Fiscal federalism and equity in the state joint local governments’ account: Oyo state in focus

Abstract

The introduction of state joint local governments’ account implies that the revenues allocated to the Local Government Areas (LGAs) of a state from the Federation Account should be pooled together and shared among the LGAs. But some deductions are usually made before the balances of the pooled revenues are distributed to the 33 LGAs in Oyo State using the principles and formula approved by the state’s House of Assembly. This resulted in allocating revenues to some LGAs more than they were allocated from the Federation Account at the expense of others. This paper examined the issue of equity in the operation of joint account in Nigeria with particular reference to Oyo State. Data for this study were collected through secondary sources and descriptive and inferential statistical methods of analysis tools such as ratios, percentages, bar charts and t-test were used. Results showed that there are discrepancies between the
proportions of direct and indirect allocations made to the LGAs during the periods 2003-2007. The comparison of per capita allocations to the LGAs with equal proportions of direct and indirect allocations further showed that the principle of equity was played down upon. The t-test also showed that there is significant difference between the means of per capita direct
allocations (PCDA) and per capita indirect allocations (PCIA). It was therefore concluded that the 33 LGAs in Oyo State were not fairly treated because majority (54%) of them were made worse off by the joint account. The paper recommended that the principles and formula used in
operating the joint account in Oyo State should be reviewed such that the treatment that can be received by individuals living in the 33 LGAs will almost be the same.