Nigeria has a population of about 130 million people.1
It consists of over 250 ethnic groups and over 100 languages.
The official language is English; the major ethnic groups are the Hausa, Ibo, and Yoruba located in the north, east, and
west of Nigeria, respectively. At Independence in 1960, these three groups held sway in these regions, hence, minority
ethnic groups agitated for the creation of more states in order to break the yoke of the dominant three. The country’s
fiscal federalism is predicated on economic, political, constitutional, local, and cultural developments. From three
regions in 1960, the country grew to four regions in 1963. During the civil war of 1967–70, the country was carved into
twelve states. By 1976, the states increased to nineteen, and by 1987 they increased to twenty-one. In August 1991, the
number of states increased to thirty, and a separate Federal Capital Territory (FCT), Abuja, was created in place of the
old capital of Lagos. By October 1996, six additional states were created, bringing the total number to thirty-six. At present there are also 774 local governments. The country exports oil and the GNP per capita in 2003 stood at US$441.
Nigeria operates a three-tier type of government (federal, state, and local).
The country runs a presidential system of government akin to that of the United States, with a bicameral legislature,
a senate, and a house of representatives at the centre. In each state, there exists a house of assembly. The local
governments have their councils. Members of all houses at the three tiers of government are elected during a general
election. There are several political parties. However, two parties – the People’s Democratic Party and the All Nigeria
Peoples’ Party – are dominant. The People’s Democratic Party is the party in power, and it controls twenty-seven states
in the Federation. It has been in power since the return to democratic rule in 1999 and won re-election in 2003. The All
Nigeria Peoples’ Party controls seven states, mainly in the north, while the Alliance for Democracy and the All Peoples
Grand Alliance control one state each in the southwest (Lagos) and southeast (Anambra), respectively.
There are three branches of government: executive, legislative, and judiciary. The executive and legislative arms are
elected along party lines. The Nigerian Constitution does not provide for independent candidature. The judiciary is
made up of several tiers of courts, culminating in the Supreme Court. The Federal Appeals Court entertains appeals
from the Federal High Courts and the State High Courts.
The FCT, Abuja, also has its own High Court, as do the states in the Federation. The Customary and Sharia Courts,
the Magistrate Courts in the states, and the FCT run almost parallel to the system of High Courts. The judges and
magistrates of the Customary and Magistrate Courts are learned in modern law, while those of the Sharia Courts, found
mainly in the north, are learned in Islamic law.
Following years of military rule, the new presidential system faces a series of challenges. The introduction of Sharia
law by some Muslim states in the north was the first problem for the new administration. There has been a rise in
ethnic/sectional militant groups, such as the O’dua Peoples Congress in the southwest, the Movement for the
Actualization of the Sovereign State of Biafra (MASSOP) in the southeast, and the numerous militant groups in the oilproducing
Niger Delta Area.
The growth rate of Nigeria’s economy was about 3.5 percent in 2001–03. It relies heavily on crude petroleum, which
provides about 90 percent of foreign exchange. The country was heavily indebted but recently obtained debt relief from
the Paris Club. About two-thirds of the country’s debt has been “forgiven,” while the remaining one-third is to be paid
in two installments.
The aim of this chapter is to examine the practice of fiscal federalism in Nigeria, paying attention to issues such as
the structure of government, macroeconomic management, revenue-raising responsibilities, and challenges that will
result in a better fiscal federalism for the country.2
The analysis confirms that, for Nigeria’s fiscal federalism to remain
robust, the diverse ethnic groups must be willing to live together in a context of fairness and equity