Nigerian states now generate the least revenue internally but receive more money from the Federal Allocation Accounts Committee (FAAC) than at any time in history.
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Yet, states don’t have enough money and the resultant effect is that there are no significant infrastructure built, salaries owed for more than eight months, and jobs not created for the teeming youths. The states are now advised to revisit their funding plans to support financial sustainability.
Ayara Ndem, a professor, gave the advice in a lead paper he presented at the 18th Joint Planning Board (JPB) and National Council on Development Planning (NCDP) meetings that kicked off in Asaba, Wednesday.
In the paper tagged “Revenue Diversification and Fiscal Sustainability in Nigeria: Options for states,” Ndem noted that the fiscal challenges at the state level had led to obvious financial crisis in many states as well as escalating deficits and mounting debt burdens amongst other challenges.
“The states in Nigeria have multiple streams of funding to sustain their operations, for instance, FAAC, private donors, grants, contracts, investments. Substantial cutbacks in both government and donor funds suggest that states should develop or revisit their funding plans to support financial sustainability.
“Challenges facing the states are due to high debt profile, low IGR, and a swollen recurrent expenditure fuelled by personnel cost need to be confronted.
“There is a huge funding gap that needs to be met, for effective implementation of state government projects and programmes that will impact on development now and in the future.”
Ndem said effort to optimize IGR to service recurrent expenditure, reduce over-dependence on FAAC and free-up funds for capital expenditure remains a critical option to consider”.
In addition, he said that states may wish to consider innovative funding techniques, such as fostering good relationships with private investors to address major financial challenges and domesticating good development partner programmes.
He stressed the importance of states aligning expectations of development partners with state development agenda, as well as giving effective circles to external development programmes and necessary counterpart seaports. Demonstrating value for money and accountability for public funds, he said was also important.
