17 states insolvent –Report

Amidst concern raised by a recent report from Economic Confidential alleging that 17 of Nigeria’s 36 states are insolvent on account of their low Internally Generated Revenue (IGR), the Managing Director and Chief Executive, Financial Derivatives Company Limited, Mr. Bismarck Rewane, yesterday stated that low IGR was not a sign of insolvency in the affected states.
Rewane, who was reacting to the Annual States Viability Index (ASVI) 2017, released by Economic Confidential, a reseaerch and economic intelligence group which classified 17 states of the federation as insolvent, with IGR far below 10 per cent of their receipts from the Federation Account Allocations (FAA) in the same year said such does not, however, necessarily suggest that the affected states were broke.
Rewane said an important parameter in measuring the solvency of a state was its total expenditure to IGR ratio and not IGR to FAA ratio. According to him, a state can only be considered insolvent if its total expenditure out weighs its revenue.
“It is a source of concern that the IGR of some of the states is low but it doesn’t mean anything. If my IGR is less than 10 per cent of my allocation and my expenditure is not high, it doesn’t mean anything. The basis of comparison using IGR to allocation ratio will not tell you much. The important thing is the total revenue to expenditure ratio. Without having those statistics, one cannot really speak intelligently on the issue,” Rewane said.
His reaction came on the heels of latest report by the Economic Confidential, which shows that 17 states are insolvent as their IGRs in 2017 were far below 10 per cent of their receipts from the FAA in the same year.
The index proved that without the monthly disbursement from the Federation Account Allocation Committee (FAAC), many states remain unviable, and cannot survive without the federally collected revenue, mostly from the oil sector.
The IGRs are generated by states through Pay-As-You-Earn (PAYE) tax, direct assessment, road taxes, and revenues from Ministries, Departments and Agencies (MDAs).
The report by the economic intelligence magazine further indicates that the IGR of Lagos State of N333 billion is higher than that of 30 states put together whose internal revenues are extremely low and poor compared to their allocations from the Federation Account.
The states with impressive over 30 per cent IGR, apart from Lagos are Ogun, Rivers, Edo, Kwara, Enugu and Kano states, which generated N607 billion in total, while the remaining states merely generated a total of N327 billion in 2017.
Recently, the magazine published the total allocations received by each state in Nigeria from the Federation Account Allocation (FAA) between January to December 2017. The latest report on IGR reveals that only Lagos and Ogun states generated more revenue than their allocations from the Federation Account by 165 per cent and 107 per cent respectively and no any other state has up to 100 per cent of IGR to the federal largesse.
The IGR of the 36 states of the federation totalled N931 billion in 2017 as compared to N801.95 billion in 2016, an increase of N130 billion.
From the report, the states with less than 10 per cent IGR have jumped to 17 from 14 states in the previous year 2016. The poor states may not stay afloat outside the FAA due to socio-political crises including insurgency, militancy, armed-banditry and herdsmen attacks. Other states lack foresight in revenue generation drive coupled with arm-chair governance.
The states that may not survive without the Federation Account due to poor internal revenue generation are Bauchi which realised a meagre N4.3 billion compared to a total of N85 billion it received from FAA in 2017 representing about 5 per cent; Yobe with IGR of N3.59 billion compared to FAA of N67 billion representing 5.33 per cent; Borno, N4.9 billion compared to FAA of N92 billion representing 5.41 per cent; Kebbi with IGR of N4.39 billion compared to N76 billion of FAA representing 5.77 per cent and Katsina with IGR of N6 billion compared to N103 billion of FAA representing 5.8 per cent within the period under review.
Other poor internal revenue earners are Niger, which generated N6.5 billion compared to FAA of N87 billion representing 7.43 per cent; Jigawa N6.6 billion compared to FAA of N85 billion representing 7.75 per cent; Imo, N6.8 billion compared to FAA of N85 billion representing 8.1 per cent and Akwa Ibom, N15 billion compared to FAA of N197 billion representing 8.06 per cent; Ekiti, N4.9 billion compared to FAA of N59 billion representing 8.38 per cent; Osun, N6.4 billion compared to FAA of N76 billion representing 8.45 per cent; Adamawa, N6.2 billion compared to FAA of N72.9 billion representing 8.49 per cent; Taraba, N5.7 billion compared to FAA of N66 billion representing 8.70 per cent and Ebonyi, N5.1 billion compared to FAA of N57.8 billion representing 8 per cent.
Meanwhile, Lagos State remained steadfast in its number one position in IGR with a total revenue generation of N333 billion compared to FAA of N201 billion, which translates to 165 per cent in the 12 months of 2017. It is followed by Ogun State, which generated IGR of N74.83 billion compared to FAA of N69 billion representing 107 per cent.
Others with impressive IGR include Rivers with N89 billion compared to FAA of N178 billion representing 50 per cent; Edo with IGR of N25 billion compared to FAA of N75 billion representing 33 per cent. Kwara State, however, with a low receipt from the Federation Account has greatly improved in its IGR of N19 billion compared to FAA of N61 billion representing 32 per cent while Enugu has IGR of N22 billion compared to FAA of N69 billion representing 32 per cent.
Kano generated N42 billion compared to FAA of N143 billion representing 30 per cent while Delta State earned N51 billion IGR against FAA of N175 billion representing 29 per cent.
The Economic Confidential ASVI further showed that only three states in the entire northern region have IGR above 20 per cent. They are Kwara, Kano and Kaduna states.
Ten states in the South recorded over 20 per cent IGR in 2017. They are Lagos, Ogun, Rivers, Edo, Enugu, Delta, Cross River, Anambra, Oyo and Abia states.
The states with the poorest IGR of less than 10 per cent in the South are Bayelsa, Ebonyi, Osun, Ekiti, Akwa-Ibom and Imo states while in the North there are Gombe, Zamfara, Taraba, Adamawa, Jigawa, Niger, Katsina, Kebbi, Borno, Yobe and Bauchi states
However, the IGR of the respective states can improve through aggressive diversification of the economy to productive sectors rather than relying on the monthly Federation Account revenues that largely come from the oil sector.

Comments are closed.