Still Living off FAC


In spite of increasing internally generated revenue in the last two years, states are still largely dependent on Federal Allocation, reports Bamidele Famoofo

Efforts by state governments in Nigeria to raise internal revenue recorded appreciable boost in 2017. The states’ collective Internally Generated Revenue (IGR) increased by about N100 billion, representing a 12.03 per cent growth compared to the 2016 figures. According to data released from the office of the Statistician General of the Federation, Dr. Yemi Kale, recently, the IGR figure increased from N831.19 billion in the financial year ended December 31, 2016 to N931.23 billion in 2017.

But the total IGR figure, placed side by side with oil money and other revenues from the federal government to states, otherwise known as federal allocation, suggests that governments at the state level need to put on their thinking caps to further innovate to boost internally generated revenue.

According to the report released by National Bureau of Statistics in March, net Federation Account Allocation Committee sharing in 2017 almost doubled the states IGR at N1.73 trillion. However, with the federal allocation, total revenue available to the states was put at N2.67 trillion.

Meanwhile, whatever gain the states had recorded in IGR was virtually lost to debt, as total debt as at December 31, 2017 stood at N9.44 trillion. A breakdown of the states’ indebtedness in the review period showed that foreign debt stood at $19.9 billion (about N6.09 trillion), while domestic debt was put at N3.35 trillion.

While 31 states recorded growth in IGR and five, namely, Akwa Ibom, Anambra, Bauchi, Osun, and Taraba, recorded a decline in IGR at the end of 2017 fiscal year, Lagos and Ogun were clearly outstanding as they generated more money internally than they received from the federal purse. With N333.97 billion IGR s against N89.70 billion FAAC allocation in 2017, Lagos State recorded almost four times the money it received from FAAC in the same year. Ogun State generated about three times the revenue it got from the federal accounts in 2017 as IGR.  The state adjudged the second fastest growing economy in Nigeria in 2017, raised N74.84 billion as IGR as against N26.19 billion FAAC allocation in 2017. The two states (Lagos and Ogun) located in the South-west geopolitical zone, by implication, were the only economically viable states as at 2017.

Furthermore, IGR contributed about 80 per cent of the total revenue available to the Lagos State government in 2017. A combination of IGR and FAAC made available N423.66 billion for the use of the Lagos State government in 2017. Ogun State’s IGR accounted for about 75 per cent of the total revenue of N101.02 billion available to the government of the state in 2017. 

Going by the data made available by NBS, none of the 34 other states were able to generate up to 50 per cent of their gross revenue in 2017 from IGR. For Cross Rivers State, which was most outstanding among the 34 states, IGR accounted for 44 per cent of N41.56 billion gross revenue available to the government in 2017.  Rivers State IGR accounted for 43 per cent of the total money available to the government in 2017, as IGR stood at N89.48 billion as against N209.12 billion gross revenue. Among the top five states in this category is Edo, whose IGR accounted for 41 per cent of N62.19 billion gross revenue generated in 2017. IGR for Kano and Osun states accounted for 39.4 per cent and 38.4 per cent, respectively, in 2017.

With a total debt burden of N9.44 trillion, which the states incurred both locally and internationally, it will take about three and a half years for the states to settle the liability if they will suspend all spending and pay out the entire revenue available to them in 2017. An analysis of the debt portfolio of the states showed that only four states will have some left in their coffers if creditors decide to call for all they are being owed in 2017.

For instance, Anambra State, being the most cost effective in 2017, would have had about N30 billion in its coffers if it decided to pay all its debt in 2017. The state’s total debt in 2017 stood at N28.91 billion compared to N58.70 billion available to it in the year. Jigawa State was another state that would have had a positive balance sheet in 2017 if it paid all its debts. Sokoto and Yobe states are two other northern states whose revenue exceeded debt in 2017. Sokoto’s total debt in 2017 stood at N38.63 billion as against N50.26 billion total revenue, while Yobe State owed N35.52 billion as against N43.09 billion revenue in 2017.

According to NBS, all states in the federation generate revenue internally through two main sources. The Ministries, Departments and Agencies (MDAs) have the responsible to raise revenue for governments to finance their budgets through the various services provided to residents in the states.

Tax is another major source of revenue generation for the states. The various means by which tax revenue is sourced from the citizens include Direct Assessment or personal income tax, PAYE (a form of personal income tax that refers to tax deducted directly from the wages and salaries of employees operating in the formal sector), road taxes, among others.

Data supplied by NBS showed that except Ebonyi State, states in the northern region of Nigeria made more effort to grow revenue internally in 2017. 

Ebonyi State led the pack of states that grew their IGR in 2017 with a growth of 118 per cent from N2.34 billion in 2016 to N5.10 billion in 2017, while Sokoto State followed with 98.4 per cent increase, from about N4.6 billion in 2016 to N9.01 billion in 2017. The trio of Jigawa, Borno and Nasarawa states grew IGR in the threshold of 80-88 per cent in the review period.