Fiscal federalism and oil derivation fund in Nigeria: the challenges of effective utilization

The 13% oil derivation fund has generated a whooping sum of revenue to the oil producing states capable of jigging the development drive of the states. Unfortunately, the developments of the states are still stunted. The study scrutinized the 13% oil derivation fund which emanates from the application of the derivation principle and the challenges facing its effective utilization by the oil producing states within the intergovernmental fiscal structure of Nigeria. These were with a view to providing information on mechanisms for judicious utilization and templates for assessing effective administration of oil derivation funds for socio-economic development in the oil producing areas. The study employed data generated from primary and secondary sources to execute its objectives. A total of 300 respondents at 100 each were purposively selected from three out of the nine oil producing states. The study identified withholding of funds by the state government, corrupt practices, poor monitoring and poor accountability as some of the challenges that are preventing the effective utilization of the oil derivation fund. The study recommends constitutional review of the provisions on derivation fund management, effective monitoring and reform of the administrative mechanisms to eliminate corruption in the handling of the fund to bring about effective utilization of the fund to spur development.