…As Commission Reconciles Over N1.3trn in Federation Revenue
Mohammed Bello Shehu, Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), says the Commission has reconciled more than N1.3 trillion in Federation revenue through its monthly monitoring and verification process, highlighting the scale of revenue leakages and the importance of tighter oversight.
In an interview with John Osadolor, Managing Editor, BusinessDay, and Onyinye Nwachukwu, Abuja Bureau Chief, Shehu discusses the Commission’s efforts to strengthen revenue mobilisation, close gaps in the collection and remittance of public funds, and modernise its operations through digitalisation. He also speaks on the new revenue-sharing formula, which he says has been concluded and could become law before the end of the year, as well as the implications of recent constitutional changes for the allocation of resources among the three tiers of government.Shehu further discusses local government financial autonomy, the 13 percent derivation, oil-producing communities, and how states can reduce their dependence on FAAC allocations.
Question: First, talk us through RMAFC’s core mandates and its role in Nigeria’s fiscal framework.
Answer: The Commission came into its current form during the administration of President Ibrahim Babangida, following Decree 89, enacted around 1989. The late Minister of Finance, Abubakar Alhaji, who passed away about two weeks ago, was instrumental in establishing the Commission. However, the functions now performed by the Commission date back to the colonial period, when the government began mobilising revenue and determining how those revenues should be accumulated, allocated and disbursed.
The Commission was subsequently given constitutional status under Section 153(1) of the 1999 Constitution, which provides for the establishment of federal executive bodies. RMAFC was among the commissions listed, alongside bodies such as the Independent National Electoral Commission (INEC) and the Federal Character Commission. Its functions are further set out in Paragraph 32(a) to (e), Part I of the Third Schedule to the Constitution, as well as the Revenue Mobilisation Allocation and Fiscal Commission Act, Cap. R7, 2004, as amended in 2025.
One of its most important mandates is to monitor revenue accruing to the Federation and ensure that those revenues are properly accounted for and distributed.
By accruals, we mean revenues generated under the operation of various laws. These include revenues from oil, solid minerals, customs duties, the Nigerian National Petroleum Company Limited (NNPC) and other sources that accrue to the Federation.
These revenues are accumulated monthly, after which the Federation Account Allocation Committee (FAAC) determines how they are distributed among the Federal Government, states and local governments in accordance with the revenue-allocation formula prescribed by law.
That is a brief overview of one of the Commission’s key functions—monitoring revenue accruals and their disbursement. The Commission has several other responsibilities, which we will discuss as we go along.
Question: You’ve outlined some of the Commission’s key responsibilities, particularly its role in monitoring revenue accruals and advising government on their management. How effectively has the Commission carried out this mandate? What gaps or loopholes have you identified, and what recommendations have you made to address them?
Answer: Well, this is a role the Commission has performed over the years. Even during COVID, when face-to-face engagement with revenue-generating agencies was impossible, we provided guidance and moved our engagements online through zoom and other platforms. Consistently, every month, the Commission meets with revenue-generating agencies to review what they have collected. We verify the figures, confirm with the CBN that the accruals were received, and reconcile the records in collaboration with the Accountant-General of the Federation and the Minister of Finance.
The main loophole has been technology. Some revenue-generating agencies have significantly upgraded their digital systems, while the Commission has not always been able to keep pace. That is now changing. Both the previous and current administrations have empowered the Commission to modernise its systems. We are upgrading our digital and fiscal infrastructure, as well as building the capacity of our staff, so that we can operate at the same level as the agencies we monitor.
For now, some of our reconciliation processes remain paper-based. We review documents, request additional records and carry out these checks every month. But with the support of Mr President, the Economic Council and the legislature, significant upgrades are already underway. Ultimately, the goal is to close these gaps and ensure that the Commission has the technology, systems and capacity to effectively reconcile revenues from agencies such as NUPRC, Customs, Solid Minerals and NNPC, among others.
Question: Staying with the Commission’s oversight role, what is RMAFC doing to ensure that oil-producing host communities benefit from the revenues generated from their resources and that the relevant institutions are held accountable?
Answer: We are concerned about the welfare of oil-producing communities, like any other institution. The Petroleum Industry Act (PIA) provides for companies to meet certain obligations to their host communities, including the provision for a 3 percent contribution to the Host Communities Development Trust. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is responsible for establishing the framework and ensuring compliance.
