# Introduction he history of post colonial Nigerian state is surrounded around state funding, revenue generation and allocation, in other words, fiscal federalism. Fiscal decentralization has become fashionable regardless of levels of development and civilization of societies. Nations are turning to devolution to improve the performance of their public sectors. Thus, ever increasing number of people desiring to get more involved in government, and the inability of the central government to deliver quality services have intensified the clamor for greater decentralization (Aigbokhan, 1999;Oates, 1972;Tanzi, 1995;Chete, 1998). Fiscal federalism is essentially about the allocation of government resources and spending to the various tiers of government. Decentralized systems of governments give rise to a set of fiscal exigencies referred to as fiscal federalism also known as fiscal decentralization (Ewetan, 2012). It refers to the scope and structure of the tiers of governmental responsibilities and functions, and the allocation of resources among the tiers of government to cope with respective functions. The importance of revenue generation, allocation as well as its distribution towards maintaining both the existing and new socio-politicoeconomic structure in any economy be it centrally planned, market or mixed economies cannot be overemphasized. Nigeria after fifty eight years of independence has been battling with the problems of development in spite of huge human material and natural resources at her disposal. Development could be seen as a critical factor and a desirable phenomenon in the substance and growth of any nation (Lawal and Oluwatoyin, 2011). However, development could be learnt from the lesson of the Asian Tigers and some other developing nations, is not a free gift. It is a product of careful design effective resource mobilization and collaborative action with the people and their leadership. Thus, it entails sacrifice and dedication coupled with careful observation and openness to change efforts (Akume, 2012). Following the truism, Nigeria fiscal federalism has affected Nigeria fiscal development negatively. Indeed, there has been an endless search for a suitable and acceptable formula for fiscal federalism, based on the consent of the people that could facilitate development and growth. The stunted development could be explained on the basis of unhealthy fiscal decentralization that either antagonizes the tiers of government or make room for sustainable national development. In short, there are complex dialectical processes to national development, however, the functions of government, and management and distribution of resources amongst them could not be underestimated. Thus, appropriate fiscal decentralization, conditions and processes will be observed. This study sets out to further expose and analyze the link between fiscal federalism and sustainable national development in Nigeria. # II. # Conceptual Clarifications a) Fiscal Federalism Understanding federalism as a larger concept will help facilitate the understanding of the concept of fiscal federalism. This is because federalism is the operational context within which fiscal federalism is situated. Hence, it is an integral aspect of federalism. Federalism refers to a political system where there are at least two levels of government. In such cases, there is juxtaposition of two levels of power of a central government otherwise called the federal government and other states labeled variously as states, regions, republics, cantons or unions (Ajayi, 1997: 150). Federalism is a system in which the power to govern is shared between national state governments, creating what is often called a federation . Furthermore, Sagay (2008:11) conceptualized federalism as "an arrangement whereby powers within a multi-national country are shared between a federal government and component units in such a way that each unit, including the central authority exits as a government separately and independently from others, operating directly on persons and prosperities with its territorial area and with a will of its own apparatus for the conduct of affairs and with an authority in some matters exclusive of others". Fiscal federalism is a general normative framework for the assignment of functions to the different levels of government and appropriate fiscal instruments for carrying out these functions (Arowolo, 2011). It is a set of guiding principles or concept that helps in designing financial relations between the national and sub national levels of government, while fiscal decentralization is the process of applying such principles (Sharma, 2003). Furthermore, to Ozo-Eson (2005), fiscal federalism concerns the division of public sector functions and finances among different tiers of government. In other words, it is the study of how competencies (expenditure) and fiscal instruments (revenue) are allocated among different (vertical) layers of the administration importantly, is the observation of the movement of revenue proceeds or payments from the central government