• Ogun At 63%, As 28 States Make Less Than 30%
(Sundiata Finance) – Lagos and Ogun states are fast moving away from other states in the country in financial capacity, following their ability to generate over 60 per cent of their revenue internally. The two states generated 73 per cent and 63 per cent of their revenue internally in 2016. This means that in the event of a failure or shortfall in allocation from the Federation Account, the two states can internally generate at least N63 out of every N100 needed monthly. Lagos and Ogun are closely followed by Rivers, Kano and Edo states, which generated 43 per cent, 38 per cent and 35 per cent respectively, of their total revenue needs, internally.
BusinessDay derived the viability metrics by expressing each state’s internally generated revenue (IGR) as a percentage of its total revenue.
The 2016 ranking of states, based on viability metrics, shows some variations when compared with the ranking of states in 2015. This is because unlike in 2015 when only Lagos, Ogun and Enugu were the states that realised over 50 per cent of their revenue internally, a 22 per cent reduction in IGR generated by the Enugu State Government in 2016 pushed the state off the wagon. Enugu generated N12.6 billion in 2016 as against N18.08 billion in 2015.
“Both Ogun and Enugu joined Lagos in achieving a ratio IGR/total revenue above 50 per cent in 2015. One other state (Rivers) managed 40 per cent, three 30 per cent (Kano, Oyo and Abia) and five 20 per cent”, a note from FBNQuest stated.
Findings by BusinessDay Research and Intelligence Unit (BRIU) on states viability in 2016 show that as against three states in 2015, only two (Lagos and Ogun) generated above 50 per cent in 2016. Rivers state improved to 43 per cent in 2016 as against 40 per cent in 2015. Furthermore, five states in 2016 as against three in 2015 realised between 30-38 per cent of their revenue in 2016.
In addition, eight states in 2016 in contrast to five got between 20 and 28 per cent of their revenue internally, while 20 states generated less twenty percent of their revenue internally.
Gregory Kronsten, head, macroeconomic and fixed income research at FBN Quest, says state governments need to do more. “State governments should make land available for investments purposes and raise their tax base,” Krosten said.
“Babatunde Fowler, chairman of the Federal Inland Revenue Service (FIRS) and the Joint Tax Board, has called upon state governments to devote more authority to their revenue agencies. We endorse his call, which requires state governors to take a broader view of their obligations”, FBNQuest note said.
The need to increase the tax base of both the federal and state governments has become imperative, following the new economic blueprint which calls for a shift away from over-reliance on crude oil revenue. Early this year, it was reported that only 40 million Nigerians out of 69.9 million, taxable , representing 57 per cent, are active tax payers. Particularly, only 214 individuals in the entire nation pay taxes in excess of N20 million, majority of who reside in the Lagos-Ogun axis.
“There should be better interstate network because the centres of economic activity in Nigeria are in Lagos, Kano-Kaduna, as well as the Aba-Rivers axis. Interstate network will encourage investors to locate their businesses anywhere in the country because they can easily access Lagos or other bigger markets. When big businesses are located everywhere in Nigeria, state governments will generate more IGR. At present however, the industries are in the Lagos-Ogun axis”, said Kemi Akinde of Meristem Securities. (BusinessDay)
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