ANALYSING STATE ALLOCATION CORRUPTION AS A FACTOR OF INCREASING POVERTY: A CASE STUDY OF REVENUE MOBILISATION ALLOCATION AND FISCAL COMMISSION

ANALYSING STATE ALLOCATION CORRUPTION AS A FACTOR OF INCREASING POVERTY: A CASE STUDY OF REVENUE MOBILISATION ALLOCATION AND FISCAL COMMISSION

Chapter One: Introduction

Background of the Study

Corruption in state allocation has long been recognized as a significant impediment to economic development, particularly in resource-rich countries. In Nigeria, the allocation of resources from the federal government to the states is mediated by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC). This body is tasked with ensuring a fair distribution of national revenue among the three tiers of government: federal, state, and local. However, the persistent issue of corruption within this allocation process has raised concerns about its impact on poverty levels across the country.

 

The RMAFC plays a critical role in determining the financial health of the states by ensuring that resources are equitably distributed based on various criteria, including population, landmass, and revenue generation capacity. However, the misallocation and embezzlement of funds at the state level have led to a situation where resources meant for development are diverted for personal gain, exacerbating poverty and undermining economic growth. According to Olowu (2018), the mismanagement of allocated funds at the state level has been a significant contributor to the increasing poverty rates in Nigeria. This situation is compounded by the lack of transparency and accountability in the allocation process, making it difficult to track the flow of funds from the federal government to the states.

 

Corruption in state allocation is not only a Nigerian problem but also a global issue, particularly in developing countries where weak institutions and governance structures create an enabling environment for corrupt practices. In many African countries, for example, the allocation of resources is often influenced by political considerations rather than developmental needs. This has led to the marginalization of certain regions and communities, further entrenching poverty and inequality. As highlighted by Acemoglu and Robinson (2014), the politicization of resource allocation often results in the misallocation of resources, with funds being diverted to politically connected individuals and regions at the expense of those in need.

 

The impact of state allocation corruption on poverty can be understood through various theoretical frameworks. One such framework is the "resource curse" theory, which posits that countries with abundant natural resources often experience slower economic growth and higher levels of poverty due to corruption and mismanagement. Nigeria, with its vast oil wealth, is a prime example of this phenomenon. Despite being one of the largest oil producers in the world, the country continues to grapple with high levels of poverty, particularly in the Niger Delta region, where the majority of the country's oil resources are located. According to Watts (2020), the mismanagement of oil revenues and the failure to allocate resources equitably have contributed to the widespread poverty and underdevelopment in the region.

 

Another relevant framework is the "patrimonialism" theory, which suggests that in many developing countries, state resources are treated as personal property by those in power. This leads to the allocation of resources based on personal relationships and loyalties rather than objective criteria. As a result, resources are often concentrated in the hands of a few, while the majority of the population remains impoverished. In Nigeria, this phenomenon is evident in the way state resources are allocated, with funds often being directed towards political allies and supporters rather than towards development projects that could alleviate poverty.

 

In addition to these theoretical perspectives, empirical evidence also highlights the link between state allocation corruption and poverty. For instance, a study by Nwaogu and Ibeh (2019) found that states with higher levels of corruption in the allocation process tend to have higher poverty rates. The study also found that the misallocation of resources leads to a lack of investment in critical sectors such as education, healthcare, and infrastructure, further entrenching poverty. Similarly, a report by Transparency International (2016) revealed that corruption in state allocation is one of the key drivers of poverty in Nigeria, with billions of dollars being siphoned off by corrupt officials each year.

 

In light of these challenges, it is essential to analyze the role of state allocation corruption as a factor in increasing poverty in Nigeria, with a particular focus on the Revenue Mobilisation Allocation and Fiscal Commission. This study seeks to contribute to the existing literature by providing an in-depth analysis of the impact of corruption on poverty, with the aim of identifying potential solutions to this pressing issue.

 

Statement of the Problem

Despite Nigeria's vast wealth, particularly in natural resources, poverty remains pervasive, affecting a significant portion of the population. A critical factor contributing to this paradox is the corruption that pervades the state's allocation process. The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), responsible for the equitable distribution of national revenue, has been implicated in numerous cases of misallocation and embezzlement of funds. This corruption undermines the ability of state governments to invest in essential services and infrastructure, thereby exacerbating poverty.

