Nigerian state governments do not generate enough revenue internally and even when money from the Federation Allocation Account (FAAC) is added, they still have too little per person to make the needed investments.
However, instead of looking inwards to grow revenues, state governments have overtime depended more on Abuja for monthly allocations, which is susceptible to oil shocks.
Data compiled by BusinessDay show that in 2018, the average income per person across the 37 states of Nigeria, including the Federal Capital Territory (FCT), stood at $50.9 (N18,511), an amount analysts say is little to drive the needed investments required for inclusive growth.
The figure was arrived at by dividing the total amount of revenue (IGR+FAAC) generated by each sates to their respective populations, using a dollar-to-naira conversion rate of 363.8 and without recourse to the debt servicing obligations of the states.
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In 2018, Nigerian states made total revenue of N3.74 trillion of which allocation from the federation account accounted for 68.7 percent of the figure, data from the National Bureau of Statistics (NBS) show.
Using latest population figures for 2018 released by the United Nations’ estimates, Bayelsa turns out to be Nigeria’s richest state, thanks to its small population that helped in boosting the income per person in the state.
The state raked in a total of N166.7 billion in revenue for its 2.4 million people, making it the state with the highest income per person at N70,000 ($192), using 363.8 dollar-to-naira conversion rate.
Delta State came next with a population of 5.9 million people, each having per capital income of N46,157 ($126.9), while populace in Abuja, Akwa Ibom, Lagos and Rivers followed next with income per residents of N40,927 ($112.5); Akwa Ibom, N33,491.93 ($108); Lagos, N38,662.70 ($106.27), and Rivers, N37,608.57 ($103.38).
Those with the lowest income per person include Osun, Katsina, Bauchi, Kano, Oyo, and Zamfara with per capita income of N6,746.6 ($18.54); N8,380.89 ($23.03); N9,309.04 ($25.59); N9,425.1 ($25.91); N10,255.47 ($28.19); N10,459.51 ($28.75), respectively.
“State government depend too much on revenue allocation from the federation account and this is making them have low capacity to generate income internally,” noted Tajudeen Ibrahim, head of research at a Lagos-based investment firm.
Ibrahim explained that states governments should pay close attention to developing tourism, entertainment and arts in their states as these were important and attract investments.
Data show that there is a high positive correlation between foreign investments and internally generated revenues, as states that are seen as more destinations for capital importation report higher IGR.
Using 2019 first quarter figures on capital importation into Nigeria, states like Lagos, Rivers and Abuja among others that received highest FDI destination, reported the largest IGR.
The reason for this is not far-fetched, since state government can have more to tax on personal income of individuals resident in the state, withholding tax on individuals, capital gain tax on individuals only, stamp duties on instrument executed by individuals, Pool Betting, lotteries, gaming and casino taxes, road taxes, etc.
