State governments may be currently grappling with varying degrees of financial concerns, following the N180.4bn crash in their internally generated revenues and the allocations they received from the Federation Accounts Allocation Committee (FAAC).
An analysis of various IGR and FAAC reports obtained from the National Bureau of Statistics (NBS) showed that the states’ total revenues dropped by N180.4bn in the first half of this year when compared to what they made in the second half of 2019.
Findings showed that the total IGR and federal allocations to the 36 states and the Federal Capital Territory in the second half of last year amounted to N1.914tn.
But this dropped to N1.121tn in the first half of 2020, indicating a crash of N181bn or 9.45 per cent when compared to the preceding half year’s revenue generation of the states.
It was observed that the total IGR of the states and FCT in the second half of 2019 was N640.3bn, while their total allocation from FAAC during the same period was N1.274tn, making a cumulative total of N1.914tn.
On the other hand, in the first half of this year, the total IGR garnered by the states and the FCT was N612.87bn, while the allocations they received from the FAAC in the same period were N1.121tn, bringing the total to N1.733tn.
Based on the above figures, both the IGR and FAAC allocation to the states and FCT dropped during the period.
Analysis of the figures showed that the states’ IGR in the first half of this year dropped by N27.44bn, when compared to what they recorded in the second half of 2019.
Also, the FAAC allocation to the 36 states in H1 2020 was N153bn lower than the allocation they received in H2 2019.
Meanwhile, further findings showed that the N693.91bn IGR of the states in the first half of 2019 was higher than the N640.3bn that they generated in the second half of last year.
But their allocation from FAAC in H1 2019 was lower than what they got in the second half of the same year.
The states’ FAAC allocation in H1 2019 was N1.199tn, while in the second half of the same year, it moved up to N1.274tn.
This came as economists and financial analysts explained that the drop in IGR and FAAC allocations of the states would impact on the delivery of capital projects in most of the states.
They also noted that this could adversely impact on the payment of workers’ salaries by some states with lower IGR and FAAC allocations.
The Director General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said the drop in both IGR and FAAC allocations to the states was expected.
He told our correspondent that this would definitely affect the development of capital projects in some states, adding that the payment of salaries could suffer as well.
Yusuf said, “The decline in the IGR and FAAC allocations to states are reflections of the general economic performance. Practically all major macroeconomic indicators have been in negative territory since the onset of the COVID-19 pandemic.
“Revenue outcomes cannot outperform the state of the economy. Naturally, infrastructure investments in the states will be adversely impacted. For some states, even their recurrent expenditure is at risk.”
The LCCI boss noted that it might take the next two quarters for the economy to begin to experience recovery.
“To fix this, some ongoing reforms need to be sustained. Cost of governance needs to be reviewed; fiscal federalism conversation needs to resume,” he stated.
Yusuf further noted that the high dependence by states on FAAC was not sustainable. – Punch.