to its lower levels of governments. Fiscal federalism is characterized by fiscal relations between central and lower levels of government. The fiscal relationship between and among the constituent of the federation is explained in terms of three main theories namely, the theory of fiscal relations which concerns the functions expected to be performed by each level of government in the fiscal allocation; the theory of inter jurisdictional cooperation which refers to areas of shared responsibility by the national, state and local governments' and the theory of multijurisdictional community (Tella, 1999). Hence, for the purpose of this study we define fiscal federalism as a set of guiding principles or concepts that, involves the transmission and cooperation's among the tiers of government in form of fiscal relations, inter jurisdictional cooperation and multijurisdictional relations. # b) Development Development can be defined as an encompassing process involving the steady and systematic change in the cultural, economic and political spheres of society in a way that increases production, empower the people and their communities, protects the environment, strengthens institutions, grows quality of life and promotes good governance. This implies that is possible to speak of social, cultural, spiritual, institutions economic and political development. Gran (1983), defines development as a social and practical process which aims at the liberation of human potential so that people acquire the maximum socially feasible and practical control over all the available resources needed for the realization of basic human needs and security. Kortes (1990:57), "development could be defined from a people centered perspective as a process by which the members of a society increase their personal and institutional capacities to mobilize and manage resources to produce sustainable and justly distributed improvements in their quality of life consistent with their own aspirations". Accordingly, Burkey (1993:35), sees development as "a process by which an individual develops self-respect, and becomes more selfconfident, self-reliant, cooperative and tolerant to others through becoming aware of his/her shortcomings as well as his/her potential for positive changes". Furthermore, Todaro and Smith's (2006:17), opines that economic and social perspective, "development is a process meant for equitable social and economic transformation of the society through institutionalized social structures, and people's positive attitudes for an accelerated and increased growth and poverty eradication". Thus, development here is preserved as a multidimensional process involving the totality of man in his political, economic, psychological, social relations, among others. # III. # Literature Review It is a tactful and concise review of extant works or study materials that have direct and indirect bearing to the topic of investigation. As a significant and critical activity, the review of literature focuses on identifying contributions already made on the subject of investigation (Abada, Okafor & Omeh, 2018). However, the review of extant literature will be done based on the following themes: # a) Fiscal Arrangement and Federal Practices in Nigeria Revenue allocations and transfers of resource control had become contending issues and debates that had propelled lingering questions on Nigerian federal practices. The most worrisome to national development is the power of government at the centre determining what constitutes revenue allocations and how it would be shared among the federating units. Sequel to this, Eme (2013) argues that the issue of fiscal federalism in Nigeria seems to have derailed national development due to fiscal imbalance, over-dependence on the centre, agitation for resource control, among others. In his view, Babalola (2015), posits that fiscal imbalances occur because constituent units hardly have enough resources to match their expenditure. But, irrespective of how they occur, imbalances must be corrected in order for the federation to continue to exist, and this may take the form of intergovernmental transfers which have the capacity to enable or limit governments in the discharge of their responsibilities. However, Danjuma (1994), posits that fiscal federalism necessitates revenue sharing arrangement to enable the component units carry out their various functions. The fiscal arrangement within the federation should, therefore, adequately cater for the federating units to enable them discharge their constitutional responsibilities. In Nigeria, it involves the assignment of functional responsibilities and taxing powers among the federal, state and local governments. The functions are classified into three. The first is the exclusive list on which only the federal governments can act. The concurrent list contains responsibilities shared by both federal and state government to act while the third, the residual list is reserved for the state government only. Though revenue sharing in Nigeria, has witnessed a plethora of reviews, as evidenced