Revenue generation: Anambra and other states

A recurring sad commentary on the revenue profile of Nigeria’s 36 states and the Federal Capital Territory (FCT), is their heavy dependence on the Federal Accounts Allocation Committee (FAAC) revenue. Data from the National Bureau of Statistics (NBS) shows that some states depend on FAAC for over 80 percent of their revenue. 

While their internally generated revenue may have improved against dwindling FAAC allocation, their overall financial situation remains worrisome. This is because many of the states run bloated bureaucracy and engage in white-elephant projects without a strong revenue base to sustain them.  Also, their lean resources are applied to long-term projects that eternally remain work-in-progress while the culture of waste is their second nature.

But Anambra has frontally tackled its revenue challenge – a major stumbling block to the economic development of many states. From all indications, Anambra realises its potential to build an industrialised economy and the state government is firing from all cylinders towards that.  This has become a priority to the current government with focus on human capital development, infrastructure, security and a conducive environment for foreign investors. The export oriented-policy of the government has also created an environment to promote private sector-driven economy.

All these are geared towards boosting the state’s revenue beyond FAAC, and data from the NBS affirms that the move is yielding fruit. For instance, the NBS Unemployment and Underemployment report for the third quarter of 2020 (Q3 ’2020) showed that Anambra had the lowest unemployment rate among the 36 states of the federation and the FCT. This is a remarkable development going by Nigeria’s frightening unemployment rate in the past six years which rose from 6.4 per cent in 2014 to 33.3 per cent in Q4 2020.

According to NBS, “Under State disaggregation, Imo State reported the highest rate of unemployment with 48.7 percent, followed by Akwa-Ibom State and Rivers State with 45.2 percent and 43.7 percent respectively. The State with the lowest rate was Anambra in the South-East with 13.1 percent. For underemployment, the state which recorded the highest rate was Zamfara with 43.7 percent, while Anambra State recorded the lowest underemployment rate, with 17 percent in Q2, 2020”, the report stated.

Furthermore, Anambra recorded foreign investment inflow of $10.02 million, making it the 6th highest capital importation destination in Nigeria as of the end of 2020. In a year that COVID-19 pandemic disrupted the global economy with severe health challenges, the figure is significant bearing in mind the state’s efforts to attract foreign investment. The state also has the second lowest domestic debt in the South East (N59.9 billion) after Ebonyi (N44.2 billion) as of 2020.  Others are Imo (N150.2 billion), Abia (N89.2 billion) and Enugu (N68 billion).

Further glimpse into the statistics bureau’s data revealed that Anambra grew its internally generated revenue (IGR) by 61.3 percent within five years covering 2016 to 2020.  According to NBS, the state’s IGR of N17.3 billion in 2016 rose to N23.6 billion in 2017, but dropped to N19.3 billion in 2028, apparently due to the recession of 2016/2017. The IGR recorded over N7 billion jump to hit N26.3 billion in 2019 before peaking at N28 billion in 2020. Anambra also ranks among 10 top revenue generating states and the FCT in 2020. 

The feat was achieved through its unique Grassroots Tax Awareness Campaign (GTAC) initiative of 2018. It was in response to the dwindling FAAC proceeds which compelled states to pursue alternative revenue channels or expand existing ones. The initiative is driven by the Taxpayer Education and Enlightenment Team (TEET) under the Anambra Internal Revenue Service (AIRS) aimed to address the low tax compliance level in the state.

“The low level of tax awareness in the state was responsible for poor compliance in tax payment among the citizenry,” said Mrs Sylvia Tochukwu-Ngige, a deputy director in the AIRS and TEET leader. The Team educates the people down to the hamlet level and ensures they fully understand tax as a civic duty. To ensure transparency and accountability, co-ordinators are appointed at all levels who issue/collect receipts for payments. The target is to reach the informal sector.

With most of the states depending on FAAC, generally referred to as ‘Abuja handout’ to survive or, literally to exist, there is a compelling need for them to become creative in expanding their revenue base.  It has been emphasized that sub-nationals should look beyond ‘Abuja handout’ to generate adequate revenue for their obligations, beyond mere rhetoric. But this has not happened.

Like the word ‘diversification’ which has featured in Nigeria’s economic lexicon for decades, ‘Abuja handout’ has remained a mere topic for talk-shop. It is a subject of public discussion without commensurate action. And the effect is seen in the perpetual financial distress of the states as many of them cannot pay salaries. Their territories are also littered with abandoned projects.

State governments should double efforts at promoting policies and programmes that enhance job-creating opportunities in their domain. There are opportunities in the agro-allied sub-sector, transportation, education, distribution and other small-holding businesses. The Central Bank of Nigeria (CBN) has created various intervention funds meant for micro, medium and small enterprises (MSMEs) to boost their revenue and serve as supply chains to large industries. The state governments should take advantage of these employment-creating windows to boost their tax revenue.

Egbuna, a developmental economist, wrote from Nnewi.