 

The problem is particularly acute in regions that are already economically disadvantaged, where the misallocation of resources can have devastating effects. For instance, in the Niger Delta, despite the region's significant contribution to Nigeria's oil wealth, poverty levels remain high due to the mismanagement and diversion of funds intended for development. As noted by Okeke (2017), the failure to address the corruption within the RMAFC and the broader state allocation process has led to a situation where the rich continue to get richer, while the poor are left further behind.

 

Furthermore, the lack of transparency and accountability in the allocation process has eroded public trust in the government, making it difficult to mobilize support for anti-corruption initiatives. This lack of trust is compounded by the perception that the government is unwilling or unable to tackle the root causes of corruption, leading to widespread disillusionment among the population. The persistent corruption in state allocation not only hampers economic development but also undermines social cohesion, as marginalized communities feel increasingly alienated from the state.

 

Given the scale of the problem and its impact on poverty, there is a pressing need for a comprehensive analysis of the factors contributing to state allocation corruption and its effects on poverty. This study aims to fill this gap by examining the role of the RMAFC in the allocation process and assessing the extent to which corruption within the commission contributes to the persistence of poverty in Nigeria.

 

Objectives of the Study

To analyze the extent to which corruption within the Revenue Mobilisation Allocation and Fiscal Commission contributes to poverty in Nigeria.

To examine the mechanisms through which state allocation corruption affects the distribution of resources and public services in Nigeria.

To propose strategies for mitigating the impact of corruption in state allocation on poverty in Nigeria.

Research Questions

How does corruption within the Revenue Mobilisation Allocation and Fiscal Commission contribute to poverty in Nigeria?

What are the mechanisms through which state allocation corruption affects the distribution of resources and public services in Nigeria?

What strategies can be implemented to mitigate the impact of corruption in state allocation on poverty in Nigeria?

Research Hypotheses

Null Hypothesis 1: There is no significant relationship between corruption within the Revenue Mobilisation Allocation and Fiscal Commission and poverty in Nigeria.

Null Hypothesis 2: State allocation corruption does not significantly affect the distribution of resources and public services in Nigeria.

Null Hypothesis 3: The implementation of anti-corruption strategies does not significantly reduce the impact of state allocation corruption on poverty in Nigeria.

Significance of the Study

This study is significant for several stakeholders:

Policymakers: The findings will provide valuable insights into the impact of state allocation corruption on poverty, helping to inform the development of policies aimed at reducing corruption and promoting equitable resource distribution.

Academics and Researchers: The study will contribute to the existing body of literature on corruption and poverty, providing a basis for further research in this area.

Civil Society Organizations: The study's findings will be useful for advocacy efforts aimed at promoting transparency and accountability in the allocation of state resources.

The General Public: The study will raise awareness of the link between state allocation corruption and poverty, encouraging greater public participation in the fight against corruption.

 

Scope and Limitations of the Study

This study focuses on the role of corruption in state allocation as a factor in increasing poverty in Nigeria, with a particular emphasis on the Revenue Mobilisation Allocation and Fiscal Commission. The scope is limited to the examination of the allocation process from 2014 to 2020, a period during which numerous cases of corruption were reported. The study's limitations include potential difficulties in obtaining accurate data due to the secretive nature of corrupt practices, as well as the challenge of isolating corruption as the sole factor contributing to poverty.

 

Definitions of Terms

State Allocation Corruption: The misuse or misappropriation of resources allocated by the government to states, often involving bribery, embezzlement, or favoritism.

Revenue Mobilisation Allocation and Fiscal Commission (RMAFC): A government body responsible for determining and distributing revenue among the three tiers of government in Nigeria.

Poverty: A state of economic deprivation where individuals or communities lack the financial resources to meet their basic needs.

Transparency: The quality of being open and honest, with clear and accessible information about government processes and decisions.

Accountability: The obligation of government officials and institutions to be answerable for their actions and to justify their decisions to the public.