by various committees and commissions instituted in this regard, yet no reliable formula has been evolved in meeting the country's yearnings and aspirations (Teidi, 2003:39). However, Elaigwu (2007) noted that in terms of resource distribution, the principle of derivation occupied a significant place in the distribution formula. This followed recommendations of the Louis Chick Commission of 1953 which was set up to 'assess the effect, on the public expenditure of Nigeria as whole, of the reallocation of functions between the centre and the regions'. Derivation principle provides for revenue allocation in proportion to the contribution to the federal purse by each state. It was also strongly felt that the principle of derivation which gave 50% of revenues to the old regional governments controlled by the dominant ethnic groups was abandoned in order to enable these same groups to control the oil wealth produced from the oil minority states. Adoption of this principle of derivation as the basis for revenue allocated to the regions increased financial disparity among the regions. In view of this, Teriba (1966) posits that; "Following Sir Louis Chick's recommendations, the Western Region received the largest share of the proceeds of import, export and excise duties as well as the total allocation from about 39 per cent under the 1952-54 regime to more than 41 per cent between 1954 and 1959. The Eastern region declined from 29 per cent to 24 per cent during the period. Though the North maintained the same share but has suffered a considerable loss of revenue through errors of 'defective derivation percentages. Consequent upon the dissatisfaction with the system was agitation for another fiscal Commission " Though, introduction of Distributive Pool Account (DPA) de-emphasized derivation principle. According to Egwaikhide (2016), the application of derivation promoted regional hostility and disunity because it supported uneven development. The current revenue allocation formula poses a lot of problems as it grants minimal fiscal autonomy to the state and local governments in terms of revenue assignments and the major taxes such as company income tax, value added tax, customs and excise duties, tax on petroleum products and education tax are assigned to the federal government. The two components of Revenue Allocation Formula in Nigeria used for the disbursement of the Federation Account Vertical and Horizontal Formulae are Vertical Allocation Formula (VAF) and Horizontal Allocation Formula (HAF). Vertical Allocation Formula (VAF): This formula shows the percentage allocated to the three tiers of government i.e. federal, states and local governments. This formula is applied vertically to the total volume of disbursable revenue in the Federation Account at a particular point in time. The VAF allows every tier of government to know what is due to it; the Federal Government on one hand and the 36 States and 774 Local Governments on the other (Bashir, 2008:3). The subject of these sharing schemes is the federally collected revenues. This is because the revenues generated within the jurisdictional areas of the units states and local governments are not subject to the national sharing formula. In the annals of federal countries" revenue sharing arrangements, the sources of the federally collected revenue that form the subject of the sharing formula have remained largely unchanged. These sources which are not amenable to other units include import duties, mining rents, excise units, export duties and royalties (Ovwasa, 1995). The implication of this is that, since these sources of revenue are not amenable to the jurisdiction of the other units of government, the problem of revenue allocation has focused on not who should raise the taxes, but on how to share the proceeds that is, the actual revenue collected by the federal government. The imbalance between functions and resources base, calls for higher level government to transfer revenue to the lower level. # Horizontal Allocation Formula (HAF): The formula is applicable to States and Local governments only. It provides the basis for sharing of the volume of revenue already allocated en bloc to the 36 States and 774 Local Governments. Through the application of the principles of horizontal allocation formula, the allocation due to each State or Local Government is determined. Thus, it can conveniently be concluded that the vertical allocation formula is for inter-tier sharing between the three tiers of government while the horizontal allocation formula is for intra tier sharing amongst the 36 States and the 774 Local Governments in Nigeria (Bashir, 2008:3). It arises out of the variations in revenue generation capacities of the component units. Where the revenue raising capacities are low, heavier tax burden is imposed relative to higher revenue raising capacities area. This transfer is called "equalization transfer". This transfer is necessary because higher taxation will scare away businesses and the economy of the unit will become more depressed. To avoid this, the higher the