Only two states were able to raise their Internally Generated Revenue above the amount distributed to them by the Federation Account Allocation Committee last year, investigations by our correspondent revealed. An analysis of the revenue profile of the three tiers of government showed that a total of 34 states and the Federal Capital Territory could not earn above what was allocated to them by FAAC in 2018.
The analysis of the states’ IGR and their monthly allocation indicated that while the total IGR generated by the 36 states and the FCT was estimated at N1.16tn in 2018, the net amount distributed to them from the federation account was N2.56tn. This implies that the amount which the states and the FCT got from the federation account in 2018 exceeded what they generated internally. The federation account is currently being managed on a legal framework that allows funds to be shared under three major components – statutory allocation, Value Added Tax distribution; and allocation made under the derivation principle.
Under statutory allocation, the Federal Government gets 52.68 per cent of the revenue shared; states, 26.72 per cent; and local governments 20.60 per cent. The framework also provides that Value Added Tax revenue be shared thus: FG, 15 per cent; states, 50 per cent; and LGs, 35 per cent. Similarly, extra allocation is given to states for revenues generated from solid minerals and oil emanating from their territories based on the 13 per cent derivation principle. Further analysis showed that only Lagos and Ogun State were able to raise their IGRs above the amount they received from FAAC.
While the revenue distributed by FAAC comes from crude oil proceeds and corporate taxes, the IGR earned by states are usually raised from five main revenue sources. They are Pay-As-You-Earn; direct assessment; road taxes; Ministries, Departments and Agencies; and other revenues. Analysis of the revenue profile of states as obtained from the National Bureau of Statistics revealed that while Lagos received a total of N119.02bn from the federation account for the whole of 2018, it was able to raise about N382.18bn as IGR during the period. This brought the total revenue available to the state for its programmes in 2018 to about N501.2bn. For Ogun State, out of the total available revenue of N124.19bn, about N84.55bn was earned through IGR while the balance of N39.64bn was received from the federation account.
Further analysis showed that Rivers State generated N112.78bn in IGR while it got the sum of N172.62bn as federal allocation. The FCT had IGR of N65.51bn as against FAAC allocation of N73.16bn, while Delta and Kano earned N58.43bn and N44.1bn respectively from IGR as against their respective FAAC allocation of N213.63bn and N84.20bn. The document stated that Kaduna generated N29.4bn as IGR as against federal allocation of N68.84bn in 2018,while Edo had N28.45bn,Oyo N24.67bn, Enugu N22.15bn and Akwa- Ibom N24.21bn as against FAAC allocation of N69.16bn, N59.28bn, N53.1bn and N202.35bn respectively.
Kwara had N23.04bn IGR as against FAAC allocation of N44.53bn; Ondo, N24.78bn as against N64.68bn allocated by FAAC; Anambra, N19.3bn as against FAAC’s N55.24bn; Imo, N14.88bn as against N54.18bn from FAAC; Abia, N14.83bn as against federal allocation of N56.32bn; Bayelsa, N13.63bn as against N153.1bn, and Plateau, N12.72bn compared to FAAC allocation of N43.88bn. Similarly, Benue had IGR of N11.21bn as against FAAC allocation of N55.24bn; Sokoto, N18.76bn compared to N54.46bn from FAAC; Kogi, N11.33bn as against N53.37bn, Niger, N10.43bn compared to N57.52bn from FAAC; Jigawa, N9.24bn in comparison to FAAC’s N60.32bn and Osun among others N10.38bn as against N22.83bn.
The Registrar, Institute of Finance and Control of Nigeria, Mr Godwin Eohoi, said there was need for the economy to be restructured in such a way that would enable states to have control of their resources. He said that this would help to check a situation where many of the federating units would have to always wait for allocations from the federation account before they can carry out their obligations such as salary payments and project execution. Eohoi told our correspondent that there was no need for states to wait for revenue allocation from the centre if the Federal Government had come up with laws that would enable them exploit their resources for the benefit of their people. He said the country’s over dependence on oil as a major source of revenue was hurting the economy. He said, “We need to focus on policies that support backward and forward integration and seek to make agriculture a business rather than occupation for self-sustenance. “Nigeria has huge economic potential outside the oil sector which is largely untapped. We have always been relying on a mono product commodity called oil as source of income, notwithstanding the fact that oil constitutes only 10 per cent of our Gross Domestic Product.
“There is potential for growth in non-oil export in most states and virtually all the states have one form of economic competitive advantage or the other. “For example, virtually the whole of Zamfara State is sitting on gold and diamond, largely untapped, with little going to illegal miners. “If the states are given the powers to control their resources, it would help promote economic competition.” He said with competition, the federating units would come up with innovative ways of stimulating their respective economies. In an interview, a former Director-General, Abuja Chamber of Commerce and Industry, Chijioke Ekechukwu, said the country’s over-reliance on oil still portends danger for the economy.
This, according to him, was because the potential of the oil sector was not only volatile but outside the control of government. President Muhammadu Buhari had last month during the National Economic. Council meeting asked the governors of the 36 states to raise their internally generated revenues and the Value Added Tax in the next four years. The president said this was to help the states to meet the challenges of providing infrastructure and equipment for fighting insecurity. He told the governors to raise the taxes in such a way that would not be disruptive to business operations. Buhari insisted that without IGR and VAT increment, it would be difficult for the state governments to meet their needs.
He said, “Going forward, states must in the next four years find ways to increase internally generated revenues, improve Value Added Tax collection and increase agricultural output without disrupting business activities.
“I also want you to work with the federal agencies and the service providers in ensuring that broadband infrastructure is made available all over the country. Information and Communications Technology is the future of work and we must not allow ourselves to be left behind. “Let me restate the high expectations on NEC as a veritable source of articulating policies and programmes that are expected to drive growth and development, secure our environment and take the country to the next level. The challenges that confront us in the next few years, especially in the areas of security, human capital development and employment for our youths are monumental and historic. But we are more than equal to the task.” PUNCH