17 States Insolvent, Cannot Survive Without Federal Revenue

17 of the country’s 36 states are technically insolvent and cannot survive without the regular infusion of cash from the Federation Accounts Allocation, FAA a study computed by the intelligence magazine, Economic Confidential has found.

The Economic Confidential’s Annual States Viability Index (ASVI) obtained by www.gwg.ng shows that the 17 states are insolvent because their Internally Generated Revenues (IGR) in 2018 were far below 10% of their receipts from the FAA.

The index carefully and painstakingly computed proved that without the monthly disbursement from the Federation Account Allocation Committee (FAAC), many states remain unviable, and cannot survive without the federally collected revenue, mostly from the oil sector. 

The IGR are generated by states through Pay-As-You-Earn Tax (PAYE), Direct Assessment, Road Taxes and revenues from Ministries, Departments and Agencies (MDA)s. 

The IGR of the 36 states of the federation totalled N1.1 trillion in 2018 as compared to N931 billion in 2018, an increase of N172 billion. The report by this economic intelligence magazine further indicates that the IGR of Lagos State of N382bn is higher than that of 30 States put together whose Internally Generated Revenues are extremely low, and poor compared to their allocations from the Federation Account. 

Meanwhile, the Federal Capital Territory Abuja which is not a state but the nation’s capital generated N65bn IGR against N29bn from the Federation Account in the same period.

Lagos State remained steadfast in its number one position in IGR with a total revenue generation of N382bn compared to FAA of N260bn which translate to 146% in the twelve months of 2018. It is followed by Ogun State which generated IGR of N84..55bn compared to FAA of N93bn representing 90%; Rivers with N112bn compared to FAA of N237bn representing 47% and Kwara State with a low receipt from the Federation Account has maintained its impressive IGR by generating N23bn compared to FAA of N81bn representing 28%.

Others with impressive IGR include Edo with IGR of N28bn compared to FAA of N112bn representing 25%; Kano generated N44bn compared to FAA of N183bn representing 24%; Enugu with IGR of N22bn compared to FAA of N92bn representing 23%; Ondo with IGR of N24bn compared to FAA of N108bn representing 22.77%; Kaduna with IGR of N29bn compared to FAA of N131bn representing 22..44% while Delta State earned N58bn IGR against FAA of N285bn representing 20%. 

The ten states with impressive IGR generated N808bn in total, while the remaining states merely generated a total of N295bn in 2018. 

While the report provides shocking discoveries, the states with less than 10% IGR have remained 17 as in the previous year 2017. The poor states may not stay afloat outside the Federation Account Allocation due to socio-political crises including insurgency, kidnapping, armed-banditry and herdsmen-farmer clashes. 

Other states lack foresight in revenue generation drive coupled with arm-chair governance. 

The states that may not survive without the Federation Account due to poor internal revenue generation are Ebonyi which realized a meagre N6.14bn compared to a total of N76bn it received from the Federation Account Allocation (FAA) in 2018 representing about 7.98%; Bayelsa with IGR of N13.6bn compared to FAA of N192bn representing 7.10%; Taraba N5.96bnbn compared to FAA of N88bn representing 6.77%; Adamawa with IGR of N6.2bn compared to N97bn of FAA representing 6.77% and Borno with IGR of N6.52bn compared to N122bn of FAA representing 5.3% within the period under review. 

The major poor internal revenue earners are Katsina which generated N6.9bn compared to FAA of N138bn representing 5.03%; Yobe N4.48bn compared to FAA of N89bn representing 4.86% and lastly Kebbi N4.88bn IGR compared to FAA of N101bn representing 4.88%.

The Economic Confidential ASVI further showed that only three states in the entire Northern region have IGR above 20% in comparison to their respective allocations from the Federation Account. They are Kwara, Kano and Kaduna States. Meanwhile seven states in the South recorded over 20% IGR in 2018. They are Lagos, Ogun, Rivers, Edo, Enugu, Ondo and Delta States. 

The four Southern states with the poorest Internally Generated Revenue of less than 10% compared to their FAA in 2018 are Akwa Ibom, Ekiti, Ebonyi and Bayelsa.. Similarly, 13 Northern States have  poorest IGR, namely Benue, Nasarawa, Gombe, Zamfara, Niger, Bauchi, Jigawa, Taraba, Adamawa, Borno, Katsina, Yobe and Kebbi States.

Meanwhile, the IGR of the respective states can improve through aggressive diversification of the economy to productive sectors rather than relying on the monthly Federation Account revenues that largely come from the oil sector. 

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