One of the most important issues facing the Nigerian nation today is how to ensure an equitable revenue allocation so as to reduce the tension it has generated over the years in the country, nay the oil producing communities. It is obvious that many factors accounts for these controversies over revenue allocation. This has propelled the researcher to as certain the present revenue allocation, the issues that causes the controversies, the issues that causes the controversies, the conditions for the adoption of the present revenue formula and to explain how revenue allocation controversies created political tension. The researcher formulated the following research question. What is the revenue allocation formula in Nigeria?, what are the controversies associated with revenue allocation in Nigeria? And what is the relationship between revenue allocation controversies and political tension in Nigeria? Quantitative method and historical design was used by the researcher to present the past and present issues as it relate to revenue allocation formula and the tension it has generated over the years especially since 1999 when Nigeria embraced civilian rule. The researcher then formulated these hypotheses. Disparities in revenue allocation caused controversies in Nigerian federalism; The political tension in Nigeria created controversies in revenue allocation. The researcher hence advised that there is need for something urgent to be done over revenue allocation formula because as it stands today, the issue has resulted in the violation of fundamental human rights, which is a threat to our nascent democracy. Besides, the Niger Delta today constitute serious security risk not only to Nigeria but the entire International community. The researcher then concluded the work with these recommendations: That the root cause of Niger Delta problem be dealt with by giving them (state) autonomy, and mineralogy be transferred to concurrent list while a minimum of 50 percent of revenue derived from the natural resources go to oil producing areas; youth empowerment scheme are to be encourage for employment, education and capacity building; the government and the oil companies devise regulatory mechanism to ensure that allocation to the oil bearing communities actually get to the people; And finally that government should intensify its ongoing efforts to diversify the national economy as that with reduce the country’s reliance on oil, making it less sensitive to national income and development.




Revenue allocation can be described as a method (s) of sharing the centrally generated revenue among the different tiers of government and how the amount allocate to a particular tier is shared among its components. Revenue sharing in a federal state is that each level of government receives an allocation of financial resources tailored to their specific requirements as defined by the mandate of legislature competence.

In Nigeria, decisions as to what proportion of centrally – generated revenue that would be retained by the federal government, the proportion that will be shared among the state government and the proportion that will go to the local government has always been a problem, due to the fact that there is no consensus of opinion as to what could be seen as an ideal formula.

The state have often accused the federal government of holding too large a share of entire federal revenue to their detriment, particularly at the local government levels where meaningful development has virtually been made impossible due to their deprivation of funds and corruption. The problem becomes even more acute due to the political dimension the issue has assumed with tempers flaring along geo-political lines over perceived injustices in the way the country’s revenue is being shared.

Meanwhile, it will be recalled that since 1946 Richardson constitution, there have been several attempts to provide equitable revenue allocation formula consistent   with the sharing of responsibilities between the federal and the regional government. In fact, from the time of colonial era to our present day government, revenue allocation has been the occupation of succeeding government in Nigeria.

This has led to the establishment of various revenue allocation commissions. All these commissions gave their recommendations, but the issue still left much to be desired. Lets take a look at these commissions briefly. Before independence, four (4) ad-hoc revenue allocation commissions where established namely; Philopson – commission (1946) Hicks/Philipson commission (1951), Chicks commission 1953) and Raisman commission (1958). We had also,

too post independence ad-hoc revenue commission namely; Binns commission (1964) and Dina commission 1969). There was four (4) military decrees. Namely, Decree 13 of (1970), Decree 9 of (1971) and (1975). Furthermore, we had the Aboyade committee 1977) and Okigbo commission (1979), we had allocation of revenue Act (1981) and Revenue Mobilization, Allocation and Fiscal commission (RMAFS) through Decree 49 of (1989) a commission which

continues with us today even in 1999 constitution. The various commissions shall be discussed in detail in subsequent chapters. The various commissions, laws and Decrees of revenue allocations had arisen because of the continuous disagreement of sections of the country, with the way national resources where divided. The various criteria that where used at any time, would seem favourable to some and unfavourable to others.

For example, derivation was highly favoured by agriculturally buoyant areas producing cash crops at a time when that was the major resource of the nation. When oil was discovered, the agricultural areas preferred population, need, national interest and landmass, for the bases of revenue allocation while oil-producing areas would prefer derivation as the bases for revenue allocation.

From the above, one could see that the issue of revenue allocation is not novel in the history of Nigeria, but has continued to attract a lot of political tensions and controversies among the Nigerian states especially the Niger Deltan. Of course, there is no doubt that this problem culminated in the death of Ken Saro-winea and eight other Ogoni people.

And even the recent imprisonment of Asari Dokubor,  worst still, the incessant abduction of foreigners working in that Niger Delta areas. What will you say about the recently concluded National conference? Where the issue of revenue allocation was top on the agenda of the conference. Yet it has defiled solution. In this research work, the researcher is poised to take a critical look at the controversies in revenue allocation and the tension it has resulted to and possibly suggest options for harmony.



