States Brace For More Cuts In Allocation

ON a continuous basis, the Federal Government is bracing for the harsh impact of dwindling oil prices with the devaluation of the Naira and strict policies on luxury spending.

   On the flip side, the states are turning to Internally Generated Revenue (IGR) to make up for the shortfall in allocations from the center.

   Across the world, many countries have become less dependent on crude oil, with the shale gas putting up a stiff competition. The majority is scouting for sources of alternative energy.  

   Many of the states are dependent on federal handouts sourced from proceeds from oil. Although the revenue allocation arrangement mandates that a certain fraction from the federation account be allocated to state governments, the funds, over time, are often not enough to cover spending. Hence, the states resort to generating funds from the within to run their affairs.

    According to figures obtained from the National Bureau of Statistics (NBS), in 2012, Lagos State generated about N219.2bn, Rivers N66.2bn and Delta, N45.5bn.  While in 2013, Lagos, Rivers and Enugu with the sum of N384.2bn, N87.9bn, and N20.2bn respectively, topped the chart. Most critics believe the figures are not commensurate with huge potentials in these states and argue that better effort be made to increase the individual tax profiles of states across the country. 

   For instance, Kano is touted to be Nigeria’s most populous state, according to the 2006 census figures. Last year, its governor, Rabiu Kwakwanso said the state generates N2 billion monthly. Assuming the figure was steady for two years, the state would have earned N24billion. But records of the NBS showed that as of 2011, when the state last featured in its books, Kano’s IGR was put at about N7.3bn. 

     Ironically, the state is the centre of commerce in Northern Nigeria, towering over Kaduna and other business saturated capitals. Failing each year to maximize this opportunity from commercial activities and increased efforts at mechanised farming in the outer districts, in generating revenue has accounted for its poor showing, a trend that runs across several states in Northern Nigeria.

    In the south, workers in Ogun State recently demanded that their salaries be paid from proceeds from IGR, shortly after the state governor hinted that the government pulled about N6bn monthly from its increased efforts at maximising opportunities within the state to raise funds. The statement has drawn the ire of critics who contend that the IGR should be used more equitably in bettering the lives of a larger spectrum of the society.

    According to the NBS, the states that are yet to update their IGR profile for 2013, include: Abia, Adamawa, Bauchi, Benue, Borno, Cross River, Delta, Ebonyi, Ekiti, Gombe, Imo, Jigawa, Kaduna, Kebbi, Nasarawa, Ogun, Ondo, Osun, Oyo, Sokoto and Yobe. However, due to insurgency, North eastern states like Adamawa, Borno and Yobe, put up a poor showing.

     Statutory allocations, many have argued, encourages laziness in some states, denying governments opportunities to maximise their revenue generation potentials. The situation is so bad that some states cannot survive without these handouts. Yet some governors live ostentatiously while their states wallow in debts incurred from local and international lenders.

    Some of the underlying problems in the proper administration of IGR remain lack of transparency, misappropriation of funds, corruption, poor internal control, and lackadaisical attitude to tax administration by civil servants. 

These age-long bottlenecks reinforce the fact that states need to devise strategise that would enable them move out of the dilemma of lean budgets as a result of happenings in the international oil market. The refrain has been for states to embrace innovative policies for tax administration, with focus on providing incentives for tax payers. But the counter claim has been the state of businesses when the infrastructure to operate is almost non-existent.