FEDERAL - STATE FISCAL RELATIONS UNDER A DEMOCRATIC SETTINGS: NIGERIA’S EXPERIENCE

Abstract

The principle of Intergovernmental fiscal relations facilitates negotiation; non-hierarchical exchange of information, and cooperation between the levels of government. This article explores the relationship between the federal–state fiscal relations under a democratic setting in Nigeria. The Part II of 1999 Constitution, contains the concurrent legislative list on which both the Federal and State governments can perform both fiscal and revenue/tax responsibilities. Establishing an appropriate legal framework is thus essential to optimize the role of IGR in the Nigerian federal system. Under the current revenue-sharing formula, the federal government takes 52.68 percent, the states 26.72 percent, and the local governments, 20.60 percent with 13 percent of derivation revenue going to the oil-producing states. The paper is a documentary research and it therefore relies on qualitative data obtained from journals, newspapers, textbooks, etc. The data was subsequently analyzed using content analysis. The paper revealed that the contending issues and challenges of fiscal federalism could be in form of a mismatch between revenue sources and the functions of the various tiers of government. The paper concluded that fiscal relations are highly lopsided as they favor the Federal Government against the various state and local governments. The Federal Government always receives a larger amount in the sharing formula and less impact on the people. The lopsided nature of fiscal arrangement has so far generated suspicion, apathy and constant overt and covert conflict between the states by way of sharing responsibilities between the Federal and States. The research recommended that there is need to ensure that the distribution of revenue should encourage each state governments to improve their internally revenue generation by allowing them to collect some taxes, not to constantly and wholly depend on fund coming from the federation account and the issues of intergovernmental fiscal relations should be reviewed and respected so that functions to be performed by each tier of government could be explicitly stated as provided for in the Constitution.