Lest the States Wither!

Muhammadu Buhari

Alleged non-viability of 17 out of the 36 states is troubling and must be addressed, writes Olawale Olaleye

An Annual States Viability Index released recently by the Economic Confidential, a Nigerian economic news magazine, for the 2018 review has stated that 17 of the 36 states of the federation were insolvent. This, it noted, was because their Internally Generated Revenues (IGR) in the year under review were far below 10 per cent of they received from the Federation Account Allocation Commission (FAAC) in the same year.

From the analysis by the Economic Confidential, without the monthly disbursement from FAAC, many of the states would remain unviable. And for most of the states, the IGRs are generated through Pay-As-You-Earn Tax (PAYE), direct assessment, road taxes and revenues that accrue from Ministries, Departments and Agencies (MDAs), amongst others.

Thus, the IGR of the 36 states of the federation, the agency noted, totaled N1.1 trillion in 2018 compared to the N931 billion in 2017, with an increase of N172 billion. It further indicated that the IGR of Lagos State at N382 billion was higher than that of 30 states put together, whose IGRs are extremely low and poor compared to their allocations from the Federation Account.

But the Federal Capital Territory (FCT), Abuja, which is the nation’s capital, it maintained, generated N65 billion IGR against N29 billion from the Federation Account in the same period.

While Lagos maintains its number one position in IGR generation with total revenue of N382 billion compared to FAA of N260 billion, which translates to 146 per cent in the 12 months of 2018, Ogun State, which generated IGR of N84.55 billion compared to FAA of N93 billion, represents 90 per cent is followed by Rivers with N112 billion compared to FAA of N237 billion representing 47 per cent.

Following in that order is Kwara State, which despite its low receipt from the Federation Account has maintained its impressive IGR by generating N23 billion compared to FAA of N81 billion representing 28 per cent.

Other states with impressive IGR collections are Edo with N28 billion compared to FAA of N112 billion representing 25 per cent; Kano with N44 billion compared to FAA of N183 billion representing 24 per cent; Enugu with IGR of N22 billion compared to FAA of N92 billion representing 23 per cent; Ondo with IGR of N24 billion compared to FAA of N108 billion representing 22.77 per cent; Kaduna with IGR of N29 billion compared to FAA of N131 billion representing 22.44 per cent while Delta State earned N58 billion IGR against FAA of N285 billion representing 20 per cent.

With the breakdown above, only 10 states boast impressive IGR generated at N808 billion, while the other states merely generated a total of N295 billion in 2018.

The import of this, Economic Intelligence reckoned, was that the 17 states with less than 10 per cent IGR even in 2017 may be unable to stay afloat outside the Federal Allocation due to socio-political crises including insurgency, kidnapping, armed banditry and herdsmen-farmer clashes.

Quite naturally, some of the states had reacted to their poor classification and dismissed the report as not a true reflection of their capacity to meet current financial obligations. But it still does not change the fact that they are truly incapable of meeting basic obligations, the reason many of them owe months of salaries, pensions and allowances of civil servants, not to talk of the demands of governance.

Indeed, the fear of the viability of some of the states has always popped up each time the call for the creation of more states is pushed by any section of the country. It is bad enough that apart from the basic source of the IGR augmented by the handouts from the federation account, a majority of the states cannot think outside the box to generate more revenues without actually putting the pressure on their people.

And despite the meager revenues that come in from the limited sources, the degree of stealing in some of the states is quite ungodly, often compounded by institutional revenue leakages, perpetuated by the civil servants in connivance with officials of the governments.
Also, many states lack prudent management of their resources through poor prioritisation of needs, which often clog the wheel of progress and make governance appear somewhat esoteric.

This is position further vindicated by the fact that despite the help that came the way of many of the states in the last few years through bailouts, Paris Club Refund and even refunds done to some states from the purse of the federal government over projects paid for by the states some years ago, the situation in many of the states has not changed.

With some states owing between 15 and 40 months of salaries, it can only get worse especially with their status not changing. This is why debate for more states creation cannot suffice now. Besides, there is the need for a more strategic intervention in the affairs of some of the states, a vacuum that could be better filled by the leadership of the Nigeria Governors’ Forum.

There is a need to resuscitate the age-old Peer review mechanism, and this time, it must transcend comparing projects delivery alone. Style, governance and administrative components of government must be incorporated for stiff and healthy competition amongst the states and to the overall good of the people of the country.

Otherwise, with the rate things are going in many of the states, there may be, although cynically, the need for merger in the future yet unseen the moments the states can no longer fulfill any other obligations outside of paying salaries.
This is why the ugly and gloomy situation painted by the Economic Confidential is scary and deserves all the attention it deserves.