The paper addresses the vexed issue of oil rent management within the context of Nigeria’s fiscal arrangements. After reviewing the conceptual and theoretical issues, the paper analyzes the data on the federation account and the relationships between the centre and the sub-national governments. The paper comes to the conclusion that the expenditure power is concentrated in the federal government, the revenue decentralization ratios are much higher for the federal government followed by the states and is the lowest for local governments and that finally, there is non-correspondence problem in the country’s fiscal relations. The paper finally suggests that conscious effort should be made to allocate more revenues to the sub-national governments; the oil producing communities should be allocated higher proportion of the oil revenue to calm the tension in the area. Moreover, the trend in the federal systems is towards decentralization.

March 10, 2007.