A report by SBM Intelligence has revealed that between 2017 to 2020, Lagos and Ogun were the only states out of 36 in Nigeria that made more Internally Generated Revenue (IGR) than the allocations received from the federal government.
Currently, Nigeria is faced with a number of socio-economic challenges, including unemployment, double-digit inflation, slow-paced economic growth, and insecurity.
Together with these challenges, public debt continues to grow due to low revenue generation. However, the low revenue predicament is not peculiar to the federal government alone but the sub-national governments as well.
An analysis of the Internally Generated Revenue (IGR) generated by the 36 states of Nigeria has shown that in 4 years, all the states, with the exception of Lagos and Ogun States, generated less revenue than what they received from the federal government as allocation. Thus, making their survival in these 4 years largely dependent on Federation Account Allocation Committee (FAAC) allocations.
IGR shows the fiscal wellness and economic viability of a state. It is the main source of funds for states to build infrastructure and execute developmental projects. It helps states to fund perennial financial obligations associated with governance, such as fixing bad roads, hospitals, and other infrastructural activities.
2017 States’ IGR Performance
In 2017, the 36 states generated a total of N936.47 billion as IGR but received N1.74 trillion as FAAC allocation.
Save for Lagos, Ogun, and Osun states, what every other state received from FAAC in 2017 was more than what they generated independently in their state.
As usual, Lagos made the highest internally generated revenue, N333.97 billion (36% of the total revenue generated by the 36 states), while Rivers and Ogun states followed with N89.49 billion and N74.84 billion respectively.
On the other hand, Kebbi, Bauchi, and Yobe recorded the lowest IGR — N4.39 billion, N4.37 billion, and N3.60 billion respectively.
Akwa Ibom got the highest FAAC allocation of N143.61 billion in the year under review. It is worthy to note that what the state collected as allocation was almost 9 times what it generated as revenue.
Together with Akwa Ibom State, Rivers, Delta, and Bayelsa were the only 4 states that received more than N100 billion from the FAAC in 2017.
Rivers received N119.63 billion as allocation from the federal government. Delta and Bayelsa state followed with N111.20 billion and N105.26 billion respectively. Whereas, what they generated internally in their respective states was way below this.
Conversely, only Lagos, among the 36 States, had an IGR that exceeded N100 billion.
2018 States’ IGR Performance
In 2018, the story was not any different, only that Osun state joined the list of other states that generated lower internal revenue than the allocations they received from the federal government.
The internal revenue generated by the 36 states hit N1.103 trillion, a 17.83% nominal increase from the previous year. In the same vein, the FAAC allocation increased to a total of N2.49 trillion, a 43.40% increase.
Apart from Lagos and Ogun, the other states’ IGR fell below the federal allocation for the year. Lagos recorded an IGR of N398.7 billion and received N117.9 billion as federal allocation. Ogun generated N84.55 billion and received N39.64 billion.
Compared with 2017, Rivers joins Lagos in 2018 to make 2 states whose IGR exceeded N100 billion. Conversely, Lagos also joins the former four — Akwa Ibom, Rivers, Delta, and Bayelsa to make 5 states who received FAAC allocation exceeding N100 billion in the year. But Delta received the highest FAAC allocation this time.
2019 States’ IGR Performance
By 2019, the goal of states’ fiscal sustainability was still not attained. The 36 states’ IGR, which stood at N1.25 trillion, still fell short of the Federation Account allocation of N2.4 trillion shared by them all.
Again, Delta receives the highest FAAC allocation followed up by Akwa Ibom. Yet, apart from Lagos and Ogun states, the other 34 states depended heavily on allocations from the federation account for survival
2020 States’ IGR Performance
In 2020, the IGR generated by the 36 states was N1.21 trillion, a 3.43% drop from the N1.25 trillion in 2019.
Lagos state still recorded the highest internally generated revenue among the states, followed by Rivers and Delta states.
For the third consecutive year, Delta state received the highest allocation from the federal government, followed by Akwa Ibom and Rivers states, respectively.
This shows that for 4 consecutive years (2017-2020), what all the 36 states collected as federal allocation, except Lagos and Ogun states, and Osun State once in 2017, was more than what they made as internally generated revenue.
This trend (of states in Nigeria having lower IGR than the funds they collect from the federation account allocation committee, FAAC), according to SBM Intelligence, reveals that the fiscal condition of almost all the states in the country is unhealthy.
Thus, there are worries that if oil revenues fall in the coming years, it would leave the states in precarious situations, which might result in an inability to meet their basic obligations — payment of salaries, wages, pensions, and even providing other important social services and infrastructures in their respective states.
In fact, according to SBM Intelligence, this (inability of states to pay salaries) has played out twice in the last 5 years which resulted in a bailout fund to states by the federal government.
Back in 2017, the federal government gave the states N1.75 trillion as bailout funds and another 656 billion in 2021 which was essentially meant for them to meet certain financial obligations.
With the country’s increasing debt and falling revenue which the federal government has decried in recent times, this might just be the right time for states to start thinking of more innovative ways to increase their IGR, and rely less on allocations from Abuja, especially now that the country will experience a change in leadership across board, in few months — after the forthcoming 2023 general elections.