... tend to have a large dependence on commodity revenues not only at the central government but also at the local level. Dependence can be as high as 75% of total central government revenues (in Nigeria, for example) or as low as 20% (in Colombia). For subnationals, revenue dependence may be even higher. Weak Internal Revenue Generation: Emerging-market subnationals that depend on oil revenues tend to have a low level of internally generated income as they lack the incentive to increase local revenues or improve collection rates. This creates problems as it leads to significant vertical imbalances, with a large proportion of transfers from the central government funding rigid expenditure at the local level. Inequalities and Disagreements: In some countries, the formula for transfers from central to local governments includes an element that favours oil-producing regions. This is the case for Nigeria, where oil-producing states benefit from an...
