Fiscal Federalism In Nigeria: Theory And Dimensions

Project and Seminar Material for Political Science

Fiscal Federalism In Nigeria: Theory And Dimensions


The dynamism and complexity of Nigeria’s federalism has attracted academic scrutiny. This is because it has generated so many problems capable of threatening the corporate existence and continuity of the Nigerian state. This research, therefore, inquired into the causes of dissatisfaction and violent agitation arising from fiscal federalism and the adopted allocation formula. In achieving this, the research adopted both descriptive and analytical methods by relying on secondary sources for data gathering. It also adopted primary sources by interviewing the key figures involved in the process of allocation of resources. However, the research, however, concluded that the centralism and the age-long hegemony of federal government as well as the protracted period of interregnum rule of the military are some of the factors that contribute to the constant conflicts associated with fiscal federalism in Nigeria. The study therefore recommended that he is need for an efficient formula between the centre and other tiers of government is recommended. This formula should also satisfy the broad objectives of inter-regional equity and balanced national development. To this end the present vertical revenue allocation formula should be reviewed by the federal government to increase the percentage to lower governments in Nigeria to strengthen their fiscal capacity and enable them play strong role in nation building.

Chapter One


1.1 Background of the Study

Fiscal decentralization has become fashionable regardless of levels of development and civilization of societies. Nations are turning to devolution to improve the performance oftheir public sectors. In the United States, the central government has turned back significant portions of federal authority to the states for a wide range of major programmes, including welfare, Medicaid, legal services, housing, and job training. The hope is that state and local governments, being closer to the people, will be more responsive to the particular preferences of their constituencies and will be able to find new and better ways to provide these services (Sharma, 2005:169).

Fiscal federalism can be explained as an arrangement that involves intergovernmental fiscal relations mostly in contemporary federations. Nevertheless, it is not a peculiarity of federal states alone; its elements are also noticed in most of the unitary states too. The concept of fiscal federalism is not to be associated with fiscal decentralization in officially declared federations only; it is applicable even to non-federal states (having no formal federal constitutional arrangement) in the sense that they encompass different levels of government which have de facto decision making authority (Adamolekun, 1983).

This, however, does not mean that all forms of governments are ‘fiscally’ federal; it only means that ‘fiscal federalism’ is a set of principles that can be applied to all countries attempting ‘fiscal decentralization’. In fact, fiscal federalism is a general normative framework for assignment of functions to the different levels of government and appropriate fiscal instruments for carrying out these functions (Oates, 1999: 1120)

Nigeria is a plural country that can be aptly classified as a federal state. The establishment of the Nigerian federal structure dated back to the 1946 adoption of Richard’s constitution which granted internal autonomy to the then existing regions of Nigeria. Also, the adoption of the Littleton constitution of 1954 laid further credence to the federal structure of Nigeria (Nwosu, 1980).

Even in non-federal states, there has been a growing movement towards greater fiscal decentralization in recent years. Some analysts have attributed this to globalization and deepening democratization the world over on the one hand and increasing incomes on theother (Tanzi, 1996). Other specific reasons for the increasing demand for decentralization are:

Central governments increasingly are finding that it is impossible for them to meet all of the competing needs of their various constituencies, and are attempting to build local capacities by delegating responsibilities downward to their regional governments.Central governments are looking to local and regional governments to assist them with national economic development strategies.

Regional and local political leaders are demanding more autonomy and want the taxation powers that go along with their expenditure responsibility (Ozo-Eson, 2005:1)

Over the years, the issue of fiscal federalism has remained dominant and most contentious in Nigeria’s polity. This is because of its multi-dimensional perspectives. Over the years the fiscal federalism in Nigeria has crystallised and remained dynamic as a result of its multiplicity in terms of ethnic composition and pluralism vis-à-vis socio-cultural dimensions. It is naturally expected, therefore, that interactions in terms of fiscal relations will be characterised by hostile competition, unending struggle and survival of the fittest syndrome. The centralised nature of the military hierarchical structure and the exploitative tendencies of the colonial government placed the federal government at an advantage in post colonial Nigeria.

