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Disaggregating fiscal profiles of states in Nigeria in Q3 2018: The takeaways

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The activities of state governments especially as they relate to their revenues and debt profiles have become a subject of intense debate among policy makers and analysts who have increasingly questioned the viability of these states in terms of meeting up with their contractual and constitutional responsibilities of paying workers’ salaries as at when due, delivering on infrastructural development, growing the local economy, amongst others.

In its recent publication, the National Bureau of Statistics (NBS) explicitly detailed state governments’ fiscal positions in the year 2018. The report presented state governments’ total revenues which it arrived at by the summation of revenues derivable from diverse sources notably internally generated revenue (IGR) and the monthly allocations from the federation account. It equally showed the debt profile, both foreign and domestic, of each of the states.

In this article, attempts will be made to show these trends and reveal the states that have generated the most from IGR sources like Pay-As-You-Earn (PAYE) and Ministries, Departments and Agencies (MDAs).


IGR of Nigerian states

The internally generated revenue of states, excluding the FCT, stood atN820.7 billion in 2016. It rose by 14 per cent to N936.5 billion in 2017 bolstered by a 12 per cent increase in total tax revenue from N547.1 billion in 2016 to N611.8 billion in 2017. This performance of tax revenue components of the states’ revenue sources underlined by a boost in PAYE, direct assessment, road taxes and other taxes, obliterated an abysmal performance of revenues accruable from MDAs which sank by 11 per cent to N160.4 billion in 2017 from its previous value of N180.1 billion in the previous year.

States IGR hit N845.1 billion when totalled across the first, second and third quarters of 2018, surpassing the entire 2016 record with possibility of equating or surpass the 2017 record

Source: NBS, BRIU

The FCT and 16 other states of Abia, Bayelsa, Benue, Delta, Ebonyi, Edo, Ekiti, Enugu, Kaduna, Kano, Katsina, Lagos, Nasarawa, Niger, Ogun and Rivers state had negative average growth rate of their IGR between Q1 2018 and Q3 2018.

Sokoto state and 19 other states sustained a positive internal revenue average growth. Sokoto state had an average growth rate of IGR of 91 per cent between Q1 2018 and Q3 2018. Others are Yobe ,28 per cent; Ondo, 24 per cent; Zamfara, 18 per cent; Osun, 14 per cent; Taraba, 13 per cent, amongst others.

PAYE: as usual, Lagos leads

Aggregately, PAYE of states including the FCT as at the end of Q3 2018 hit N163.1 billion. Between January and September 2018, the total PAYE amount collected by all states in the country stood at a whooping N515.6 billion, surpassing the total amount of N407.5bn and N448.2bn in 2016 and 2017 respectively.

Using the total PAYE collected between January and September, Lagos state, the commercial nerve centre of Nigeria, came top of the chart. The state’s total PAYE size within the period under review was N176.9 billion, about 34 per cent of the entire PAYE amount by all states including the FCT. In fact, the state’s PAYE amount surpassed the amount of PAYE accruable to the bottom 32 states.

Source: NBS,BRIU

Rivers state came closer, pocketing N63.9 billion in PAYE amount between January and September. Other included FCT, N46.2bn; Delta, N31.6bn; Ogun ,N30.1bn; Akwa Ibom, N14.5bn; Kano, N10.5bn; Kaduna, N9.7bn; Edo, N8.9bn and Bayelsa, N8.7bn.

Together, these ten states account for more than two-thirds (77.8%) of the total PAYE of states in January to September 2018.

State MDAs: How effective have they been?

In 2016 and 2017, total revenues from states’ MDAs were N180.06bn and N160.59bn respectively.
Across the various states’ MDAs in the country, over N155bn revenue was derived between January and September of 2018 with 68 per cent of that figure generated in the first half of the year while 32 per cent (N50.41bn) was generated in the third quarter of the reference year.

Lagos State’s MDAs, with an amount in excess of N39.5bn, generated the most revenue within the period under review. Ogun, N20.9bn and Kaduna, N10.2bn followed suit in that order. Others in the top ten categories of highest MDA revenues included Kwara, N9.5bn; Kano, N9.2bn; Enugu, N6.5bn; Edo, N5.7bn; Delta, N5.7bn; Ondo, N5.4bn and Rivers, N4.7bn.

The combined MDA revenue of these top ten states is N117.24bn which is about 75 per cent of the entire states MDAs’ revenue for the period.

Source: NBS, BRIU


States debts: are they within reasonable thresholds?

Source: NBS, BRIU

NBS report puts the total external debt of states as at end of first half 2018 (H1’18) at $4.22bn (about N1.29trn using exchange rate of N306/$). Similarly, the total domestic debt figure as at the same period was put at N3.38trn. Consequently, the total debt size of all states in Nigeria stood at N4.68trn as at H1’18.
Using the various size of the economy of each state, we computed the state governments’ potential in repaying these large debt sizes using the debt-to-gross state product (GSP) ratio. The national average of the debt-to-GSP ratio was 4.2 per cent with only 10 (plus the FCT) of the 36 states sitting below that. These 10 states plus the FCT are Anambra, 3.9 per cent; Benue, 3 per cent; Zamfara, 2.9 per cent; Kano, 2.7per cent; Lagos, 2.6per cent; Rivers, 2.1 per cent; Jigawa, 1.9per cent; Niger, 1.7 per cent; Katsina, 1.6per cent; Sokoto, 1.2 per cent and the FCT, 1.1 per cent.

Conversely, 26 states ranked above the national debt-to-GSP average. Osun State ranked the highest with a ratio of 24.9 per cent while Ekiti State had 23.4 per cent. Others on the top ten lists are Cross River, 20.8 per cent; Plateau, 18.6 per cent; Kogi, 16.3 per cent; Taraba, 16 per cent; Bauchi, 15.3per cent; Edo, 15.2per cent; Imo, 11.9per cent and Adamawa, 11.6 per cent.

We foresee a situation where some states revenue are strained given the bogus size of these debt figures exacerbated by expanding personnel expenses that will come with the proposed new minimum wage from N18,000 to N30,000 as demanded by organized labour movement.

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