a. Dimensions of Revenue Sharing in a Federation:

1. Vertical Revenue Sharing:
   Vertical revenue sharing refers to the distribution of revenue among the different levels of government within a federation, including the federal, state, and local governments. This sharing is based on predetermined formulas and guidelines that dictate how revenue collected at the national level is allocated to lower tiers of government.
2. Horizontal Revenue Sharing:
   Horizontal revenue sharing involves the distribution of revenue among states or local governments within the same tier. This allocation is typically based on principles such as equity, population, and development needs, aiming to reduce disparities among states and ensure balanced development across regions.

b. Principles of Revenue Allocation:

1. Derivation Principle:
   This principle asserts that states from which revenue is generated should receive a larger share of that revenue compared to others. It encourages states to generate revenue through their natural resources or economic activities.
2. Even Development Principle:
   The objective here is to ensure that all regions grow and develop at an optimal rate. This principle promotes equitable distribution of resources to reduce regional disparities and ensure that no state lags significantly behind others.
3. Need Principle:
   This principle takes into account the specific needs of states, recognizing that some may require more financial support to achieve similar levels of development as others. It allows for the transfer of resources from more affluent to less affluent states based on their developmental needs.
4. National Interest Principle:
   This principle is used by the central government to intervene in the allocation of funds to states based on national priorities. It reflects the government’s desire to ensure that resources are directed toward areas of strategic national importance.
5. Independent Revenue Principle:
   This principle emphasizes that each level of government should have the capacity to generate its own revenue and retain it for local use. This encourages states to explore and maximize their revenue-generating potential.