Despite the various commissions and their recommendations, revenue allocation has continued to constitute a lingering problem in Nigeria. Due to dissatisfaction by the states of the federation on the issue of revenue allocation, tensions have been on the rising side. Different tribes and ethnic groups now have militias who engage themselves in the act of terrorism, which includes the kidnapping of foreign oil company workers and physical

confrontation with the men of the Nigerian Army (military) which has led to the death of some military personnel. The derivation principle (especially on the on-shore/off-shore) has brought bitter confrontation between the states and the federal government over who gets what. The states government has on numerous occasions dragged the federal government to court and series of threats have been issued by some states just because of the revenue allocation. With this, the following research questions have been formulated to guide the researcher.

  • What is the revenue allocation formula in Nigeria?
  • What are the controversies associated with revenue allocation Nigeria?
  • What is the relationship between revenue allocation controversies and political tension in Nigeria?

1.3                   OBJECTIVES OF THE STUDY

  • To identify the revenue allocation formula in Nigeria
  • To explain the conditions for the adoption of the present revenue formula in Nigeria.
  • To identify the issues that causes controversies in revenue allocation in Nigeria.
  • To determine the contested controversies in revenue allocation. And
  • To explain how revenue allocation controversies create political tension in Nigeria.

The importance of this work cannot be overemphasized, especially at this stage of the nation’s political and economic development. The need to bring to limelight the damages the issue of revenue allocation formula has done to our national live is of great importance. Because without correcting the mistakes of the pest, the future may not be bright.

Hence the need to know the past revenue allocation formulas, the conditions for its adoption, identify the issue that causes controversies and finally explain how these controversies has given room to political tensions in the country, which has resulted in different tribes and ethnic groups raising militias who engages themselves in the act of terrorism like kidnapping of foreign oil company workers and physical confrontation with the man of the Nigerian

Army (military) which has led to the death of military personnel. A situation, which has painted us black before the outside world. What about the death of Ken Saro Wiwa and eight other Ogoni people? These things need to be addressed and possibly suggest options for harmony. Finally the research would serve as an aid to students of social sciences.


          A hypothesis can be defined as a guess of an answer to a particular problem under investigation. The hypothesis to which this work is being carried out include:

  • The disparities of revenue allocation formula have caused controversies in Nigerian federalism.
  • The political tensions in Nigeria created controversies in revenue allocation.

1.6     Research methodology

In this research work, the researcher intends to use extensively, secondary method of data collection which documentary design serve as its main source of data collection. Hence, the use of relevant Textbooks of mostly Nigerian authors, journals, magazines as well as relevant Newspapers and handouts.

The researcher will also make use of historical method as a basis of investigating and drawing conclusion.


The researcher will take a crucial consideration at the different formulas right from its inception. However the major part of the work will be on the tension the issue of revenue allocation has generated in Nigeria, nay Niger Delta since 1999 to date, including the last National political reform conference deliberation over the issue. The reason why the scope will cover from 1999 to date  is because the issue of revenue allocation is very vast going by

its origin, and heterogeneous nature of Nigeria. Hence it is limited to the tension it has generated in the oil producing areas. The major constraint to this work is finance and time, which has reduced the number of materials needed for the research work.


In this work, the researcher adopted market Economic theory as its theoretical framework. This is because it has a potential for resolving the controversies of revenue allocation, which tend to bedevil the relationship between the regions and the center government. One of the proponents of this theory is John Rawls. A Professor of economics. He argued that in a market economy, the market should be free from governmental interference.

According to Mike Mofatt, (1998) market economy is an economy in which the allocation of resources is only determined by their supply and demand. Market economy, by its nature, should be decentralized, flexible, practicable and changeable. In his words, Michael Watt (2001) defined market economy as a system of allocating resources only on the interaction of market forces, such as supply and demand. He further explained that, a market economy is

free from governmental influence. This is when the government allows the individuals or groups to produce and distribute their economic resources without interference by the central government. The government is expected to adopt a strict laissez-fair attitude towards the distribution of goods and services and allows the individuals the freedom to produce and distribute their products and services. This would give room for competition.

This theory is suitable for this research because it shows that in a federal system of government like ours, the central government does not have the right or any reason whatsoever to take total control of the revenue accruing from the state government. As a federation each component unit has the power to control their resources while the center government serves as a watchdog, regulating their activities.

This would spur the component units into action by harnessing their God endowed resources because each regions is blessed in one way or the other, but because oil is seem as the only geese that lay the golden eggs, every region focuses on it thereby causing controversies and tension in the country at it where. Furthermore, a one sided economy can never grow, but if the center government would allow each state to manage its resources, there would be competition.

Because each region would want to be ahead of the other thereby enhancing development and to a large extent ease or reduce tension and controversies that revenue allocation has generated. This is what market economy preaches. That the government should stop interfering in economic activities to give room for competition.


At this juncture, it is necessary to know the meaning of some concepts that would be operational throughout this research work.

REVENUE ALLOCATION: This refers to the mechanism for sharing the country’s financial resources among different tiers of government in the federation with the overall objective of enhancing economic growth and development, minimizing inter-governmental tension as well as promoting national unit.

POLITICAL TENSION: This can be seen as the fear or anger between two groups of people, which may be as a result of political activities.  It can also be seen as the mutual suspicion and strife arising among group of people (regions or countries) as a result of political activities. The conflict among these groups in Nigeria society generated by their political relationship and interdependent. This is political tension. In this work, political tension is defined as the disagreement between political entities, which might result to violence.


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