Fiscal Federalism and Political Stability in Nigeria, 1999-2007

Abstract

The study evaluates fiscal federalism under Obasanjo and ascertains how its operations have affected the political stability of the country. This is done to suggest modalities for fiscal independence for tire federating units. Therefore, in setting out for this, content analysis was used because of the nature of the study. More so, the researcher observed the imbalances in the revenue (sharing/tax allocation functions) jurisdiction between the centre and the constituent units (states), the emergence of the military in government and its command nature; the tendency towards a unitary system of government shaped present-day operations of fiscal federalism. It is on this premise that the paper posited that the current fiscal arrangement, which is characterised by the weak fiscal capacity of both the state and local governments, be changed, and the derivation principle is pursued vigorously for stability to flourish. The paper further recommends adjustment in revenue sharing formula, fiscal commission to work out a formal mechanism for fiscal equalization, the existence of mutual compromise to enable fairness, justice and relative equity and in all the diversification of Nigeria economy which will maintain a shift away from reliance on crude oil exports.