Report: States’ Reliance on FG Allocation Rose to 61.45% in 2022

•Abdulrazaq urges Nigerians to assess leaders based on investments in education, health rather than roads, bridges

James Emejo in Abuja

A new report has found that 16 states of the federation relied on federal transfers for 70 per cent of their total revenues in 2022.

The report noted that 50 per cent of the total revenue of 32 states were federal transfers from the Federation Accounts Allocation Committee (FAAC), a situation which further showed their low drive for Internally Generated Revenue (IGR) at the sub-national levels.

This was contained in BudgIT’s 2023 State of States Report, themed: “Subnational Healthcare Delivery for Improved Economic Development”.

The report, unveiled yesterday by the Governor of Kwara State/Chairman, Nigeria Governors’ Forum (NGF), Abdulrahman Abdulrazaq, also showed that total expenditure of the 36 states rose by 24.7 per cent to N8.2 trillion in 2022 compared to N6.58 trillion in 2021.

The report revealed that the cumulative revenue of the states grew by 28.95 per cent to N6.6 trillion in the review period compared to N5.12 trillion 2021, while IGR appreciated by 12.98 per cent to N1.82 trillion from N1.61 trillion in the preceding year.

However, IGR to GDP ratio remained low at 1.01 per cent, up from 0.98 in the previous year, the document noted. The increase in IGR however, failed to reflect across the board, the report noted adding that 17 states experienced a decline in IGR from the previous year while 19 states recorded positive growth.

Occasioned by a 49.2 per cent increase in global oil prices, gross federal transfers rose by 35.68 per cent from the previous year to N4.05 trillion, despite a 12.55 per cent drop in crude oil production.

The report stated that between 2018 and 2022, states’ total debt grew by 45.89 per cent to N6.37 trillion from N4.97 trillion in 2018.

Lagos, Kaduna, Edo, and Cross River, have dollar-denominated debts in excess of $250 million, the report noted, adding that Lagos’ foreign debt stock of $1.25 billion increased from N560.03 billion (using an exchange rate of N448 to $1) to N933.92 billion (using an exchange rate of N747.1 to $1).

It further pointed out that despite the fact that 15 states are yet to implement the minimum wage of N30,000, the cumulative personnel cost of the 36 states grew by 13.44 per cent to N1.75 trillion from N1.54 trillion in 2021.

The report further revealed the extent to which healthcare spending had been relegated at the sub-national level, stating that only Sokoto and Jigawa States surpassed the 10 per cent Abuja declaration on health spending.

On a per capita basis, while 24 states spent below the national average of N4,499.48 in 2022, just 12 states spent above the national average of N2,200 per capita on education, it added.

Meanwhile Abdulrazaq, in his intervention at the launch, advised Nigerians to assess their leaders based on what they have offered in the areas of education and health which have long-term benefits rather than roads and bridges that are quickly built in order to win a re-election.

Essentially, the report assesses and ranks the fiscal performance of all the states from the most sustainable to the least sustainable. This year’s edition additionally spotlights the state of healthcare delivery for improved economic development at state levels.

BudgIT’s Research and Policy Advisory Lead, Iniobong Usen, said, “To reduce their over-reliance on federal transfers, states need to broaden and diversify their tax base, which currently is predominantly PAYE-dependent.

“In light of the huge infrastructure deficit, states need to prioritise capital expenditure over recurrent, especially on areas that improve the ease of doing business, namely road, power, transport, digital and security infrastructure.

“The multiplicity of taxes, which puts inflationary pressures on the price of commodities, more importantly food, needs to be urgently addressed. Just as the state governments need to improve their capacity to accurately and consistently project their revenues and expenditures to improve service delivery outcomes, they need to establish robust consequence management regimes to deter corruption and ensure value for money.”

In his keynote address, World Bank Health Specialist, Dr. Olumide Okunola, said Nigeria was “clearly not doing well in health spending.”

He said the suboptimal service delivery in health was limiting development outcomes and weakening the social contract between the state and citizens.

He also linked the low focus on health to an unimpressive revenue-raising potential which remained one of the lowest in the world.