federal level of government has to transfer to the lower unit(s), the better, to enable it make up for the differences between its internally generated revenue and those required for maintaining the minimum standard of services. # b) Public Finance and Economic Development According to Olowononi (2016), it is argued that the principles and practice of public finance which concentrates functions and power in the hands of the federal government will accelerate economic development. Of course the rational is that classical federalism favours centralization and integrates fiscal powers. However, a major explanation for Nigeria's poor economic performance in particular may be found in the state's flawed domestic political economy, which encourages over dependency on oil. Nigeria's postcolonial economy inherited an economy that was reliant on agricultural products for its foreign exchange earnings, but the discovery of oil changed that, and by 1973 the Nigerian economy had been transformed into an oil rentier economy, as the state became heavily dependent on oil rents for its sustenance. Nigeria's neglect of the agricultural sector has been well documented and needs no extensive discussion here (Bangura, 1986). Nigeria's economic record since the oil boom of the 1970s has been characterized by a lack of growth and increasing poverty. The Nigerian state now operates oil centered economy in which all other sectors, and by extension, governments at all levels, consequently depend on the oil sector. Over the last four decades, the sources of public revenue in Nigeria are proceeds from the sale of crude oil, taxes, levies, fines, tolls, penalties and charges. Oil revenues are the main source of public revenue, accounting for about 80% to 85% of the total (AfDB, UNECA, and OECD 2010). In the period 2001-09, oil revenues averaged 27% of GDP while tax revenues averaged 6.4%. Oil revenues have been volatile, ranging from 35.6% in 2001 to 19.6% in 2009 when oil prices dropped as a result of the global recession. This problem is further compounded by the country's federal system, which is loaded with a myriad of centrifugal forces, including ethnic diversity and economic disparity among the federating units. Nigeria is one of the oil rich countries in the world, yet the country's oil wealth has not provided the needed stimulus for economic development. It also affects the political balance because, whichever level of government has the major financial resources, finds in its hand the means of political control, and determine which governments or structures are able to use these instruments to control the economy. Therefore the contemporary controversy of restructuring does not merely exist because of the arrangements in themselves but because of the development implication of Nigerian fiscal federalism # IV. Theoretical Framework of Analysis The systems and practices of intergovernmental arrangements, nature and configuration of relationships among the tier levels of government in Nigeria is a replicate of power wielding. Therefore, situating the relationship that exists between the government at the centre and various component units calls for the appreciation of unequal power equation. Hence, the understanding of this piece of study is guided with the domestication of power theory as propounded by Han Morgenthau in 1967. Accordingly, Morgenthau (1967: 29) sees power as man's control over the minds and actions of other men. Meanwhile, in Nigeria federal practices, the government at the centre controls and at the same appropriates enormous power over resources at the expense of the federated units. Fundamentally, the interactions and interconnectedness of various tiers of government, the exercise of power for appropriation of values and resources always set in. Therefore, the spillover effect of over centralization of power by central government is the powerlessness of the component units toward promoting development of their jurisdiction. The imbalance in the fiscal arrangement had stood tall to conscripts other tiers of government from performing. Despite the stipends that accrue to the federating units are not enough to offset the administrative and logistical operations. The entrenchment of the institutions of federal accounts at the centre and state-local government joint account across states in Nigeria proves the nature of undiluted power configuration and excesses exercised. The effects abound as other tiers other than the government at the centre cannot claim to be performing with bare hand and resources. Likewise, the untimely disbursement of federal allocations amount to shivering by federating units that seek alternative of going for loans. The amounts which would have used to provide adequate development will then be offered as a sacrificial servicing of loans. The state government on their part through the instrumentation of joint account with local government councils in their areas of operation had continued unceaselessly appropriating unnecessary power over accruable and other funds made available to third tier