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A careful examination of the economics of other industrialised countries such as the United States, Canada, and Germany appears to point in the direction of federalism being compatible with national progress or development.

Scholars of fiscal federalism appear to agree that decentralisation of spending duties in federal states promotes economic development (See Boadway and Watts, 2004, Kincaid, 2001; Oates, 1999; Ter-Minassian, 1997; Watts, 2003).

(That Nigeria is not one of the world’s wealthiest economies). Scholars claim that the absence of a viable federal system is one of the reasons affecting the economic performance of many of the poor federations (using Nigeria as an example). In other words, the way a federal system is run influences the political and economic success of federal states, and vice versa.

Fiscal imbalances develop in federations because constituent units do not have enough resources to match their expenditure. However, imbalances must be remedied regardless of how they develop in order for the federation to continue to exist,

and this may take the shape of intergovernmental transfers that have the power to enable or limit government in the fulfilment of its tasks.

Nigeria fiscal federalism, like that of other federations, is characterised primarily by the pooling of fiscal resources among the many tiers of government that comprise the federation. However, the country’s social and economic disparities have consistently made revenue allocation the most contentious part of the federal government.

At the moment, no single fiscal theory has been developed to ensure equitable revenue distribution in a federal system; instead, federations adopt principles that appear to favour their individual circumstances, and, most importantly, they ensure that their fiscal systems are designed in such a way that economic development is realised and sustained.

In an ideal and close-knit federation, such revenue sharing formulas as the principle of need and of equalisation predominate, whereas loose federations like Nigeria are always predisposed to the principle of derivation,

which is the method of distributing centrally generated revenue to constituent units in relation to the contribution made by a unit to the country large revenue, in Nigeria derivation means, in addition to the contribution made by a unit to the country large revenue,

In Nigeria, fiscal federalism is aimed at achieving a balanced federation and national economic progress; the question is, how has the country’s fiscal federalism done in this regard?

To what extent can Nigeria’s fiscal federalism be deemed to have succeeded?

Statement of the Problem

Fiscal federalism is the dynamic interplay of several levels of government. It raises concerns about how the nature of financial interactions in any federal system impacts the distribution of wealth in the country.

Nigeria suffers from fundamental imbalances, and real federalism requires component parts to pursue their own development independently.

Revenue sharing in Nigeria has seen a variety of evaluations, as demonstrated by many committees and commissions established in this respect, but no solid formula for addressing the country’s yearnings and aspirations has been developed (Teidi, 2003:39). Such shortcomings have occurred.

Many erroneous acts have resulted, notably among sub-national governments that complain about fiscal imbalance (Okeke, 2004:28). Even when dispersed, the statutory amounts from the Federation Account result in zero allocation for some federating units to operate their business (Yusuf, 2008:1).

Discordant fiscal federalism demonstrates a lack of political maturity and an unwillingness to allow true federalism to grow without being overly politicised.

External imposition of arrangement and political will, among other things, is a risk to Nigerian federalism. Because of the nature of current politics, revenue allocation among various tiers of government in Nigeria is fraught with agitations,

disagreements, and outright denials. Section 149 (7) of the 1979 Constitution provides for budgetary ties between states and local governments,

however Section 162 (5) of the 1999 Constitution views local government as an extension of the state tier, resulting in discordant fiscal federalism. The 1977 Aboyade Technical Committee on Population was illogical since the notion of national interest it advocated defied particular interpretation in Nigeria’s current conditions. Furthermore, the 2005 Political Reform Conference was stalled when delegates from the South-South Region staged a walkout over fiscal issues.

imbalance. Financial relationships between the constituent parts of any federation should result in federal progress and production. However, it appears that fiscal federalism causes discontent among the federating units in Nigeria, reducing the federation’s productive capacity.

as a person.

Theoretical Structure
The theoretical underpinning for the paper is Chin’s (1969) “System Relations Approach to Inter-governmental Relationships (IGR)” as referenced in Olugbemi (1980). The systems approach offers a complete framework for identifying,

dealing with, and integrating IGR’s institutional, behavioural, and management elements. Furthermore, the systems paradigm has the ability to resolve the allocation disputes that plague interjurisdictional relationships.

The idea is viewed of as an organised purposeful whole, comprising of structurally and functionally recognisable but interconnected elements, and delineated by definable boundaries from the suprasystem (environment) in which it is immersed.

According to Ackoff (1972), the advent of the systems construct signified a significant movement from the mechanistic notion of social reality, which sought to explain a phenomenon by its component units, to a holistic view of parts.

in terms of the totality. He sees a system as a whole that cannot be disassembled without losing its basic traits, which include:

A specific goal that the thing strives to attain and without which it cannot exist.

A hierarchy of interdependent units into which the system objectives for national development are separated.

iii. Subsystem role specificity, each system has a defined and specialised role in the realisation of the unitary whole’s total purpose(s), and sub-system roles are mutually reinforcing.

An input transforming technology that refers to the processes and strategies used to change resource inputs retrieved from within and outside the system into outputs that have implications for system persistence and effectiveness via a feed-back mechanism.

A border that excludes a multitude of other systems and determines the transaction threshold within the universe of systems.


This study attempts to project the character of Nigeria’s fiscal federalism in order to use the system as a yardstick to measure the Nigerian federation’s national economic development performance. To do this, the following goals would be pursued.

To investigate the political and economic rationales for revenue sharing in Nigeria.

To gain access to the fundamental imperative of fiscal federalism in Nigeria’s growth.

to investigate how Nigerian inter-governmental ties have been handled.

To assess the level of hope for both human and physical growth in the country through revenue distribution.

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