AN ANALYSIS OF REVENUE ALLOCATION MECHANISMS AND THEIR EFFECT ON NIGERIA’S ECONOMY

Abstract

Public revenue is a critical element in financing government operations and achieving sustainable economic development. In Nigeria, public revenue is broadly categorized into federation revenue and independent revenue. Federation revenue, which comprises oil and non-oil sources, is centrally collected and paid into the Federation Account—an account constitutionally mandated by Section 162 of the 1999 Constitution of the Federal Republic of Nigeria. This account serves as a distributable pool from which allocations are made to all tiers of government: federal, state, and local. The independent revenue, on the other hand, is generated directly by each level of government within its jurisdiction. This paper examines the structure and significance of revenue allocation through the Federation Account and explores its impact on economic growth in Nigeria. It analyzes the constitutional foundation, sources, and mechanisms of distribution, highlighting the pivotal role the Federation Account plays in national development. Understanding the balance between revenue collection and equitable distribution is essential for evaluating fiscal federalism and assessing how revenue impacts macroeconomic performance. The study contributes to ongoing discourse on resource control, fiscal accountability, and efficient utilization of public funds for developmental purposes in Nigeria.