Revenue crisis: States broke, can’t pay salaries, execute projects – BH investigation

By AYOOLA OLAOLUWA

The gloomy economic situation in Nigeria has impacted negatively on the 36 states of the federation, with many of them currently struggling to finance governance and execute projects owing to months of dwindling revenue, Business Hallmark findings can reveal.

According to findings, virtually all the 36 states of the federation, with the exemption of Lagos, Rivers, Anambra, Delta, Kaduna, Kano and a few others, are currently broke and are not earning the needed revenue to fund projects and pay workers salaries and emoluments.

The problem is exacerbated by the drastic reduction in allocation from the federation account, arising from dwindling oil revenue as well as their inability to remarkably raise Internally Generated Revenue (IGR) needed to keep them afloat.

For instance, the three tiers of government, the federal, state and local government shared a much reduced N655.932 billion in April 2023, compared to the sum of N714.63 billion shared March.

While the Federal Government received the sum of N248.809 billion out of the N655.932 billion shared in April, the states got N218.307 billion, the local government councils received N160.600 billion, while the oil producing states received N28.216 billion as derivation, (13% of mineral revenue).

An in-depth analysis of FAAC allocations to the three tiers of government in the last one year confirmed that revenue generated and shared by the arms have been on the downward trend.

For example, while the three arms of government shared N990.189 billion in December 2022, what was shared in January 2023 dropped to N750.174 billion. This represents a massive drop of N240.015 billion compared to December’s allocation .

The downward trend continued in February 2023 when the three arms of government again shared N722.677 billion, a decrease of N27.497 billion compared to January’s allocation.

Also in March 2023, the Federation Account Allocation Committee (FAAC) the sum of shared N714.629 billion among the three tiers of government in March 2023, a decrease of N8.048 billion compared to February’s allocation.

A tabulation of what was shared between December 2022 and April 2023, a period of five months, indicate a sharp loss of N334.242 billion in revenue to the three arms of governments.

Meanwhile, while proceeds from FAAC has been on a spiral fall, IGR generated by states, apart from Lagos, Rivers, Ogun and the Federal Capital Territory (FCT) has not been encouraging.

In 2019, the 36 states generated N1.33 trillion revenue. The amount fell to N1.31 trillion in 2020, representing a fall of N20 billion compared with the revenue generated the previous year.

Things improved in 2021, with internally generated revenue rising to N1.89. The figures for 2022 full year are yet to be released, though early quarterly reports suggest there will be a major improvement in generated revenues.

However, while the increases are notable, experts believe that they are not commensurate with the growing needs and expenses of the states.

According to the SBM Intelligence in its last report on states incomes and sustainability between 2017 to 2020, Lagos and Ogun out of the 36 states of the federation made more IGR than the allocations they get from FAAC.

The remaining 32 states, however, rely heavily on monthly payments from the centre as their monthly IGRs are far lower from what they get from FAAC.

This indicates that the affected states, even the oil rich states, cannot survive on their own without the usual monthly handouts from Abuja.

The states, however, compensate for the shortfall by borrowing from lending institutions to fund parts of their recurrent and capital expenditures and also to service old debts.

Meanwhile, owing to the fallout of the 2023 polls, where newly elected governors warned that they won’t honour any loan awarded to the outgoing governors after the March 11th elections, many banks have refused to grant more loans to states despite serious pressure from state officials.

As a result of the increasing cost of running government, coupled with the need to service huge foreign and domestic debts, despite diminishing revenue, several months, and in some cases, years of unpaid serving and retired workers’ salaries, gratuities and pensions are daily accumulating,

Also, abandonment projects, such as access roads, public schools, health care centres, bridges and stadiums are littered across the federation.

Even Lagos, reputed as the only state in the country that could survive without allocations from the national purse, is not immune from the revenue challenge.

Though, the state has been consistent in paying workers wages between the 22nd and 25th of each month in the last 20 years, the hitherto fast pace of ongoing projects has slowed down.

Checks around the state indicate that several projects are going on at a very slow pace, while already approved ones are yet to kick off due largely to paucity of funds.

For instance, construction works on the proposed Fagba Flyover on Iju Road is yet to start, despite the state government demolishing structures on it Right of Way (ROW) more than five years ago.

According to sources in the Lagos State Ministry of Works, the Fagba Flyover should have commenced immediately after the completion of the Agege/Pen Cinema Bridge.

“Before he even left office in May 2019, former Governor Akinwunmi Ambode had secured the necessary ROW for the bridge by removing all obstacles on its part and paying full compensation to affected owners.

“However, like the Agege/Pen Cinema bridge, local politics during the 2019 polls also stalled the takeoff of the Fagba bridge.

“The new administration had planned to revive it in the 2020 budget, but unfortunately, Covid19 landed in Nigeria. The outbreak created several unforeseen hiccups, especially the unfortunate economic downturn, which many nations are still grappling with today.

“Expectedly, many projects were affected, particularly the Fagba Flyover and Lagos Metro rail project.

“While construction work is ongoing on the iconic rail project, hopefully, works will soon start on the Fagba Flyover and others”, the senior civil servant assured.

While Lagos is largely liquid and can weather prolonged revenue shortfalls from the centre (already, it had generated N179.912 billion/about N60billion monthly in the first quarter of 2023), other states are not so endowed.

Several states like Osun, Ondo, Kogi, Plateau, Adamawa, Bauchi, Gombe, Cross River, Benue, Taraba and Abia, apart from owing workers several arrears of salaries, leave bonuses, promotion arrears, monthly pension and co-operative deductions, as well as pensions and gratuities of retirees, have abandoned projects scattered across their cities and towns.

According to the advocacy group, states like Abia, Adamawa, Ebonyi, Ondo and Taraba owe three years or less in payments.

Breaking it down further, the report said Abia State currently owes its state tertiary institution workers six months’ salary, while Ebonyi has not paid its pensioners in the last six months.

Likewise, secretariat workers in Taraba State complained of irregular salary payments for up to six months, while lecturers at state tertiary institutions and midwives in the state-owned hospital in Ondo State have not been paid in the last four months.

Out of the remaining 23 states that can meet recurrent expenditure and loan repayment schedules with their total revenue, eight of them have revenue leftovers that are very small (less than N6bn), that they still have to borrow heavily to fund any meaningful capital expenditure, the report stated.

The worst-hit in this category, according to the report, are Zamfara, Ondo and Kwara States.

Troubled by the development, a developmental economist, Dr. Tajudeen Idris, warned that the industrial harmony currently being experienced in states could soon be shattered if the trend is not reversed.

“The states are in real trouble. And as I see it, it is not going to end soon judging by evolving economic parameters.

“I see no other way out (apart from allowing affected states to go bankrupt), than bailing them out through intervention programmes like the ‘budget support’ used by President Mumammadu Buhari to halt the drift into anarchy in states when he assumed power in 2019”, declared the expert.