States have been advised to reduce their reliance on allocations from the Federal Accounts Allocations Committee (FAAC) by harnessing the resources sitting idle in a bid to ramp up their revenues.
FAAC allocation to the 36 state governors stood at over N2.13 trillion between June and December last year as compared to N1.3 trillion received from January to May, according to official data.
The cumulative internally generated revenues (IGR) of the state governments for 2023 had not been released by the National Bureau of Statistics as of Monday. Their combined IGR was put at N1.93 trillion in 2022, much lower than the N3.24 trillion disbursed to them by FAAC.
IGR are generated by states through the collection of Pay-As-You-Earn Tax (PAYE), direct assessment, road taxes, and revenues from ministries, departments and agencies.
Experts who spoke to BusinessDay stressed the need for state governments to optimise their available resources to boost revenue.
“Some states have oil, some solid minerals and others are rich in agriculture but we do not see these governors harnessing these resources. They will rather look to the federal government for monthly allocation,” John Okpara, an economic analyst, said.
“Apart from a few states, we still have some states that cannot attract investments, because they are not developed. And you see these governors piling up debts that they cannot pay,” he said. “It’s high time our governors look for ways to boost their IGR instead of relying on the federal government.”
Okpara said state governments can enter into public private partnership arrangements to enhance quality of service delivery in states as well as boost revenues.
He said: “Another measure these governments can take to boost revenue is to enter into partnerships with private companies to develop infrastructure projects or provide services in exchange for revenue sharing agreements.
“They should increase investments in economic development programmes and initiatives to stimulate economic growth, create jobs, and attract businesses to increase revenue through taxes and fees. They can also invest in technology and enforcement efforts to improve tax collection and reduce tax evasion to boost revenue.”
For the 2023 fiscal year, the 36 states projected to generate a total IGR of N2.64 trillion.
Lagos State had the highest projected internal revenue, followed by River State. Ogun, Delta, Kaduna, Imo, and Oyo projected to generate at least N83 billion internally.
On the bottom were Kebbi, Yobe, Jigawa, Gombe, Ebonyi, and Taraba, with projected IGR of less than N20 billion.
Muda Yusuf, executive director at Centre for the Promotion of Private Enterprise, said state governments need to do a lot more to attract investments.
He said: “The IGR is a function of the economy of the state and many of our states are well known for agriculture. So there is a need for the governors to develop means of attracting investments into their states.
“For some of the resources, the state governors do not have control over but the federal government and this has to be addressed to enable the subnationals to generate more revenue.”
Also speaking with BusinessDay, Damilare Asimiyu, head of investment research at Afrinvest Limited, urged the state governments to harness resources within the states for revenue generation.
He said: “Only a few states can boast of a reasonable IGR in the country; others rely solely on FAAC monthly disbursements to run their government and this is bad.
“States should be able to optimise their resources to generate revenue. The governors should look inward, and create an enabling environment for businesses to thrive, give them tax holidays, invest in critical infrastructure that can support the smooth running of businesses; these are incentives that can attract investments to a state.”