However, over the years, we have received petitions from some oil-producing communities alleging that oil companies have influenced the selection of community representatives, creating divisions within the communities. The NUPRC has a framework for addressing such grievances. Our role is not to take over the responsibilities of another agency. But we are concerned because instability in an oil-producing community can disrupt production, and when production falls, the entire Federation loses revenue.
That is why the Commission sometimes intervenes—to help prevent disputes from escalating and ultimately affecting oil production and national revenue. We are not doing this alone. We work closely with the agency responsible for regulating the sector, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and maintain open communication with its leadership. Our concern is to prevent a repeat of what happened during the Yar’Adua administration, when unrest across the Niger Delta severely disrupted oil production and reduced national revenue.
That is why RMAFC gets involved. We want to promote peace in host communities, ensure oil companies meet their obligations, and minimise environmental degradation and pollution. Ultimately, it is about protecting the communities, sustaining oil production and safeguarding revenue for the Federation.
Question: Recently, you directed the NUPRC to shut down the Host Communities Development Trust fund within 48 hours. There were also concerns around Sterling Oil Exploration and Energy Production Company (SEEPCO). What prompted these actions, and what exactly is at issue?
Answer: It was a misrepresentation. There was a meeting involving the NUPRC and other relevant agencies, where we raised our concerns. But RMAFC does not have the power to direct the NUPRC to shut down the Host Communities Development Trust fund. We are engaging with the NUPRC and other stakeholders on the issues raised. They have explained their position and the steps they are taking, and we are giving them the benefit of the doubt. We expect the matter to be resolved amicably.
Question: So, you did not direct the NUPRC to shut down the fund?
Answer: No. We did not direct them to shut it down. We asked them to review its operations, assess compliance and address any gaps we identified. That is all.
Question: With many states still heavily dependent on FAAC allocations, what policy levers can RMAFC use to help states build sustainable internally generated revenue and achieve greater fiscal independence?
Answer: We have consistently advocated for revenue mobilisation and the development of new revenue sources. We have also encouraged states to learn from those that are performing well. The FCT, for instance, receives a one percent allocation from FAAC but generates more than 70 percent of what it spends. Lagos is another example. Our message to other states is simple: study what these states are doing right, send your officials to learn from them, and adapt those practices to your own circumstances. That can significantly improve internally generated revenue. But more fundamentally, we need to modernise how revenue is collected. For years, the process has been largely manual—you pay cash, receive a receipt, and there is always the risk that the receipt is fraudulent and the money never reaches government. That is the system we need to move away from.
Interestingly, digitalisation is already making a difference. States such as Nasarawa, Kaduna and Enugu have significantly increased their internally generated revenue, in some cases by more than 300 percent. We encourage other states to follow their example and learn from what is working elsewhere. But states also need to identify and exploit their comparative advantages—whether in agriculture, manufacturing, palm oil, textiles or other sectors—and build industries around them. That can create revenue not only for the state but also economic opportunities for other parts of the country.
We have consistently promoted this kind of diversification. Three years ago, for instance, the Commission held a conference in Asaba on leveraging Delta State’s gas resources to attract industries. One participant took the idea forward, brought in an investor and eventually established a multimillion-dollar plant. States should also look beyond their individual boundaries. Neighbouring states can pool their resources and pursue shared infrastructure, industries, road networks and rail projects. The states in the South-West, for example, have developed a long-term blueprint for greater regional integration. That is the kind of thinking we need across the country. States should be at the centre of development. They need to learn from one another, build on their comparative advantages and work together where it makes economic sense.
Question: With FAAC allocations rising significantly, is the Commission also advising states on how to deploy these funds more effectively and ensure they translate into sustainable development?
Answer: States have their own experts and understand their priorities. Our advice is simply to manage their resources prudently and ensure that public funds are deployed for their intended purposes. Some states are already doing this well. In Enugu, for example, you can see significant investment in infrastructure and education. Abia and Imo are also making progress. In the North, Yobe has invested in a specialised laboratory conducting DNA research and studying diseases affecting the region. Kaduna is leveraging its agricultural and livestock potential, while also investing in rural roads. Akwa Ibom is another example. I have seen how the state is transforming an area previously affected by severe erosion into a tourism destination. This demonstrates the potential states have to turn their unique assets into economic opportunities. States such as Taraba and Cross River can similarly leverage their tourism potential, while others can develop opportunities in digitalisation, entertainment and other emerging sectors.
