Bogged down in economic misery, which is partially linked to low internally generated revenue, it is an opportune moment for state governments to diversify their sources of income by looking beyond the diminishing federal allocations. As of 2018, the IGR of the largest number of states was still very meagre, a report by the National Bureau of Statistics reveals. Only Lagos – and probably Rivers – can stay afloat if federally-shared revenues were to cease. This is an uncomfortable reality that the states should aim to reverse without delay.
In all, the NBS noted that all the 36 states and the Federal Capital Territory, Abuja, generated a total of N1.17 trillion in fiscal year 2018. Considering the financial obligations confronting them, that amount is grossly insufficient, even with the monthly allocations from the centre. About three years ago, no fewer than 26 states owed workers’ salaries. Not only that, social infrastructure in the states is in tatters primarily because governments depend morbidly on the money being shared from crude oil revenues.
Several states are consistently unable to raise their IGR profile as the years go by and obligations pile up. In the year under consideration, 15 states generated N10 billion and below internally. Kebbi, Adamawa, Borno, Ekiti, Nasarawa, Katsina, Ebonyi and Taraba all oscillated between N4 billion and N7 billion. Factoring in inflation, the figures are ridiculous.
Nevertheless, there is some consolation. Lagos raked in N382.18 billion in 2018, garnering a growth of 14.4 per cent in contrast to the N333.96 billion it earned in 2017. Lagos, being Nigeria’s economic capital and Africa’s seventh largest economy, has developed a niche for generating revenue independent of the Federal Government, though it could perform far better. Oil-rich Rivers netted N112.7 billion in 2018, achieving a growth of 26.03 per cent from the N89.4 billion it realised the previous year. Except Ogun, which generated N84.5 billion and Delta, with N58 billion in 2018, the rest of the states generated between N11 billion and N24 billion annually.
For the first time, Ondo State hit the N24 billion IGR mark in 2018. With a 126.83 per cent increase, it recorded the biggest leap of all the states as, in 2017, the state had generated just N10.9 billion. Ondo is trailed by Bauchi, Imo and Sokoto, which grew their IGR in 2018 by 121.79, 117.26 and 108.03 per cent respectively. In spite of this, it is not that these states have discovered a winning formula to their crushing economic malaise as they are far off from their potential.
Currently, the states just essentially exist to pay the salaries of civil servants and political office holders, who constitute a minute fraction of their citizenry. This is wrong. It means they do not provide basic education, affordable health services, good roads, security, potable water or housing in their domains. Since the economic crisis instigated by the crash in oil prices in the international market (in 2014), the Muhammadu Buhari administration has had to channel an extra-statutory bailout of N1.75 trillion to the states.
Despite all this, states do not feel under pressure to rip up their IGR formula that has levied extreme poverty, joblessness and underdevelopment on their citizens. For example, Akwa Ibom State is only surviving because of its vast oil deposits, from where it gets extra revenue from the 13 per cent derivation fund monthly. That extra income has not made much impact: at 37.7 per cent or 1.67 million unemployed, it had the highest jobless rate among the 36 states nationwide in Q3 2018.
In truth, however, no state in Nigeria should be poor. Experts stress that Kogi, which increased its IGR by 71 per cent from 2017 to 2018 at N19.3 billion, is home to the widest variety of solid mineral deposits among the 36 states. Yet, it is unable to generate enough income to pay salaries. It should seize the moment as the Federal Government has liberalised the mining sector. Kogi, Zamfara, Nasarawa, Plateau and Niger, and other states where mineral deposits are lying fallow, should collaborate with foreign investors to get things going.
Although Lagos is the clear IGR leader, it should be concerned that it has yet to close the loopholes where its revenues are leaking. Take taxation: in 2017, Governor Akinwunmi Ambode deplored a situation that saw only 600,000 out of the 22 million residents of Lagos paying their taxes. This should not be tolerated anymore.
Modern governance is sustained by taxation. The United States Office of Management and Budget stated that out of the $3.64 trillion the American government projected to generate in fiscal year 2020, income tax would contribute $1.82 trillion or over half of it. Corporation taxes would add just $256 billion. Lagos should tighten its tax system, which currently allows a majority of its residents to evade taxes. It is a critical assignment for the governor-elect, Babajide Sanwo-Olu.
With the rise in oil prices projected to be ephemeral, all states should concentrate on their areas of comparative advantage in the bid to build up their IGR to cope with the implementation of the N30,000 new minimum wage. The states in the North should prioritise modern agriculture methods, utilising the Federal Government windows like the Anchor Borrowers Programme to cultivate rice, sorghum, tomato, fruits, vegetables, pepper and other food crops, adding value to the raw products. They should discourage nomadic livestock rearing, which is fostering crisis all over the country, by encouraging ranching.
In the South, states like Edo and Imo should revive their palm produce ventures. They should develop their infrastructure, enticing foreign direct investment in the process. They should see themselves as centres of economic development, just like California, an American state, which is the world’s fifth largest economy with a GDP of $2.7 trillion.