Project Abstract

The importance of revenue allocation from the federal government is necessary to help the state government meet their financial obligations. The research survey on statistical; analysis of revenue allocation to states in Nigeria from (1999-2005) with Imo state as a case study was carried out in order to determine the rate of revenue allocation and expenditure in Imo state. Data was collected at central bank of Nigeria Owerri Imo state. Method of analysis used is simple correlation analysis to ascertain whether there is a significant increase in the trend of revenue allocation to the state and its local government areas, as well as to investigate whether there is a linear relationship between the revenue allocated to the state and its 27 local government area.

From the observation made

• There is a weak relationship between revenue allocated to the state and its local government area in Imo state.
• The state ministry of finance should convince the federal government to ensure that revenue allocated to the state and its local government is equal.

The researcher made the following recommendations

• The principle of federal presence should not also be used in allocating revenue to states because the state without federal presence will eventually suffer when the allocation is made leaving them behind.
• The principle of equity should be applied in allocating revenue to the states and its local government areas.

Project Overview

1.0 INTRODUCTION

      In a federation, responsibilities are shared between the component parts of the federation, so also are tax strength which are the source of revenue to carryout these responsibilities, but unfortunately there is always a divergence between the criteria for sharing these constitutional responsibilities and which is used to share the tax powers.

 The essence of revenue allocation therefore is to attempt to correct this unbalance between the expenditure obligation and the revenue services. In view of these, revenue allocation therefore refers to the criteria, process and method o f sharing federation’s financial resources among the various tier of government in the federation in such a peaceful way that guarantees development, progress and enhances unity.

 The case of Nigeria involves sharing the federal revenue and other resources, firstly among the three tiers of government in a vertical allocation which deals with the sharing of the revenue among the three level of government, where it determines what share goes to the federal government, state government and local government and then among the units of a particular tier in a horizontal allocation, where it involves how to share the allocation to each level of government to its members. For instance how to share the allocation for state to the states in the federation.

      The critical issues involved in revenue sharing in Nigeria include, to determine how much independent source of revenue should be given to a tier of government to enable it execute its responsibility and to determine how the federation accounts should be shared, the distribution of federation finance is not restricted to direct allocation to government, there is also special funds for specific projects or programs. The majors issues involved in horizontal allocation include the criteria for sharing.

 The principles and criteria for these allocation are determined by the National Assembly for vertical allocation between various layers of government and horizontal allocation among the state government on their own behalf and on behalf of the local government and the state house of assembly (for horizontal distribution among local government within the state) or any other similar bodies vested with such responsibility, such principle when established become the basis for revenue allocation. Though these could vary from one nation to another