Mining is another major opportunity. Nigeria’s mineral resources are enormous, but much of the sector remains informal. We need to organise artisanal miners and create an environment that attracts serious investors. The potential of our solid minerals sector is significant and could become an important source of wealth beyond oil. The Commission is actively engaging states on these opportunities. Our department responsible for revenue mobilisation regularly visits states, while we also work with institutions such as the Bank of Agriculture and the Bank of Industry to bring states, investors and other stakeholders together. The goal is to identify viable projects that can generate revenue, attract investment and, importantly, create jobs.
Question: So your role is advisory?
Answer: Yes. We cannot dictate how elected governors spend their money. Our role is advisory. We can advise states, monitor the utilisation of public funds and review their budgets, which we do every year. Where we identify what we consider a misplaced priority or an opportunity to improve spending, we communicate that directly to the state and make our recommendations. But we do not publicly dictate how a governor should allocate resources. The same principle applies to local governments.
Question: Let’s turn to the revenue-sharing formula. The Commission has been working on its review for some time. Where does the process stand now?
Answer: We have concluded the new revenue allocation formula and are working with the Ministry of Justice to finalise the enabling legislation. We expect that to be completed this week or next. I discussed the matter with Mr President about four weeks ago, and he is awaiting the document. Once we submit it, we expect him to transmit it to the National Assembly for consideration. Our hope is that the new formula will become law before the end of the year. In developing the formula, we took into account the significant changes in the country over the years, including recent constitutional amendments that have altered the responsibilities of the federal and state governments.
For example, states can now establish and operate railways, prisons and police services, and have greater responsibilities in areas such as electricity. These were previously largely within the exclusive purview of the Federal Government. The new formula therefore has to reflect these changing responsibilities and the resources required to deliver them. The Constitution provides that the Commission submits the formula to the President, who may then transmit it to the National Assembly. To facilitate that process, we decided to work with the Ministry of Justice to prepare the enabling legislation before submitting the package to the President. We believe that will make the process more straightforward. Ultimately, however, the decision to transmit the proposal to the National Assembly rests with the President.
Question: Staying with the new revenue allocation formula, beyond the constitutional changes, what other factors did the Commission consider—such as population, landmass and internally generated revenue?
Answer: The Constitution already specifies parameters such as landmass and population, and we have taken those into account. There are other factors we are considering, but I would rather not disclose them at this stage. It is important to distinguish between the vertical and horizontal revenue-sharing formulas. The vertical formula determines how revenue is shared among the Federal Government, states and local governments. The horizontal formula determines how the states—or local governments—share their respective allocations based on specific parameters and indices.
We are also reviewing the data used for the horizontal allocation. Over the past year, we have asked states to submit information on indicators such as school enrolment, hospital capacity and other socio-economic factors through a digital platform. We are now physically verifying those submissions to determine whether the data reflects the reality on the ground. We have completed this exercise in almost all the states, with only Kwara State and the FCT remaining. Once that is completed, we will finalise our review of the horizontal revenue-sharing arrangement.
Question: The Commission recently undertook a coordinate-mapping exercise to resolve longstanding boundary disputes among coastal states. What prompted the exercise, what has it achieved, and how will the outcome affect the 13 percent derivation payments to producing states? Also, how is the Commission using technology to prevent similar disputes in the future?
Answer: The exercise is not being conducted by RMAFC alone. We are working with the National Boundary Commission, the Surveyor-General of the Federation, NUPRC and the Surveyor-Generals of the affected states. We have also acquired specialised equipment from China and are using it to map the relevant areas. The exercise is still ongoing, and we expect to provide an update next year. When new oil fields are discovered and begin production, NUPRC notifies the Commission so we can determine which state is entitled to the 13 percent derivation. This can be particularly difficult in areas where states share close boundaries or where oil fields are offshore.
Our objective is to ensure that derivation payments are based on accurate coordinates and reliable data, rather than competing claims by states. Where a producing well sits between two states, for example, we can determine how the revenue should be shared based on the applicable coordinates and law. These disputes have sometimes resulted in prolonged litigation, including cases that have reached the Supreme Court. We are trying to minimise that through accurate mapping and collaboration among the relevant agencies.
