Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has said state and local governments account for about 85 per cent of Nigeria’s resources, leaving the Federal Government with just 15 per cent despite its extensive responsibilities.
Oyedele spoke on Wednesday at Chatham House in London during a discussion on Nigeria’s economic outlook, ongoing reforms and prospects for inclusive growth.
He argued that the Federal Government was financially constrained relative to its obligations, which include defence, internal security, foreign affairs and the conduct of elections.
According to him, the federal administration also intervenes in basic education and primary healthcare, placing additional demands on its resources.
“The centre is the most deprived of resources yet it has the most responsibilities. Of all Nigerian resources, roughly 85 percent are assigned to subnational. Only 15 percent to the federal government,” the minister said.
Oyedele also highlighted the Federal Government’s limited role in collecting certain taxes, noting that it does not collect personal income tax directly from individuals.
On value-added tax (VAT), he said states receive 90 per cent of the revenue while the Federal Government gets 10 per cent. He added that states also retain revenue from stamp duties, while the centre depends largely on its allocation from the Federation Account.
The minister argued that the commonly cited 52.68 per cent allocation to the Federal Government could be misleading because the percentage applies to a smaller pool of revenue within the Federation Account.
Under Nigeria’s current revenue allocation formula, the Federal Government receives 52.68 per cent, states get 26.72 per cent, while local governments receive 20.60 per cent.
The Senate had, on February 3, initiated moves to amend relevant provisions of the 1999 Constitution to increase the Federal Government’s share of revenue, citing the need to fund its expanding responsibilities.
FG considers transferring more responsibilities to states
Oyedele also disclosed that the Federal Government was considering transferring some responsibilities to state governments, which he said were better positioned to deliver certain services.
He explained that the proposed approach would allow the centre to improve its revenue-generating capacity without imposing additional financial burdens on Nigerians.
Under the arrangement, the Federal Government could provide targeted funding to states for projects in basic education, agriculture and access roads connecting farms to markets.
Oyedele said such transfers could encourage state governments to prioritise projects with direct economic and social benefits.
He added that the proposed framework would enable the Federal Government to influence development priorities at the subnational level through targeted financial support.
The minister’s comments come amid ongoing discussions over Nigeria’s revenue-sharing formula and the balance between the resources available to the three tiers of government and their respective responsibilities.