The total Internally Generated Revenue, IGR of the thirty-six states of the federation grew by 12.98 percent to N1.82 trillion in 2022 from N1.61 trillion recorded in 2021. The BudgIT 2023 State of States report has revealed.
According to the report, the cumulative revenue of the 36 states grew by 28.95 per cent from N5.12 trillion in 2021 to N6.6 trillion in 2022, indicating a strengthened domestic revenue mobilization capability.
The report also indicated that the increase in IGR did not reflect across the board as 17 states experienced a decline in their IGR from the previous year while 19 states recorded positive growth.
“The viability of states still depends largely on their ability to mobilize revenue internally, primarily through taxes. To do this, states will need to implement reforms aimed at strengthening their tax mobilization capacity, broadening and diversifying their tax base, formalising their informal sector using technology and establishing a robust consequence management regime to address and deter instances of corruption.
“Cumulatively, states ‘ reliance on transfers from the federal government increased from 58.4 percent in 2021 to 61.45 percent in 2022. At least 70 percent of the total revenue of 16 states comprised federal transfers while 32 states depended on transfer from the federal government for at least 50 percent of their revenue,” it stated.
The report also showed that the total expenditure of the 36 states stood at N82 trillion, 24.7 percent more than the N6.58 trillion spent in 2021. Save for three states-Anambra, Cross River, and Rivers, 33 states had an increase in their total spending in the 2022 fiscal year.
Considering the huge deficit in infrastructure, primary health care, education and key ease of doing business metrics, the report showed that several states are concentrating their resources on improving infrastructure and security, improving transparency and accessibility to information, reforming the regulatory environment, and improving health and educational outcomes.
On health care, Sokoto and Jigawa surpassed the Abuja declaration recommendation of earmarking 15 percent of total expenditure for improvement in healthcare delivery.
On a per capita basis, 24 states spent below the national average of N4,499.48 in 2022. Anambra and Abia spent below N1,000 per capita on health.
Similarly, just 12 states spent above the national average of N2,200 per capita on education.
“Furthermore, 8 states spent below N1,000 per capita on education. A look at expenditure more broadly revealed that a 19.26 percent increase in cumulative operating expenses of the 36 states was accompanied by a 28.54 percent increase in capital expenditure, year-on-year.
“Even though 15 states are yet to implement the minimum wage of N30,000, the cumulative personnel cost of the 36 states grew by 13.44 percent to N1 .75tn from N1.54tn the previous year. Similarly, overheads grew by 23.42 percent to N1.24tn in 2022,” it stated.
The total debt of the 36 states increased by 13.89 percent from N6.37 trillion in 2021 to N7.25 trillion in 2022. “Five states, Plateau, Bayelsa, Imo, Katsina, and Rivers recorded a decline in their total debt stock from the previous year, while Lagos, alongside Kaduna, Edo, and Cross River, have dollar-denominated debts over $250million.
Lagos’ foreign debt stock of $1.25billion surpassed the cumulative foreign debt stock of 24 states as of 31st December 2022, making it highly susceptible to exchange rate volatility. Without accumulating any additional dollar-denominated debt, the foreign debt stock of Lagos in naira increased from N560.03bn (using an exchange rate of N448 to $1) to N933.92bn (using an exchange rate of N747.1 to $1).
“Overall, except for Zamfara, which exceeded the recommended threshold for debt service to revenue ratio, and Cross River state, which surpassed the debt to revenue threshold, all other states remained within the recommended limits for debt to GDP, debt to revenue, debt service to revenue, and personnel cost to revenue ratio.
“To reduce their over-reliance on federal transfers, States need to broaden and diversify their tax base, which currently is predominantly PAYE-dependent. In light of the huge infrastructure deficit, states need to prioritise capital expenditure over recurrent, especially in areas that improve the ease of doing business, namely road, power, transport, digital and security infrastructure. The multiplicity of taxes, which puts inflationary pressures on the price of commodities, more importantly food, needs to be urgently addressed.
“Just as the state governments need to improve their capacity to accurately and consistently project their IGR and expenditures to improve service delivery outcomes, they need to establish robust consequence management regimes to deter corruption and ensure value for money,” the report stated.