government. The implication is the continued general poverty and lack of development of man and the Nigeria nation state. There is no infrastructure and other indicators of both human and physical development made by state government, rather they rely on allocations that may not come at when due. V. # Methodology The practice of Nigeria's version of federalism and the attendant implications on the development of the polity at large has called for the needs to decentralize power and weigh the operations of intergovernmental relations as it affects other tier levels of government. The study of this kind tolled the procedural steps underlining the strengths and weakness of other levels of government in discharging their fundamental responsibilities to bring forth development in the country. Therefore, worried by the conscripted nature of federal practices, the study gears toward filling the gap in the extant literature. Methodologically, the study adopted documentary method, while data were adequately sourced through the secondary sources of data collection. The analysis of data was done through content frame. The secondary sources appropriated include journal articles, monographs, text books, internet, newspaper etc. # VI. # Findings The quest and entrenchment of modern democracy in many developing economies had heightened the path of participation of the citizens in matters important to the system. The government in the long run, reflecting the mandate given, is charged with providing basic necessities of life at any level of its operation. Such practice is not an exception in Nigeria as it claims to provide dividends and infrastructure for development. However, despite the claims and counterclaims by Nigeria federal practices has attracted gamut of agitations to restructure the structure of federalism peculiar to the system. Also identified as finding is that the components and federating units are totally engulfed with myriads of developmental challenges due largely to the nature of federal and fiscal deficit of the system. # VII. # Result Arising from investigation of the study is the result of the findings. Accordingly, the study exposed that unless the system of federal relations is being amended to reflect true and formidable fiscal and intergovernmental arrangement, other tiers of government other than the government at the center will continue to exist at the mercy of the central government. Also, the lump sided nature and accruable to the government at the center conscripts the federating states and local government from performing, thereby making them face difficulties in providing laudable developmental projects and dividend to the people in their respective jurisdiction. # VIII. Conclusion and Recommendations It is undisputable and very clear that in many emerging African democracies, the system of fixing the state to respond to the demands of the citizenry has become problematique following the nature and character of post colonial African states. The Nigeria state is not totally exonerated as agitations from different quarters ensue to restructure the federal practice. It is on this note that paper appreciated the cosmetic nature and configuration of Nigerian federalism as implicated on the fiscal imbalance between and amongst the three tiers of government; central, component units and local government. The theory utilized centered on the power theory which emphasizes that central government due to its nature as the government at the center lords over other tiers at the expense of the other levels of government. Importantly, the implication of unequal power and fiscal responsibilities has dwindled other levels of government other than the government at the center from providing basic infrastructure for the wellbeing of the people and nation-state at large. However, arising through the investigation and findings of the study, the paper recommends the following; ? There is the need through enforceable legal frame, statutory role of the three tier system as invoked in Nigerian federal system. It is important noting that the mixing up of the levels of government in terms of unclear demarcation of lines of action had forced the central government to appropriate the advantages. The constitution like every other documents need to review in order to reflect the restructuring question. ? It is high time tiers of government shall have sense of responsibilities. The federating units and the local government should exhibit the culture of self reliant. This is important for making them devise more and reliable sources for its sustenance. The component units together with local government is expected by now not hope for stipend coming from the center, that which may not come forth as when due. Also, unexplored avenues should be appropriated to make yields to government, thereby entrenching the spirit of self-reliant. 