Federalism, Revenue Allocation, and Development Equity in Nigeria: A Critical Political Economy

This study develops a critical political economy of Nigeria's revenue allocation system, theorising the relationship between the constitutional architecture of fiscal federalism, the political settlements that produced and sustain the current allocation formula, and the systematic reproduction of development inequity across geopolitical zones. Nigeria's revenue allocation formula has been contested since independence, with the principles of derivation, population, equality of states, land mass, and social development weighted differently across different constitutional and political moments. Existing studies have analysed the formula's technical properties but have not adequately theorised the political economy logic through which allocation outcomes are produced and reproduced. Drawing on the critical political economy of federalism, the distributive politics literature, and the African political economy tradition, the study develops an original framework conceptualising revenue allocation as a mechanism for managing elite distributional conflict within a multi-ethnic federation. The framework is operationalised through a combination of constitutional history analysis covering the period from 1960 to 2023, quantitative analysis of allocation outcomes and human development indicators across all states and geopolitical zones, and elite interview research with former revenue allocation commissioners, finance ministers, and academic economists. Findings demonstrate that the current allocation formula reflects not developmental rationality but a political settlement that balances the competing demands of oil-producing states, populous northern states, and the federal centre. The persistence of the formula despite its documented development failures reflects its value as a conflict-management tool rather than a development instrument. Recommendations include a convened constitutional conference on fiscal federalism with mandated outcome timelines. Keywords: federalism, revenue allocation, development equity, critical political economy, fiscal federalism