As states’ internally-generated revenues also slip

Last year, states’ internally generated revenues (IGRs) slipped, indicating an increasing dependence on Abuja to fund state governments’ expenditures, much of which is recurrent.

Two per cent dip in revenue mobilisation, which was what the fall was when weighed against the general business environment, is fair and understandable. But the devil, as it were, is not in the insignificant drop. The uneven spread of the percentage loss among the states validates, once again, the viability concern raised by advocates of fiscal federalism in the past years.

According to the internal revenue data released by the National Bureau of Statistics (NBS), on Friday, 18 states reported a decline of an average of 19 per cent in their last year’s IGRs

Benue emerged as the worst-performing state in the year with its income crumbling by as much as 41 per cent while Sokoto’s slipped by 37.9 per cent. Kwara, Jigawa and Ogun states had their internal revenue earnings cut by 36 per cent, 33 per cent and 28.4 per cent, respectively, to join Benue and Sokoto at the bottom of the table.

Abia, Akwa Ibom, Delta, Yobe, Bayelsa, Adamawa, Rivers, Ondo, Edo, Niger, Kano, Enugu and Cross River also recorded negative growth, which may have weakened their fiscal position and worsened their economic sustainability.

Overall, states’ IGRs slipped to N1.3 trillion as against N1.33 trillion realised the previous year. That puts the average figure generated per state in the entire year at N35.1 billion or N2.9 billion per month.

Interestingly too, of the total revenue, N1.09 trillion or 83 per cent, came from taxes, while revenue drive efforts of ministries, departments and agencies (MDAs) contributed a meagre 218 billion to the pool. On average, the one-year non-tax revenue of a state was N5.9 billion. Lagos alone contributed almost a quarter of the total non-tax income (N51.8 billion) while Ogun earned N19.2 billion.

If one takes out the earnings of Lagos, and Rivers, FCT and Delta out, IGRs balloon by a paltry sum. Lagos alone contributed almost one-third to the entire IGRs, and that has been the trend for as far as anyone can recall. Its share of the IGRs has floated around 30 per cent in recent years.

Lagos, Rivers, FCT and Delta jointly cornered 53 per cent of the revenue for themselves while the remaining 33 states scampered for less than half of the pile.

But that is far from the reality – not the figures but the impression conveyed by the use of ‘cornered’ and ‘scampered’. States’ revenue performance is nothing close to a zero-sum game where one entity’s win is another’s loss. Every state, notwithstanding what happens elsewhere, has an apple opportunity within the limitless possibilities of its endowment to demonstrate like Lagos and Ogun have done that it can stand on its feet. Though Lagos and Ogun have demonstrated this possibility, experts said they merely scratched the surface of their vast resources.

The COVID-19 pandemic is an albatross of some sort, providing a ready alibi for every failing. It will, thus, not be surprising if many states blame the pandemic for their inability to harness their potential to bridge the budget gaps, which the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, said the regulator printed money to fund in 2015.

But while the COVID-19 eroded, and continued to erode, every good opportunity as some people claim, a few states scored high in revving up their 2020 IGR profiles. Kebbi, breaking away from the tradition, topped the most improved states, raising last year’s IGRs by 87 per cent. Ebonyi, another fringe state, followed with 82.3 per cent. Oyo, Borno, Katsina, Gombe, Taraba, FCT, Zamfara, Plateau, Nasawara and Kaduna also recorded what could be described as an impressive improvement, boosting their IGRs by the range of 12 per cent and 43 per cent.

Surprisingly, many of the most-improved states bear the scars of different forms of insecurity such as banditry and herder/farmer crisis. Borno, Kastina, Zamfara and Kaduna, for instance, have been hotbeds of terrorism and banditry. Yet, they increased their IGRs substantially.

In 2020, like every other previous year, states depended on the centre for upward of 64 per cent, a situation that reinforces the question of the viability of many of the states. Apart from Lagos, Ogun and FCT, FAAC allocation made up over 50 per cent of the states’ revenues.

Bayelsa and Jigawa are examples of extreme dependence on the centre for sustenance. While over 90.5 per cent of revenue available to Bayelsa was from the Federation Account Allocation Committee (FAAC), Jigawa depended on the common purse for 86.7 per cent of its revenue. Over 80 per cent of total revenues of states such as Adamawa, Akwa Ibom, Borno, Ekiti, Katsina, Niger, Taraba, Yobe and Sokoto came from the Federation Account.

Yet, the sorrowful state of the revenues does not deter the states from piling up debts. Yobe came last on the amount of IGR realised last year, ranking only N7.8 billion for 12 months. As of the close of last year, Yobe’s external debt alone stood at $26.6 million. The amount generated last year was but only 7.7 per cent of its external debt stock.

As of December 2020 also, the total debt obligation of the 36 states and FCT was approximately N6 trillion, which is almost five folds of the total revenues they generated. Supposing the states do not incur fresh debts and channel all their IGRs into paying off the existing borrowed money, it will take them, at least, five years to pay up if their revenue-generating capacity remains constant.

The IGR scorecard was released while Gov. Godwin Obaseki, whose state’s internal revenue also slopped by almost eight per cent last year, and members of the national economic management team were throwing jabs at the health of the economy.

The governor claimed that the Federal Government printed between N50 and N60 billion for the March monthly allocations. While the Minister of Finance, Budget and National Planning, Zainab Ahmed, described the governor’s claim as sad and untrue, Emefiele wondered how Obaseki’s position was anyway different from the CBN’s responsibility.

Emefiele explained that the apex bank’s interventions are meant to address the terrible economic outlook as “Nigeria is unfortunately in a very bad situation.

“If you understand the concept of printing of money, it is about lending money. That is our job. To print is about lending money. So, there is no need to put all the controversy about the printing of money as if we go into the factory, print the naira and start distributing on the streets.”

He said it was “very inappropriate for people to give colouration to the printing of money as if it is some foreign words coming from the sky”.

“It is important for me to put it this way that in 2015/16,” he continued, “the kind of situation we found ourselves in, we did provide a budget support facility to all the states of this country. That loan is still unpaid up till now. We are going to insist on them paying back those monies since they’re accusing us of giving them loans.”

The CBN boss reiterated his response when Fitch raised the same concern, saying: “It will be irresponsible for the CBN or any other federal reserve to stand idle and refuse to support its government at this time.”

Emefiele’s line of argument has become the usual rhetoric. The government, at all levels, is broken; hence any desperate action is justified. It has become haemorrhage, which no advocate of the more-debt-and-more-mint theory, has told the citizens how long it will last.