1TaxLegal JurisdictionCollectionRetentionImport dutiesFederalFederalExercise dutiesFederalFederalExport DutiesFederalFederalMining rent and royaltyFederalFederalPetroleum profit taxFederalFederalCapital gains taxFederalStateStatePersonal Income tax (other than listed in 8)FederalStateStatePersonal Income tax; Armed and Police Forces,external affair officers, non-residents, residentsFederalFederalFederalof Federal Capital TerritoryValue added tax (Sales tax beforeFederalFederal/ StateFederal/ StateCompany taxFederalFederalFederalStamp dutiesFederalStateStateGift taxFederalStateStateProperty tax and ratingsStateState/LocalState/Local © 2020 Global Journals Year 2020 © 2020 Global Journals * Fiscal federalism and economic growth in Nigeria. In Fiscal Federalism and Nigeria's Economic Development 1999 proceedings of the annual conference of the Nigerian Economic Society Ibadan UnecaAfdb Oecd 09. Paris and Tunis: Af DB and OECD 2. Aigbokhan, B. E. 2010. 2008. 1999 Nigerian Economic Society African Economic Outlook * Fiscal federalism and economic, industrial and social development of Nigeria BEAigbolihan Onah, F. 2006 Great Ap Express Publishers Ltd Nsukka Eds) Fiscal federalism * Federalism and Unitarism KAjayi Readings in Political Science DKolawole Ibadan Dekaal Publishers 1997 * Fiscal federalism and local Government Finance in Nigeria: An Examination of Revenue, Rights and Fiscal Jurisdiction STAkindele Olaopa Contemporary Issues in Public Administration FOmotoso Lagos Bolabay Publications 2002 * Fiscal federalism and local government finance in Nigeria: an examination of revenue, rights and fiscal jurisdiction STAkindele KOlaopa Contemporary issues in public administration FOmotoso Lagos Bolabay Publications 2002 * Leadership in Nigeria: A paradox of Action for Resource mobilization in a Depressed and Privatized Economy for National Development ATAkume International Review of Social Sciences and Humanities 3 2 2012 * Revenue Allocation in Nigerian and Fiscal Federalism in Nigeria JCAnyanwu Journal of Economic Management 2 2 1995 * Fiscal federalism in Nigeria: Theory and dimensions DArowolo Afro Asian Journal of Social Sciences 2 22 2011 * Fiscal Federalism and Economic Development in Nigeria: The Contending Issues DBabalola Global Journal of Political Science and Administration 3 2015 * The Deepening Economic Crisis and its Political Implications Bangura Nigeria: A Republic in Ruins Mohammed TEdoh Zaria Gaskiya Corporation Ltd 1986 * People First: A Guide to Self -Reliant SBurkey Participatory Rural Development 1993 Zed Books * Fiscal decentralization and macroeconomic management in Nigeria LNChete Journal of Economic Management 6 1 1998 * Revenue Sharing and the Political Economy of Nigerian Federalism TDanjuma Journal of Federalism 1 1 1994 * Revenue Allocation in Nigeria: Derivation Principle Revisited In FEgwaikhinde Federalism and Political Restructuring in Nigeria. Ibadan: Spectrum Books Ltd Amuwo 2016 * The Politics of Federalism in Nigeria JIElaigwu 2007 Adonis & Abbey Publisher Ltd London * Issues of fiscal federalism and National Development in Nigeria During Obasanjo Adminisrtation OEme Journal of Educational and Social Research MCSER Publishing 2013 * Fiscal Federalism in Nigeria: Theory and Practice OEwetan International journal of development and sustainability 1 3 2012 * Development by People: Citizen Construction of a Just World GGran 1983 Praege New York * The Mechanics of Revenue Allocation: Understanding the Need for Effective Data Collection and Management AKabir Bashir 2008 Workshop Paper * Getting to the 21st Century: Voluntary Action and the Global Agenda DCKorten 1990 Kumarian Press United State of America * National Development in Nigeria: Issues, Challenges and Prospects TLawal AOluwatoyin Journal of Public Administration and Policy Research 3 9 2011 * Fiscal Federalism WEOates 1972 Harcourt Brace Jovanovich New York * Revenue Allocation and economics of Federalsm GDOlowononi Federalsim and political restructuring in KAmuwo AAgbaje RSuberu GHerault Nigeria; Ibadan 2016 Spectrum Limited * The Politics of Revenue Allocation in Nigeria LOOvwasa Contemporary Issues in Nigeria Affairs HODanm IOle OTaiwo AEDavies Ibadan, Nigeria Sunnad Publishers Limited 1995 * Fiscal federalism: theory, issues and perspectives, Daily Independent Ozo-Eson 2005. 16 February. May 19th Press Limited * How a True Federal System Should Run. The Nation ISagay 2008 Lagos, Vintage * The Federal Approach to Fiscal Decentralization: Conceptual Contours for Policy Makers CKSharma Loyola. Journal of Social Sciences 19 2 2005 * Fiscal federalism and decentralization: A review of some efficiency and macroeconomic aspects VTanzi Annual World Bank Conference on Development Economics MBruno BPleskovic The World Bank 1995 * Federalism and Inter-governmental Fiscal Relations in Nigeria STeidi 2003 Spectrum Books Ltd Ibadan * Promoting states economic independence through financial market Cooperation. In Fiscal Federalism and Nigeria's Economic Development 1999 proceedings of the Nigerian Economic Society SATella 1999 Nigerian Economic Society Ibadan * Nigeria Revenue Allocation Experiencer OTeriba The Nigerian Journal of Economic and Social Studies 8 1966 * Economic Development MTodaro SCSmith 2006 PEARSON Addison Wesley Harlow 9th edition