Invariably, the financial hegemony enjoyed by the Federal Government over the thirty six (36) states and seven hundred and seventy four (774) local governments has created disaffection in the Nigerian federation. It reinforces the structural vulnerability of the component units while simultaneously intensifying the pressures for better federal economic patronage.

1.2 Statement of the Problem

The federal system of government was set up for the purpose of national unity in the plural society like Nigeria and to preserve the distinct social identities valued by its constituent parts. Moreover, the implementation of the federal system in the Nigerian context and Nigeria‟s political system has continued to work with minimum unity and diversity. Competition basically prompted by cultural common distrust progressively deteriorates the stuff of Nigerian Authority. Nigeria accepted federalism as a means of accomplishing its much-needed goal of national unity among people of different religion, ethnicity, and culture. In essence, the federalism so adopted is expected to lessen the massively destructive inter-ethnic competition and tension, alleviate the usually assumed fear of majority and minority domination, and bringing government closer to the people and give these diverse groups more opportunities, thereby integrating the country but the opposite is the order as the unification has resulted in unequal power sharing and resources allocation among the general populous across the nation. Especially between the majority and minority ethnic groups. The problem of inequality in power and resources allocation among the citizens has created a wide gap as the ethnic majority has dominated the few minorities in all sphere of life in the country especially in the power and resources allocation. The domination of some state regions as well as the minority ethnic groups has created a wide vacuum which leads to ethno religious conflict across the nation hence maki9ng it pertinent for us to critically assess the Nigerian federalism.

1.3 Objective of the Study

The main objective of the study is to critically examine Fiscal Federalism: Theory and Dimension. Specifically the study seeks :

  1. To examine why Nigeria, adopt a federal system of government
  2. To examine the nature of dissatisfaction and violent agitation arising from fiscal federalism.
  3. To explore the prospect of Nigerian federalism

1.4 Research Question

The research would be guided by the following research questions:

  1. What are the reasons that prompted Nigeria, adopt a federal system of government
  2. What is the nature of dissatisfaction and violent agitation arising from fiscal federalism and the adopted allocation formula.
  3. What are the prospect to enhance Nigerian federalism

1.5 Significance of the Study

Findings from the study will be relevant to the government, law makers and all the public stakeholders. The research will enlighten them on the need to reevaluate the current practices of Nigeria Federalism in other to favour all ethnic groups as well fulfil the goal of unification. More so findings will add to the body of empirical knowledge and serve as reference material to scholars and student who wishes to conduct further studies in related field.

1.6 Scope of the Study

The scope of this study borders on a critical assessment of Fiscal Federalism: Theory and Dimension The study is therefore limited to the period covering first to fourth republic.

1.7 Research Methodology

This research adopted a descriptive and analytical approach. Data were generated through secondary sources of data collection. In preparing this article several books, journal articles, newspapers, and magazines were systematically reviewed and discussed the case under investigation. More so the design adopted is case study approach considering the nature of the topic because this approach helps the scholar to understand the depth case or cases under investigation. Provides an in-depth understanding of a case or cases under examination. It also assists in Developing an in-depth explanation and examination of a case.

1.8 Limitation of the Study

An attempt was made to conduct a comprehensive research work on this project so as to make it a board base text to all manner of people. However, the inadequate finances and limited time period allowed for the completion of this project was not considered enough and could not allow for a thorough and in-depth work to be done.

1.9 Definition of Terms


Federalism is a mixed or compound mode of government that combines a general government (the central or “federal” government) with regional governments (provincial, state, cantonal, territorial or other sub-unit governments) in a single political system.

Fiscal Federalism:

Fiscal federalism deals with the division of governmental functions and financial relations among levels of government.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary

The focus of the study is directed at a critical study on Fiscal Federalism: Theory and Dimension. The study examined why Nigeria adopted a federal system of government. it examined the nature of dissatisfaction and violent agitation arising from fiscal federalism. it explore the prospect of Nigerian federalism. In achieving this, the research adopted both descriptive and analytical methods by relying on secondary sources for data gathering. Data were obtained from secondary sources through books, journals, newspapers, magazines, reports. These data were thoroughly reviewed to explain the topic under examination.

