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Oil and the politics of revenue allocation in Nigeria

This paper delves into one of the most controversial debates in the political economy of Nigeria: the way revenue is shared amongst the component tiers of government in the country. It shows how the discovery of oil and the enormous revenues derived from it led to the de-emphasis of derivation as the basis for revenue allocation. This paper calls for a rethink of the current policy and reversion to a derivation based revenue allocation system. Apart from helping douse the current tensions and feelings of injustice, which is currently widespread in the oil producing states, it will also help engender non oil producing states to develop other human and natural resources which they have long abandoned in the struggle for their share of the oil money. There is thus the need to give more powers for revenue creation and control back to the states. Such states will therefore be in a position to take into consideration their peculiar circumstances before determining their tax and revenue laws.