FISCAL ALLOCATION IN NIGERIA: POLITICS OF DERIVATION PRINCIPLES

ABSTRACT Fiscal allocation in Nigeria has been one of the most intractable and controversial issues. This paper seeks to explore this interesting subject as it analysis the derivation principle with respect to the actual expectations from it, and then present the advantages and challenges. While adopting the Political Economy approach, the study sought to analyse the realities and challenges facing Nigeria; living in an inter-dependent world and how Nigeria ensures and maintains an inter-dependent economy in her relationship with the various competing tiers of government within the polity. The study discovered that the structure of Nigeria’s federalism, the major source of Nigeria’s revenue i.e., oil affects and determines the way and manner in which the fiscal allocations and reallocations are made...this invariably affects the pace of growth and development in the Country. The study recommended that there is need for a review of the present fiscal allocation formula and each tiers of the federating unit should have equal representative in the review committee. Secondly, Investment should be made in agriculture which is one of the key sectors that sustained the economy of Nigeria before the discovery of oil in a commercial quantity.