Revenue allocation formula in Nigeria - SS3 Government Lesson Note

The revenue allocation formula in Nigeria is the way in which the government shares the money it earns from taxes, natural resources, and other sources of income among its federal, state, and local governments.

The formula is based on a principle called "derivation," which means that the more resources a state or region contributes to the country's economy, the more money it should receive in return.

Currently, the formula allocates 52.68% of revenue to the federal government, 26.72% to the states, and 20.60% to the local governments. Within the state portion, each state is allocated a share based on a combination of factors such as population, land area, and internally generated revenue.

The revenue allocated to the federal government is further divided into several components, including a 13% derivation fund for oil-producing states and a federal intervention fund to support less-developed areas.

While the revenue allocation formula has undergone several revisions over the years, it remains a contentious issue in Nigeria, with some arguing that it should be revised to better reflect the principle of derivation and promote equitable distribution of resources.