Fiscal Federalism and Service Delivery in Nigeria: The Role of States and Local Governments Prepared for the Nigerian PER Steering Committee

1. The relative roles of the three tiers of government—the federal government, the state governments, and the local government authorities (LGAs)—in public service delivery has emerged as one of the most important topics of open and vigorous debate in the new democratic climate in Nigeria. There have been increasing calls for intergovernmental fiscal relations to be reassessed in light of a widespread belief that although the states and LGAs are assigned primary responsibility for the delivery of basic public services, they are not equipped with adequate revenue resources to fulfill their expenditure obligations because the bulk of government revenues is retained by the federal government. The discussion is overwhelmingly centered around the revenue sharing formula that allocates resources from the Federation Account amongst the three tiers of government—currently 48.5 percent of the resources are transferred to the federal government, 24 percent to the state governments, and 20 percent to the LGAs. The subnational tiers of government are now demanding that their respective shares be substantially increased.