The Need for States to Boost Internal Revenue Generation

A recent report from the Economic Confidential has brought attention to the worrying financial condition of several states in Nigeria. The report reveals that six states are on the brink of insolvency, highlighting their heavy dependence on federal allocations for survival. This emphasizes the urgent need for states to actively strive towards achieving economic self-sustainability.

The report, which sourced data from the National Bureau of Statistics and the Federation Account Allocation Committee, has identified Lagos, Ogun, Rivers, Kaduna, Kwara, Oyo, and Edo as the most financially viable states in Nigeria for 2022. Conversely, Bayelsa, Akwa Ibom, Katsina, Taraba, Yobe, and Kebbi were found to have failed in generating even 10 per cent of the total allocations they received from FAAC, rendering them insolvent.

The combined internally generated revenue (IGR) of all 36 states amounted to N1.8 trillion in 2022, with Lagos alone contributing N651 billion. This starkly contrasts with the fact that the other 30 states together generated less than Lagos. The report also indicates that the seven most viable states’ IGR was nearly double the total IGR of the other 29 states, which generated around N650 billion.

Furthermore, the nine oil-producing states received additional allocations from their 13 per cent derivation revenue, bringing their total receipts to approximately N869.09 billion. This underscores the extent to which many states rely on federal allocations and oil revenues to remain financially stable.

While the current situation highlights the prevalent dependence on the central government, it is crucial to acknowledge that each state possesses inherent resources that can be leveraged to drive economic growth. With advantageous agricultural and mineral assets, states have the potential to bolster revenue generation, stimulate production, create employment opportunities, and expand their tax base.

Drawing from the successes of the defunct regions of the First Republic, states can learn from their predecessors’ self-reliance, innovation, and productivity. These regions were renowned for their individual contributions to Nigeria’s global agricultural output, and they used internally generated revenue, particularly from agricultural produce, to develop lasting institutions. Today’s states can follow suit by capitalizing on their unique strengths in agriculture and mineral resources to advance as autonomous economic entities.

To achieve this, states must also prioritize internal security, attract investment through the provision of critical infrastructure, and create an environment conducive to economic growth. Improving rural infrastructure and capitalizing on opportunities in agriculture and mining will be vital to kick-starting economic progress. Furthermore, active participation in sectors such as mining and power, as allowed by the central government, can open doors for further economic development.

In conclusion, the current state of affairs demands that states take proactive measures to boost their internal revenue generation and reduce their reliance on federal allocations. By harnessing their unique strengths, attracting investment, and building robust infrastructure, states can transition from being dependent entities to flourishing economic hubs. The time has come for a shift towards economic self-sufficiency and away from the era of “beggar states.”