In one ongoing case involving Bayelsa and Rivers over SOKU, the two states have agreed to share the proceeds 50-50 while their legal dispute continues. We welcome such practical solutions. Ultimately, the Commission will not take sides. Our responsibility is to apply the law fairly and ensure that derivation revenue is allocated accurately, equitably and transparently.
Question: Let’s return to the issue of intervention. With local governments now enjoying financial autonomy, does RMAFC have any role beyond advising them on how to manage and invest their increased resources?
Answer: Yes, we do. The Commission has historically monitored how states and local governments utilise their funds. We have 37 Commissioners representing the states and the FCT, and we used to deploy them to monitor local government spending. At one point, however, the Supreme Court ruled that we were exceeding our mandate. Following the recent legal proceedings on local government autonomy, the Supreme Court’s ruling has restored the basis for that oversight. In response, the Commission has established state and local government monitoring committees, which will soon begin their work. Local governments should be centres of development. When they function effectively and deliver basic services, people have less reason to migrate to state capitals in search of opportunities. Strong local governments can also help address some of the social and security challenges facing the country. Our objective is therefore to ensure that local governments have the resources and accountability mechanisms needed to deliver development at the grassroots.
Question: Let’s return to one of RMAFC’s core mandates which is monitoring revenue accruals. Given the scrutiny surrounding agencies such as NNPCL, the Nigeria Revenue Service and Customs, how does the Commission independently verify the revenues reported by these major revenue-generating agencies?
Answer: We hold monthly reconciliation meetings with all the major revenue-generating agencies. They report what they collected, what they remitted to the CBN, and we verify those figures with the Accountant-General of the Federation, the CBN and our own technical teams. We also conduct what we call the FAAC post-mortem, although in practice it is more of a pre-FAAC review. We scrutinise every revenue item, analyse the figures, reconcile discrepancies and seek clarification where necessary.
I presided over the latest review yesterday ahead of this month’s FAAC meeting in Owerri. The CBN is always part of the process. Last year alone, we reconciled more than N1.3 trillion in revenue. Without this reconciliation process, some of those funds could have gone unaccounted for. We also investigate information from whistleblowers. Where there are allegations that an agency has failed to remit revenue, we deploy experts to examine the matter and take appropriate action. Where necessary, we work with agencies such as the Economic and Financial Crimes Commission (EFCC) and the Department of State Services (DSS). I cannot go into the details of those engagements, but the collaboration is ongoing. Our job is to ensure that every naira that should accrue to the Federation is properly accounted for and remitted. We do that consistently, every month.
Question: Are there aspects of the RMAFC Act that need to be amended or strengthened to make the Commission more effective in delivering its mandate?
Answer: Absolutely. We proposed amendments to the RMAFC Act in 2025, but the proposal was not taken forward. We were essentially told to work with the existing provisions for now and return to the issue at a later time.
Question: Looking ahead, what would you like your legacy at RMAFC to be?
Answer: I would like to be remembered as someone who helped transform and modernise the Commission. Having served as Secretary to the Commission before becoming Chairman, I have focused on digitalisation, upgrading the skills and capacity of our staff, improving the Commission’s visibility, strengthening revenue mobilisation and improving staff welfare. When I came in, staff remuneration was significantly below that of the agencies we monitor, including NNPC and Customs. We may not be at the same level today, but the gap has narrowed considerably. Better pay, training and working conditions have improved morale and given our people greater capacity to deliver. I want people to look back and say that during my tenure, the Commission was upgraded to the level its founding fathers envisaged. You can see the physical transformation, the improved infrastructure and, more importantly, the confidence of the staff.
I also want to be remembered as someone who supported the President’s economic reform agenda. The removal of the fuel subsidy, for example, was unpopular but necessary. Continuing with the subsidy regime would have placed an unsustainable burden on the economy, and there were significant leakages in the system. The reforms to the foreign-exchange market were also necessary. Multiple exchange rates created uncertainty for consumers and investors. Greater stability in the exchange rate is critical to economic confidence. Infrastructure is equally important, particularly with Nigeria’s young and growing population. Better roads and railways can unlock businesses, tourism and investment across the country.
Tax reform is another critical part of that transformation. We need a more transparent and digital tax system in which payments go directly to government, lower-income earners are protected and those with greater capacity contribute more. These reforms may be difficult in the short term, but they are necessary. Ultimately, I would like to be remembered as someone who helped strengthen RMAFC, supported economic reforms and contributed to building a more efficient and sustainable Nigerian economy.
