Business
Senate Urges Periodic Review Of Revenue Allocation Formula
The Senate last Thursday advocated a periodic review of the current revenue allocation formula at present in operation to favour states and local governments.
The Senate noted that the exercise was in accordance with sections 313 and 315 of the constitution.
The upper chamber made the call following the adoption of the report of the Sen. Barnabas Gemade (PDP-Benue) led joint Committee on National Planning, Economic Affairs and Poverty Alleviation; Appropriation; Finance and States and Local Governments.
The Senate had at its plenary on Oct. 27, 2011 mandated the committee to investigate the looming danger of bankruptcy in some states and the need for a fiscal evaluation.
The committee was charged to study the situation and suggest remedial measures to avoid a total collapse of the economies of the affected states.
Presenting the report, Gemade said the committee saw the need for the revenue formula to be reviewed in favour of states and local governments with the increased responsibilities from further devolution of powers.
The committee also advocated that the application of the 13 per cent derivation principle be properly implemented considering the Supreme Court judgment of April 5, 2002.
Some of the recommendation also included that the cost of governance should be reduced by cutting down on recurrent expenditure particularly the reduction of the number of political aides.
It also noted the need for the harmonisation of the functions of Ministries, Departments and Agencies (MDAs) and the elimination of ghost workers at the three tiers of government.
Government was also advised to imbibe a budget discipline in producing balanced budgets and ensure strict budget implementation.
The National Assembly was advised to come out with a clear direction on state creation to guide against the creation of unviable entities in future.
Some of the findings of the committee included that there were indications of looming danger of bankruptcy in states because most of the states depended fully on statutory allocations from the federation account.
The committee had also found out that the over dependency on oil revenue at the expense of internally generated revenue by states was responsible for their continued call on the Federal Government to share the proceeds of the excess crude.
It also discovered that records available from the Debt Management Office (DMO) showed that as at December 2011, the total external debt stock of all the states stood at $2.165 billion.
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