established

(iii)     A Special Grants Account; and

(iv)     A Permanent Planning and Fiscal Commission to administer the Special Grant Account, and also to study and review the Revenue Allocation Formula.

  •    That horizontally, the allocation principles should be based on:
  •    Basic needs
  •    Minimum national standards
  •    Derivation
  •    That the vertical sharing formula for royalties from on-shore mining should be:
    1.     State of Origin                  —       10%
    2.     Federal Government          —       10%
    3.     State Joint Account           —       70% and
    4.     Special Grants Account      —       5%

(e)   That rents from on-shore operations should be paid to the States on the basis of Derivation – 100%

Note that the Dina Committee’s Report was rejected on the grounds that its range went beyond the mood of the Military Government of that time. For example, it recommended that there should be uniform tax legislation for the nation and that the pricing of Marketing Board produce should be harmonized. In addition, it proposed that the Federal Government should finance all levels of Higher Education. After rejecting the report, Government continued with the then existing formula based on Binns’ Report of 1964.

(G)     The Aboyade Technical Committee Report (1977)

The highlights of this report were the recommendation of the following five (5) Principles:

    1. Equality of access to development opportunities
    2. National minimum standards for national integration
    3. Absorptive capacity
    4. Independent revenue and minimum tax effort; and
    5. Fiscal efficiency

Recommended formula for vertical allocation were:

(i)     Federal Government         –        57%

(ii)    State Governments          –        30%

(iii)  Local Government s         –        10%

(iv)  Special Grants Account     –          3%

                   Total                              –       100%

(c) Recommended formula for horizontal allocation based on weights to the Principles:

              Principles                                    Relative Importance

  1. Equality of Access to Development opportunities 0.25
  2. National Minimum Standards for National Integration 0.22

iii. Absorptive Capacity                                                    0.20

  1. Independent Revenue and Tax Effort 0.18
  2. Fiscal Efficiency                    0.15

                   TOTAL                                                       1.00    Note: The Report was rejected because it was considered too technical.



(H)     The Okigbo Commission (1980)

The summary of the recommendations of the Okigbo Commission report are as follows:


(a)      Vertical Allocation

(i)      Federal Government                   — 53%

(ii)      State Government                       —  30%

(iii)     Local Government                       —  10%

(iv)     Special Funds                   —  7%


(b)     Horizontal Allocation

(i) Minimum Responsibilities of Government                 –        40%

(ii) Population                                                  –        40%

(iii) Social Development Factor                               –        15%

(iv) Internal Revenue Effort                                   –         5%

–        100%

(c)      Sharing of the Special Fund of 7%

(i) Initial Development of FCT                                   –        2.5%

(ii) Special Problems of Mineral Producing Areas            –        2.0

(iii) Ecological Problems (Social, Erosion,

Desert Encroachment, Flood Control etc.)              –       1.0%

(iv) Revenue Equalization Fund                                  –        1.5%

                             –        7.0%

(d) Sharing of the Social Development Factor of 15%

(i) Direct Primary School Enrolment                              –    11.25%

(ii) Inverse Primary School Enrolment                       –      3.75%

–     15.00%

(e) Each State to contribute 5% of its total revenue for sharing among its Local Government Councils.

(f) Finally, it recommended the establishment of a permanent Fiscal Commission with well-defined functions.