Stop relying on monthly allocations, NESG urges states
The Nigeria Economic Summit Group (NESG) has situated state governments’ inability to generate comfortable internally generated revenue (IGR) on reliance for the monthly Federation Accounts Allocation Committee (FAAC) perks.
The Chief Executive Officer (CEO), Laoye Jaiyeola, who spoke yesterday in Abuja at the official launch of BudgIT’s State of States report, regretted that the “failure of governance at the sub-national is written on faces of millions of unemployed youths littering every state.”
According to him, states are in dire financial strait that required bold, urgent and pragmatic solutions. His words: “Most of our states are haemorrhaging and are only surviving from the massive monetary blood transfusion from the Federal Government, which is also fast depleting due to mounting debt and debt service payments.
“The country’s tax-to-Gross )Domestic Product (GDP) ratio, between four and five per cents, further buttresses the point of this troubling reality. In most cases, lack of capacity, corruption and over-dependence on FAAC contribute significantly to this situation.”
Jaiyeola stated that sub-national growth should be primarily dependent on local resources, adding that states and local governments could tackle growth trajectories by re-imagining their endowments and building both comparative and competitive advantages.
“Otherwise, states that have sustained their growth process will continue to get rich, while those that are outside the growth process, remain poor,” he added.
The NESG chief noted that the time has come for the nation to exploit resources of states as primary driver of economic growth. He continued: “This, therefore, imposes a critical burden on states to immediately accelerate efforts towards exploring innovative fiscal options to build back better.
“No doubt, our sub-nationals need a radical reset to be able to deliver impact at the grassroots.
“Our weak public financial institutions and systems, which translate to limited fiscal space, we have noted earlier, reflect the lack of shared philosophy on sovereign wealth generation and distribution as a nation.”
“This inadequacy describes the structural pattern of our problem.” On the way forward, Jaiyeola urged states to boost tax administration, assuring them that the system would contribute significantly to expanding their tax net amid efficient spending.
Jaiyeola went on: “For example, to fully harness the property tax option, we need an effective housing policy that supports a vibrant market for seamless exchange between real estate developers and renters. Such policy will seek to protect the investment of property owners for increased housing supply.
“States will need to invest more in systems for transparent valuation of properties, including the Geographic Information Systems (GIS).
“Exploring strategies for expanding the tax base through policies that enhance the quality of the investment climate to attract businesses and people is also important.”
In his presentation, BudgIT’s Head of Research and Policy Advisory, Abel Akeni, who acknowledged that COVID-19 ravaged revenues of many state governments, stressed the need to explore options for building back better.