The performance of states’ internally generated revenue (IGR) is absolutely disgraceful, according to the latest figures released by the National Bureau of Statistics. These figures reveal that the states continue to underperform and rely heavily on monthly allocations for their survival. In 2022, the 36 states and the Federal Capital Territory generated a total of N1.92 trillion, while they received N3.24 trillion from the Federation Account Allocation Committee. This reliance on allocations perpetuates poverty and needs to be urgently reversed.
The report also shows that there has been a sluggish growth of just 2.0 percent year-on-year in IGR, compared to the N1.89 trillion recorded in 2021. Furthermore, 31 states heavily depend on federal allocations for their survival, which goes against the principles of federalism. The idea of autonomous and self-reliant states is undermined when they rely so heavily on external support.
Lagos State once again leads the pack with the highest IGR of N651.15 billion, accounting for 34 percent of the total. Rivers follows with N172.8 billion, and the Federal Capital Territory with N124 billion. Ogun and Delta are next in line with N120.6 billion and N85.9 billion respectively. On the other end of the spectrum, the four states with the lowest IGR are Kebbi with N9.15 billion, Taraba with N10.24 billion, Yobe with N10.46 billion, and Ebonyi with N12.4 billion.
Only five states are able to rely on their internal revenue and federal allocations: Kaduna, Kwara, Lagos, Ogun, and Oyo. The Federal Capital Territory also performs well in this regard. Shamefully, the remaining states overwhelmingly depend on the Federation Account Allocation Committee.
The absurdity of this situation is highlighted by the fact that only nine states are oil-bearing states, yet oil and gas revenues play a significant role in the distributable accruals. This fiscal arrangement promotes laziness and dependency, hindering development. All states have the potential for agriculture, mining, and human capital development. In order for Nigeria to maximize its potential, states must become productive and self-sufficient.
The population is growing at a rate of 2.6 percent annually, while GDP is projected to grow by only 2.1 percent this year and 3.2 percent in 2024, according to the IMF. The unemployment rate of 33.3 percent is believed to be an understatement, with the youth segment experiencing a staggering 53.4 percent unemployment rate.
Nigeria needs to make difficult but necessary choices. It must operate as a true federation of autonomous and productive units. This way, the states can drive investment, create jobs, and generate wealth to improve the current poor human development indices. In the First Republic, the regions were the driving force behind Nigeria’s development, leading in agriculture, mining, industrialization, infrastructure, and social services. They were self-sufficient.
The governors need to implement comprehensive economic policies and, most importantly, reduce their dependence on federal sharing. While advocating for the replacement of the 1999 Constitution, they should take advantage of the partially liberalized solid minerals and power sectors to attract investments and stimulate productive activities.
An example can be seen in Nevada, an arid state in the United States, which transformed itself into a national and global gambling and entertainment center as its revenue from mining declined. According to Statista, its revenue from casino gaming reached a peak of $11.6 billion in 2018.
Nigeria’s states should focus on rural infrastructure and agriculture. This will empower farmers, reverse the trend of high rural-urban migration, and lift farmers out of poverty. Each state should also address financial leakages and reduce the cost of governance. The governors should advocate for the repeal of the constraining Railways Act of 1955 to attract investment in rail transportation.
Furthermore, they should create an environment conducive to investment and promote private sector-led economies, with micro, small, and medium enterprises (MSMEs) and start-ups at the forefront.
The current state of IGR is dismal, and the states must strive for radical change.