Question (1): What do you understand by fiscal federalism? Expound fiscal
federalism in Nigeria from 1946 to date
Fiscal Federalism is simply refers to financial relations between units of
governments in a federal government system. It has a special place in field of
public finance. The concept was first introduced by a German-America born
economist by name Richard Masgrave in 1959. The theory of fiscal federalism
assumes that a federal government system can be efficient and effective at solving
problem government’s face today such as just distribution of income, efficient
and effective allocation of resources and economic stability.
The concept of fiscal federalism deals with the division of governmental
functions and financial relation among levels of government. It is defined as the
distribution of financial resources and responsibilities between different levels of
government, such as the federal government and government.
Fiscal federalism refers to the processes used by federal, state and local
governments to share administration and financial responsibilities for some
activities and programs such as education.
Fiscal federalism operates through the various federal taxes. Grants, and transfers
that occur in addition to states and localities.
Fiscal federalism in Nigeria
Prior to 1946, Nigeria was under the administration of British administrative
colony headed by Sir Bourdillon, it was under Sir Bourdillon administration that
regional government was introduced by the regards constitution. This new
constitution ushered Regionalism which break the former province of North and
South to Northern, Western and Eastern regions.
First phase of Revenue Allocation of 1946
The revenue allocation was set up by Phillipson commission of 1946 to Sir Louis
Chicks commission of 1954 which was limited to allocating equitably to the
regional government which was determined by the constitution spearheaded by
Phillipson commission recommended the use of derivation and even development
as a criteria for revenue distribution. The Hick Phillipson commission (1950)
recommended need, derivation, independent revenue or fiscal autonomy and
national interest as a criteria for revenue sharing. The above analysis is what gave
birth to fiscal federalism in Nigeria administrative history.
Second phase of revenue allocation 1967-1979
The creation of 12 states in May, 1967 by Gen. Gowon and constitutional decree
No. 15 of 1967 promulgated to share the revenue in the distributable pool Account
(DPA) among the new states.
The Dina commission (1969) recommended National Standards, balanced
development in the allocation of the states joint account and basic need. The
commission distributed the revenue sharing familiar between federal (57%) state
(30% and local government 1% and 3% to special fund.
Third phase of revenue allocation was 1979-1999
The year 1999, constitution inhibited the revenue and financial influence of
federal government by removing exclusive right of company income tax and
petroleum profit tax. Furthermore, the local government was recognized as a
separate tier of government and accorded it important financial status in revenue
sharing.
Conclusion
Fiscal Federalism is akin to Federal system of government where resource
allocative and demonstrative power and decisions making units are decentralized.
It also suggests that it is suitable for multi-cultural society with many tiers of
government.