The Economic Confidential has released the Annual States Viability Index (ASVI) which shows that seven (7) States are insolvent as their Internally Generated Revenues (IGR) in 2019 were far below 10 per cent of their receipts from the Federation Account Allocations (FAA) in the same year.
The index showed that without the monthly disbursement from the Federation Account Allocation Committee (FAAC), many states remain unviable, and cannot survive without the federally collected revenue, mostly from the oil sector.
The IGR are generated by states through Pay-As-You-Earn Tax (PAYE), Direct Assessment, Road Taxes and revenues from Ministries, Departments and Agencies (MDA)s.
The IGR of the 36 states of the federation totalled N1.3 trillion in 2019 as compared to N1.1 trillion in 2018, an increase of about N200 billion. The report by the Economic Confidential, an intelligence magazine further indicates that the IGR of Lagos State of N398 billion is higher than that of 20 other states put together whose Internally Generated Revenues are extremely low, and poor compared to their allocations from the Federation Account.
Meanwhile, the Federal Capital Territory (FCT) Abuja which is not a state but the nation’s capital generated N74 billion IGR against N30 billion from the Federation Account in the same period.
Lagos State remained steadfast in its number one position in IGR with a total revenue generation of N398 billion compared to FAA of N270 billion which translates to 147 per cent in the twelve months of 2019. It is followed by Ogun State which generated IGR of N70.92 billion compared to FAA of N92 billion representing 77 per cent; Rivers with N140 billion compared to FAA of N219 billion representing 64 per cent and Kwara State with a low receipt from the Federation Account has maintained its impressive IGR by generating N30 billion compared to FAA of N80 billion representing 38 per cent.
Others with impressive IGR include Kaduna with IGR of N44 billion compared to FAA of N129 billion representing 35 per cent; Enugu generated N31 billion compared to FAA of N103 billion representing 29 per cent; Ondo with IGR of N30 billion compared to FAA of N103 billion representing 29 per cent; Edo with IGR of N29 billion compared to FAA of N108 billion representing 27 per cent; Anambra with IGR of N26 billion compared to FAA of N98 billion representing 27 per cent while Cross River State earned N22 billion IGR against FAA of N99 billion representing 25 per cent.
The ten states with impressive IGR generated N894 billion in total, while the remaining 26 states merely generated a total of N440bn in 2019.
The report provides an amazing discovery, as most states have improved their IGR compared to previous years. In 2019 only seven states generated less than 10 per cent IGR compared to 17 states in 2018.
There are seven states that may not survive without the Federation Account due to their extremely poor internal revenue generation of less than 10 per cent compared to their federal allocations. Top on the list is Katsina, the home state of President Muhammadu Buhari generated the poorest and lowest IGR compared to its federal allocation in 2019. It realized a meagre N8 billion compared to a total of N136 billion ‘free money’ received from the Federation Account Allocation (FAA) in 2019 representing 6 per cent. It is followed by Kebbi with IGR of N7.3 billion compared to FAA of N100 billion representing 7 per cent; Borno N8 billion compared to FAA of N121 billion representing 7 per cent and Taraba with IGR of N6.5 billion compared to N86 billion of FAA representing 8 per cent.
Others include Bayelsa, the home state of former President Goodluck Jonathan with IGR of N16 billion compared to N176 billion of FAA representing 9 per cent; Yobe with IGR of N8.4 billion compared to N88 billion of FAA representing 9 per cent and Gombe with IGR of N6.8 compared to N75bn of FAA representing 75% within the period under review.
The poor states with lower IGR may not stay afloat outside the monthly allocations from Federation Account due to lack of initiatives for revenue generation drive coupled with arm-chair governance. Some of the states cannot attract investors due to socio-political and economic crises including insurgency, kidnapping, armed-banditry and herdsmen-farmers clashes.
The Economic Confidential ASVI further showed that only three states in the entire Northern region have IGR above 20 per cent in comparison to their respective allocations from the Federation Account. They are Kwara, Kaduna and Kano States in that order.
Meanwhile, ten states in the South recorded over 20 per cent IGR in 2019. They are Lagos, Ogun, Rivers, Enugu, Ondo, Edo, Delta, Anambra, Cross River and Delta States.
Only Bayelsa is a state with the poorest Internally Generated Revenue of less than 10 per cent compared to their FAA in the South in 2019. The other poorest IGR states are in North-East Yobe, Gombe, Borno and Taraba State and two states from North-West, namely Katsina and Kebbi.
Meanwhile, the IGR of the respective states can improve through aggressive diversification of the economy to productive sectors rather than relying on the monthly Federation Account revenues that largely come from the oil sector.
The Economic Confidential is a sister publication of PRNigeria.