ONLY three states including Lagos, Rivers, and Akwa Ibom can meet and finance their recurrent expenditure obligation with states-owned revenue without receiving the monthly allocation from the Federal Account Allocation Committee (FAAC).
This was learned on Thursday, October 23 at the 2019 edition of the State of States report released by BudgIT, a civic organisation driven to make the Nigerian budget and public data understandable and accessible across every literacy span.
The State of States report that reveals the fiscal sustainability of Nigerian states is anchored on three key indices which are; Index A: states’ ability to meet their recurrent expenditures independently of the Federal Government (weighted average of 0.35 per cent), Index B: the state’s ability to meet their recurrent expenditures with both its internally generated revenue (IGR) and federal allocations (weighted average of 0.50 per cent), and Index C: how long it would take states to pay off their total debt stock (weighted average of 0.15 per cent).
The report shows that considering the ability of states to meet up with their recurrent expenditure obligation with their IGR, Value Added Tax (VAT), 13 per cent share of oil derivation paid to oil-producing states, states like Lagos with index 0.48, Rivers-0.73, and Akwa Ibom- 0.91 sit top in that index.
States like Kogi, Adamawa, Plateau, Taraba, and Osun with 4.34, 4.19, 3.60, 3.89, and 3.04 respectively as their indices on the ladder will have to rely so much on the federal allocation and also have to borrow to settle their recurrent obligations.
In the report, BudgIT stated that access to audited statements brought out some facts on the true state of recurrent expenditure in focus states.
“We discovered states, such as Delta, running huge recurrent expenditure reaching N200billion. Bayelsa, despite its size and population, has a high recurrent bill as high as N137billion, compared with Ebonyi with a recurrent bill of N30billion, Sokoto N38billion, Jigawa N43billion, Yobe N35billion etc,” BudgIT said in the report.
“However, we notice that Kogi lags behind due to its huge recurrent bill as at 2017, when it was still paying salaries for workers and also had high repayment bills for loans,” the report added.
BudgIT, however, said it believes that Nigeria needs to create incentives for states to expand growth and earning potential, thereby activating resources needed to improve the state of health, education, and access to opportunity.
It further said states can invest in their unique resources to boost their income by keeping their recurrent costs lean to free up more spending for social and economic infrastructure.