The main goal of economic development is to improve the quality of life of the people of the country and getting them out of abject poverty. To achieve this laudable goal, enormous resources are required. Where a nation operates a federal system of government having more than one level of government such as Nigeria, available national resources need to be shared among the various levels to enable each level discharge its constitutional functions. In Nigeria, like other federated nations, revenue generating and expenditure powers are shared among the three levels of government. The nation’s revenue sharing formula has been reviewed several times to keep pace with economic and political realities of the nation. Unfortunately, there has been so much discontentment with the various revenue sharing formulae on the ground that they have not met the development needs of the various regions of the country. As a result, people have not only called for a re-review of the current formula but are also calling for resources control and the restructuring of the nation in terms of economic and political. This paper examines the issues with revenue allocation formula in Nigeria and how to make the formula more responsive to the development need and aspirations of the people and to achieve the goal of poverty eradication and improving the people’s standard of living.