Revenue allocation has been one of the most contentious and controversial issues in Nigerian political life. The sharing of the nation’s wealth among the federal, state and local government has been very problematic over the years. There are no generally acceptable criteria for revenue sharing between federal government and component units. This has led to the establishment of different opinions by final year students in their undergraduate research works as to criteria for proper revenue allocation. Nonetheless, the principles commonly used are:

Derivation : This is a return of a lion’s share or a disproportionate large amount to the area from which the revenue is derived. In other words, derivation denotes the sharing of federal revenue to the various units on the basis of contribution to the Distractable Pool Account, which is now called Federation Accounts.

Population : This means that revenue sharing should be shared on population basis amongst the component units.

Even development : This means that a certain proportion of the revenue is set aside to allow for uniform development of the component states. This area that are considered underdeveloped are assisted in order to catch up while development area is not discouraged in the process.

Equality of units: It refers to equality of states in sharing a certain percentage of national revenue. This has led to a continuous demand for the creation of more states.

Geographical peculiarities : This has to do with ecological problems and environmental pollution due to exploration and exploitation of mineral resources.

National interest : Certain parts of the country require special focus because of their national importance like Lagos and Abuja. Therefore, a disproportionate large share is set-aside for them for the provision and maintenance of infrastructural facilities in such areas for the overall interest of the people. It is for the social, political and economic development of the country.