Only three of the 36 states of the federation can finance their recurrent expenditure without depending on the monthly allocation from the federal government, a report from Nigeria’s civic tech organization, BudgIT, has said.
This report published under the title State of States 2019, showed that only Lagos, Rivers, and Akwa-Ibom States can finance themselves without the disbursement from the Federal Account Allocation Committee (FAAC).
The report, released in Abuja on Wednesday, confirmed that if the allocation from the federal government were to be affected by any event such as fluctuations in oil prices, many states would be at risk.
The State of States report revealed that the fiscal sustainability of Nigerian states is anchored on three key indices; Index A: states’ ability to meet their recurrent expenditures independently of the Federal Government (weighted average of 0.35 per cent), Index B: the state’s ability to meet their recurrent expenditures with both its internally generated revenue (IGR) and federal allocations (weighted average of 0.50 per cent), and Index C: how long it would take states to pay off their total debt stock (weighted average of 0.15 per cent).
The report also showed that considering the ability of states to meet up with their recurrent expenditure obligation with their IGR, Value Added Tax (VAT), 13 percent share of oil derivation paid to oil-producing states, states like Lagos with index 0.48 sits at the top, followed by Rivers with 0.73 and Akwa Ibom with 0.91 in third.
In its analysis, BudgIT said it was a recurring development to see states in the South-South region running high recurrent bills, mainly driven by the high revenues earned as a result of the 13 percent derivation principle.
The firm said it was also interesting to see states such as Cross River with a high budget of N1.04 trillion spend less than N93 billion on an annual basis.
Speaking on the outcome of the report, the Lead Researcher, BudgiT, Mr Orji Uche, said only 19 states out of 36 could meet their expenditure with internally generated revenue and federal allocation.
“We discovered states, such as Delta, running huge recurrent expenditure reaching N200 billion. Bayelsa, despite its size and population, has a high recurrent bill as high as N137 billion, compared with Ebonyi with a recurrent bill of N30 billion, Sokoto N38 billion, Jigawa N43 billion, Yobe N35 billion etc,” he said.
BudgIT recommended that Nigeria needs to create incentives for states to expand growth and earning potential, thereby activating resources needed to improve the state of health, education, and access to opportunity.
It further recommended states to invest in their unique resources to boost their income by keeping their recurrent costs lean to free up more spending for social and economic infrastructure.
