With higher allocations from the Federal Account Allocation Committee (FAAC) following the floating of the naira, Nigerians are calling on state governors to do away with opulent lifestyles and focus on providing essential services to ease the economic realities of the recent removal of petrol subsidies.
The three tiers of government in Africa’s biggest economy are set to share a record-breaking N1.959 trillion in July 2023, a 149 percent increase from the amount shared in June (N786.161 billion) and a 199 percent increase from May allocations (N655.93 billion), according to findings by BusinessDay.
Further breakdown of the N1.9 trillion showed statutory collections make up N1.7 trillion of the federally collected revenues, followed by N293 billion from VAT and N12 billion from electronic money transfer charges.
Despite rising allocation, economists polled by BusinessDay said state governors have a responsibility to reduce their spending and focus on providing essential services to alleviate the hardships facing people living in rural communities.
“States need to do more for their citizens during this difficult period, especially with increasing FAAC allocation,” Biodun Adedipe, the founder and chief consultant of B. Adedipe Associates Limited, said.
Niyi Awoyemi, a public finance expert and managing director of Brightlve Capitals, said rising FAAC allocation presents a perfect opportunity for states to provide new direction anchored on prudence, revenue base expansion, lean cabinets, and increased accountability of public expenditure.
“Central to the states’ rescue plans is a reduction in the cost of governance. States governors need to resist reckless lifestyles by having state-procured jets. The era of having a thousand aides or cabinet members must stop,” Awoyemi said.
A report by BudgIT, a civic organisation helping to make the Nigerian budget and public data more understandable and accessible, said: “State governments’ recurrent costs have increased significantly over the years with only a small portion of collected revenue and loans dedicated to meet capital.”
“This spending pattern is not sustainable as this has opened gaps in providing quality healthcare services and educational systems, thus slowing down social development as well as growth in other key areas of the economy,” BudgIT said in its report titled ‘Patterns in States’ Expenditure’.
The BudgIT’s report also showed at least 50 percent of the total revenue of 33 states was federal transfers, with 13 states relying on federal transfers for at least 70 percent of their total revenues in 2021.
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Pat Utomi, a political economist and former presidential candidate, urged states to create an environment for wealth creation rather than depend solely on the federal allocations.
“States must focus more on creating the environment for wealth creation. If you go back to the late 50s and early 60s, most of the developments that took place in Nigeria were from the subnational governments. They collected the revenue and sent 50 percent of it to the centre, but the military ruined all of that,” he said.
Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, said the cost of governance at the state level is too high.
“The states are having unhealthy overheads, too much unnecessary staff strength, and it seems they lack the political will to cut down personnel cost, corruption and leakage of low level of accountability,” Yusuf told BusinessDay.
He added: “States need to be creative in generating revenue; while some of them have resources which can yield more revenue, high levels of complacency have increased their dependency on FAAC allocation.”
Another report by Dataphyte, a research and data analytics organisation, showed many states may fall below their projected revenue for the 2023 fiscal year based on their performance in Q1.
For instance, as of the end of Q1 2023, Dataphyte’s report showed that Kwara State had generated 45.03 percent of its N41.04 billion internal revenue generation (IGR) for the year. Delta State also generated over 40 percent of its projected IGR for 2023.
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“It is worth stating that the 42.64% IGR performance of Delta State was because revenues were collected from some IGR codes that were not budgeted in the first quarter of the year as explained in the state’s budget implementation report,” Dataphyte’s report showed.
Kebbi, Ondo, Kogi, Ekiti, and Gombe generated at least 30 percent of their IGR at the end of Q1 while Jigawa, Bayelsa, Plateau, and Anambra achieved at least 27 percent.
Apart from these 11 states, the report showed every other state generated below 25 percent of their IGR at the end of the first quarter of the year.
Akwa Ibom, Imo, Enugu, and Katsina generated below 15 percent of their projected internal revenue for the year as of the end of Q1.
“For some of the states, their low IGR performance was attributed to security challenges and electioneering activities,” Dataphyte said.
However, for Akwa Ibom State, which realised less than 2 percent of its projected N47.85 billion IGR for the year, Dataphyte said it was disclosed in the budget implementation report that some MDAs, as of Q1, had not submitted its documentations.
“States must desist from unprofitable ventures such as sponsorship of people to the holy lands on various occasions,” Awoyemi said.
