Obasanjo presents New Revenue Formula

Vanguard (Lagos)

January 12, 2005
Posted to the web January 12, 2005

Emmanuel Aziken
Abuja

PRESIDENT Olusegun Obasanjo has presented a new revenue formula bill to the
National Assembly which, among others, aims to stop the use of number of local
governments in determining the amount of funds that would go to the states. Also
yesterday, the president submitted for Senate approval a request to enable him
raise N65 billion from the money market for the purpose of financing the 2004
budget deficit.

The President’s letter forwarding the revenue allocation bill dated January 6,
2005 read: “Please find attached herewith a copy of the Allocation Revenue, etc,
Bill 2004 for consideration and process into an Act for my signature.

“You will observe from section 2 sub-section 5 at page 5 that the horizontal
formula proposed does not include ‘equality of local government.’ This is
deliberate. As you are aware, there has been such unhealthy competition among
states of the federation in the creation of local governments without any regard
for constitutional requirements.

It is believed that the situation is being fueled by the fact that ‘equality of
local government’ which has to do with the number of local governments in a
state is currently being reckoned with in the distribution of local government
allocation. It is, therefore, thought that if ‘equality of local government’ is
removed from the formula, creation of additional local government may become
unattractive to the states. This is why I have removed ‘equality of local
government’ from the formula and the percentage allocated to ‘equality’ now
re-distributed among the other indices of the formula.”

Also yesterday, a letter from the president seeking to raise N65 billion through
treasury bills for the purpose of financing the 2004 budget deficit was read in
the Senate. The letter pegged the decision on the failure to recover the looted
funds held in Switzerland as previously expected.

The letter addressed to the Senate President and dated January 6, 2005 read: “I
write to inform you of our intention to issue 90-day Treasury Bills in the
amount of N65 billion as bridging funding to close the budget deficit for the
2004 fiscal year. The treasury bills would be open to subscription to all except
the Central Bank of Nigeria.

“As you would be aware, we have been expecting the return of the recovered
(looted) funds from Switzerland. Our discussions with the Swiss authorities are
now at an advanced stage and the funds are now expected to be released around
the end of January 2005. This amount was already programmed into the 2004 budget
as a financing item. Our plan is to redeem the bills with the recovered funds
once we receive them.”