5.2 Conclusion

The spirit of true federalism is to unite all the states and the regions in the country. And to give each state or region nationally significant independence to manage its affairs at the states and regions. Nigerian federalism centered essentially on the need to understand the basis of true federalism of power sharing and resource control. This arrangement is in line with the principles of federalism. Though the system is attributed by conflict in power-sharing and resources allocation. This has created a series of debate among the individuals in the nation. This debate is old, obsessive and questionable.The study analyzed the evolution of fiscal federalism, evolved a theoretical basis for fiscal federalism and discussed extensively on the nature and challenges of fiscal relations in Nigeria. The research concluded that fiscal responsibility and taxing powers still remain considerably centralized.The Federal Government always receives larger amount in the sharing formula and with less impact on the people. Any reliable revenue allocation and utilization system must practically reflect the Federal nature of the country.

The lopsided nature of fiscal arrangement in favour of the federal government is detrimental to fiscal operations of state and local governments and this has impacted negatively on socio-economic development of Nigeria. Greater emphasis should be laid at the grassroots where the bulk of the people live and where development appears to be virtually non-existent. A number of factors have inhibited the practice of fiscal federalism in Nigeria. These include the dominance of the federal government in revenue sharing from the Federation Account, the centralist system of fiscal relations, critical issue of over dependence on oil revenue, conflict over sharing principle, and disharmonious federal-state relations

5.3 Recommendation

The intractable problems arising from the widely unacceptable and constant conflicting fiscal federalism in Nigeria need urgent measures” . Accordingly, the following suggestions are proffered:

  1. There is need to reverse the age long fiscal dominance by the federal government in order to re-establisha true federal system is strongly recommended. The solution is to redress the prevailing mismatch by raising the level of taxing assignment of subnational governments.
  2. The is need for an efficient formula between the centre and other tiers of government is recommended.This formula should also satisfy the broad objectives of inter-regional equity and balanced national development. To this end the present vertical revenue allocation formula should be reviewed by the federal government to increase the percentage to lower governments in Nigeria to strengthen their fiscal capacity and enable them play strong role in nation building.
  3. It is also imperative to embark on radical diversification of the Nigerian economy to other viable and productive sectors of the economy, such as agriculture, mining, industry and human development
  4. The federal government should see to the Urgent reform in fiscal federalism in Nigeria in order to address the constitutional issue of fiscal powers among the three tiers of government to redress the prevailing fiscal mismatch at subnational levels of government as this is strongly recommended.
  5. The need to diversify and strengthen the fiscal base of subnational governments is recommended. To this end, local tax administration should be improved, unproductive local taxes eliminated, and untapped tax potentials identified.
  6. The need to promote fiscal discipline at all levels of government to sustain macroeconomic stability is strongly recommended. The policy should compulsorily place effective limits on governments’ deficits at all levels, consistent with the objective of macroeconomic stability to ensure sustainable national development.

Project Material Download

5,000 5000

The Complete Material Will Be Sent to You in Just 2 Steps

Quick & Simple…

Step One Purchase

Make Payment (Through Transfer) of ₦5,000 to Any of the Account Below

Access Bank PlcAcc No: 0811003731
Samphina Academy
Current Account
Zenith BankAcc No: 1225513212
Samphina Academy
Current Account
PalmPay Main LogoAcc No: 8143831497
Samphina Academy
Digital Account

Or CLICK HERE To Pay With Debit Card

CLICK HERE To Purchase Material ($15)
Make Payment of 120 GHS to 0553978005 | Douglas Cloud Osabutey | MTN MoMo

Step Two Purchase

Send the Following Details on WhatsApp ( 08143831497) After Payment

  1. Payment Details

  2. TOPIC: Fiscal Federalism In Nigeria: Theory And Dimensions

The Complete Material Will Be Sent To You On WhatsApp After Receiving Your Details
T & C Apply

  Contact Our Help Desk

Need a Different Topic? Perform a Quick Search

List of Related Works

Click on Any Topic to Preview the Content

Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.