The cumulative revenues of the Nigerian 36 states of the federation grew by 9.19 percent from the N4.69 trillion earned in 2020 to N5.12 trillion in 2021, according to BudgIT, a Nigerian civic organisation that applies technology for citizen engagement with institutional improvement to facilitate societal change.
BudgIT disclosed this in its 2022 state of states ranking report, which saw Lagos leading among states that have comparatively limited dependence on federally distributed revenue for their operations.
However, the bulk of the states still rely heavily on federally distributed revenues to implement their budgets.
While at least 50 percent of the total revenue of 33 states were federal transfers, 13 states relied on federal transfers for at least 70 percent of their total revenues.
“Being faced with declining revenues owing to Nigeria’s subsidy regime and the volatile price of crude oil, over-reliance on federal transfers is becoming increasingly unsustainable. Hence states as a matter of urgency need to wean themselves off the dependence on federally distributed revenues by significantly improving their capacity to mobilise revenues internally,” Budgit said in the report.
On the expenditure side, the cumulative expenditure of the 36 states increased by 27 percent from N5.23 trillion in 2020 to N6.64 trillion in 2021.
While 31 states increased their total expenditure from the previous year, five states reduced their expenditure, Zamfara declining the most by 15.59 percent.
Several states implemented reforms to identify ghost workers and eliminate payroll fraud, leading to decline in the year-on-year growth of the personnel cost of seven states, the report revealed.
However, the cumulative personnel cost of the 36 states grew by 5.38 percent from N1.46 trillion in 2020 to N1.54 trillion in 2021. Interestingly, nine States reduced their overhead cost from the previous year, signalling a reduction in the cost of governance. Conversely, 11 States increased their overhead cost from the previous year by more than 40 percent, with Akwa Ibom having the highest growth of 424.60 percent.
The report noted that cumulative spending on capital expenditure by the 36 states grew by 52.52 percent from N1.77tn in 2020 to N2.70tn in 2021.
Eight States increased the capital expenditure year-on-year by more than 100 percent, however, just five States, including Anambra, Ebonyi, Cross River, Kaduna, and Rivers, prioritized capital expenditure over operating expenses, signalling the prioritisation of investments in infrastructure, job creation, and human capital development.
Speaking of spending in critical social sectors like health and education, 24 states spent below the subnational average of N1977.07 on population health spending per capita.
Read also: Reps probes computation of revenue allocation to states, LGs from 2012-2021
Similarly, the education spending per capita of 22 States were below the subnational average of N3954.99. With an education spending per capita of N380.65 and N365.30 respectively, Imo and Ondo had the least investments in education per capita in 2021.
On subnational debt outlook, the report noted that the cumulative debt stock of the 36 States grew by 8.68 percent from N5.86tn in 2020 to N6.37tn in 2021.
A more disaggregated view of the subnational debt shows that 11 states reduced their total debt liability, with Delta State having the most impressive decline of 33.84 percent. Four states — Oyo, Yobe, Ogun and Sokoto, grew their total debt stock by more than 40 percent from 2020.
The five most indebted states — Lagos, Kaduna, Rivers, Ogun, and Cross River, are responsible for 37.09 percent of total subnational debt.
Kogi State, with a foreign debt year-on-year growth of 85.65 percent, ranked 1st among the 17 States that grew foreign debt in 2021. The four states with the highest dollar-denominated debt ($250million and above) — Lagos, Kaduna, Cross River and Edo — are the most susceptible to exchange rate volatility. However, all States need to check their appetite for acquiring dollar-denominated loans, especially in an era of low foreign direct investments and dwindling foreign reserves.
Six states — Plateau, Imo, Cross River, Osun, Kaduna and Ekiti—exceeded the debt-to-revenue ratio solvency threshold of 200 percent in 2021. While Zamfara was the only State that exceeded the debt service-to revenue solvency threshold of 40 percent, no state exceeded the solvency thresholds of 40 percent and 60 percent respectively for debt-to-GDP ratio and personnel cost-to revenue ratio.
