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Published On: Sun, Apr 1st, 2018

IGR: States battle rising fiscal challenges


Realities of tough economic times have compelled states across the federation to engineer improved ways of increasing their internally generated revenue (IGR); recently released figures by the National Bureau of Statistics (NBS) show that several states have had to fatten their treasury receipts to cope with the mounting challenge of rising recurrent and capital expenditure. The NBS report shows that in 2017 states had mixed fortunes.

Ebonyi State made the most significant improvement in Internally Generated Revenue (IGR) among the 36 states in the country, although Lagos State remained the most viable sub unit.

Ebonyi states IGR surged forward by 118 per cent to N5.10 billion, making it the state with the highest upward IGR movement in 2017, while the N333.97 billion Lagos State generated was the maximum raked in by any of the states from internal economic activities.

Most states responded to the 16-month recession the country battled with between 2016 and 2017 by inward review of potential revenue sources.

Bauchi, Akwa Ibom, Osun and Taraba were the only states in the federation that failed to grow their IGR in 2017 as states collectively improved their internally generated income 12.03 per cent year-on-year to N931.23bn last year, compared to the N831.19bn they raised the preceding year, aided by the Voluntary Assets Identification and Declaration Scheme (VAIDS), which ended on March 31st 2018.

The need to develop Ebonyi State and address the challenge of a sharp reduction in Federal allocation, following a fall in international oil prices nudged the state to engage new hands and snappier minds, said Emma Uzor, Chief Press Secretary to Governor David Umahi. He further explained that Ebonyi State Government has automated revenue collection in the state, which helped immensely in blocking leakages, resulting in the improvement seen in the state’s 2017 IGR.

Like Ebonyi State, eight other states ramped up their IGRs by more than 50 per cent last year, with terror-ravaged Borno State raising internal income by 86 per cent to N4.98 billion.

Besides Lagos which developed an exceptionally efficient revenue collection system, which shot IGR up by..per cent over a 19 year period, other states such as Rivers, Ogun and Kano also stumped up sizeable incomes as IGR during the year.

Although total IGR states went up by 12 per cent to N931.23 billion last year as against the N831.19 billion recorded in 2016 this still paled against the huge dependence of states on the Federation Account Allocation Committee (FAAC) distribution of federal earnings. Net FAAC allocation in 2017 was put at N1.73 trillion while the total revenue available to the states was placed at N2.67 trillion, there was also an upswing in state expenditure with the foreign debts of states hitting a dodgy $19.9 billion, with domestic debt rising to an equally scary N3.35 trillion as at the end of last year.

The 12 per cent rise in States’ IGR was not something to celebrate because it followed a natural course of growth as population has continued to increase, notes Dr Vincent Nwani, director, Research and Advocacy, Lagos Chamber of Commerce and Industry (LCCI). He argues that the IGR growth has not been proportional to states’ overhead, which has made them desperately dependent on federal allocations.

“If most of the states were corporate entities, they would have been insolvent by now,” Nwani claims.

Bauchi suffered the worst dip in IGR in 2017, plunging -50 per cent to N4.37 billion, followed by AkwaIbom and Osun whose IGR dropped -15 per cent to N15.96 billion and -27 per cent to N6.49 billion respectively.  But Akwa Ibom gets one of the highest federal allocations in the country, collecting N143.61 billion in 2017 as IGR forming only 10 per cent of the total income of N159.57 billion it realized last year. The state has a local debt of N187.28 billion and $50.52 million foreign debt hanging over its head.

The decline in Akwa Ibom State IGR was traced to lack of efficient revenue collection structure, which gave room for a lot of leakages, opined Professor Leo Ukpong, dean, School of Business, University of Uyo. He argued that because the state gets huge bunk of money from federal allocation, this has dampened   drive for internal revenue.

Lagos State which generated 35.86 per cent of the total N931.23 IGR states recorded in 2017, got just N89.69 billion as federal allocation and owes N363.29 billion to local creditors, which is 35.61 per cent of the states’ total debts excluding a foreign debt of $1.47 billion.

To further increase its IGR, the state raised Land Use Charge by almost 200 per cent, which caused the organized private sector (OPS) and civil societies to protest, arm-twisting the government to review it downward.

The State governor, Akinwunmi  Ambode maintained that the increase was necessitated by the need to improve the state of infrastructure in Lagos. But Dr Muda Yusuf, Director-General, LCCI countered, asserting that those already in the tax net were being overburdened. He advised the state to bring more people into the tax net rather than raise rates, adding that though the people are willing to pay taxes, they currently lack the capacity to pay higher rates.

Many believe the revenue states generate as not been commensurate with infrastructural projects executed in the country.

And Bill Gates, founder, Microsoft Incorporated recently counseled political leaders in the country to invest in human development in order to generate better tax revenues.

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