ANALYSIS: 17 states cannot fund personnel costs with IGR

ON December 12, the governor of Abia State, Alex Otti, presented the proposed 2024 appropriation bill of N567.2 billion to the state House of Assembly.

The proposed budget, more than 300 per cent higher than what was approved for 2023 (N160.5 billion), generated mixed reactions from the public.

The thrust of the argument was that the state governor presented a budget with a deficit of more than N400 billion,  which would be secured from local and foreign borrowings to finance capital expenditure.

At the same time, N166 billion, pulled from the state’s internally generated revenue (IGR) and  Federation Accounts Allocation Committee (FAAC), would be used for recurrent expenditure. 

The governor said the N400 billion loan would be used to develop capital projects like roads, schools and other facilities that could generate revenue for the state’s economy, which would pay off the loan in the long term.

Amidst these reactions, The ICIR Data used the Abia state governor’s economic model to check if the country’s 36 states could use their IGR to offset recurrent expenditure, specifically personnel costs.

The ICIR Data used the states’ approved 2023 budget and the IGR generated in 2022, which are the latest data available for such analysis.

Personnel cost in a fiscal budget is the total money spent on the remuneration of workers within the government system. 

Our findings showed that 17 out of 36 states in Nigeria cannot pay up to six months of the total personnel cost approved in the fiscal budget in 2023 if the IGR were used. To run their budget, the affected states would depend on local or external borrowings, multilateral loans, FAAC, grants and aids.

These states are Abia, Adamawa, Akwa Ibom, Bayelsa, Benue, Borno, Cross Rivers, Ebonyi and Imo.

Others are Kastina, Kebbi, Kogi, Nasarawa, Niger, Plateau, Taraba and Yobe. [View the sheet analysis here]

For instance, in the Bayelsa state fiscal appropriation for 2023, the budget for personnel cost was N81.78 billion, which is N6.81 billion if broken down monthly. However, the state generated an IGR of N15.09 billion. If the IGR is used to offset personnel costs, it can only pay for two months. 

Similarly, the personnel cost approved for Plateau state in 2023 was N39.83billion (3.318 billion monthly), but the state generated an IGR of N15.93 billion, which can only offset five months of personnel expenditure. 

The National Bureau of Statistics reported that the total IGR generated by the 36 states and the Federal Capital Territory in 2022 was N1.93 trillion. This was 1.57 per cent higher than N1.896 trillion pulled in 2021.

Meanwhile, The ICIR reported that Lagos, Rivers and the FCT got nearly half (49.25 per cent) of the total IGR generated in 2022.

Despite generating IGR, 13 states could not implement 80 per cent of their 2022 fiscal budget.

Also, most states with a lower internally generated revenue survived on the Federal Government allocation and other loans. 

On the contrary, states like Lagos, Ogun, and Rivers can use their yearly IGR to offset the personnel cost of a fiscal year and more.

The ICIR analysis shows that the 2022 IGR of Lagos state can offset the state’s personnel expenditure for two years and ten months (34 months). Also, Ogun IGR would offset 14 months, while Rivers’ will take care of 16 months. 






     

     

    However, this does not exonerate Lagos and Rivers states from running deficit budgets despite the federal allocation and IGR.

    Expert reacts

    The Acting Head of Open Government and Institutional Partnership, BudgIT,  Iyanu Bolarinwa, said that most states could not fund their budget due to a lack of capital investments in foreign exchange. 

    He said, “By the time you remove IGR from a state, you will discover that some states cannot pay for recurrent expenditure, let alone capital expenditure. Many states believe that they can increase IGR by taxation, but when you do not expand the purchasing power of people through investment, you reduce the number of people you can tax.”

    He added that for a state to develop its IGR, it needed to look at the human development index (HDI), invest more in capital projects, and expand its sales to the world.

    Kehinde Ogunyale tells stories by using data to hold power into account. You can send him a mail at [email protected] or Twitter: Prof_KennyJames

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