Thursday, March 17, 2016 08:55AM /FBNQuest Research
CBN data for 2014 reveal that internally generated revenue (IGR) provided 21.8% of the total revenue of the 36 states and the Federal Capital Territory, compared with 15.3% the previous year. Aggregate IGR grew by 37% to N801bn (US$4.0bn) from N586bn in 2013.
Again, Lagos emerged as the leading state achieving an IGR/total revenue ratio of 67% while Ogun, Rivers and Anambra managed 40%, 32% and 31% respectively. We stick with the CBN series for ease of comparison although it is dated and several individual states show different (generally higher) percentages.
Given that the oil price has been on the slide since mid-2014, states have no choice but to reduce their dependence on the oil-driven monthly distributions from the FAAC by bolstering their IGR.
Value-added tax (VAT) receipts stood at N389bn, representing 10.6% of total revenue in 2014. The budget and national planning minister, Udo Udoma, recently disclosed that there would be no increase in the standard 5% rate of VAT “at the moment”.
According to the DMO, states’ domestic debt at end-2014 amounted to N1.7trn. Lagos has the best record for IGR and is also the largest debtor among the states, with total domestic obligations of N268bn. The figures include arrears due, for example, to contractors and employees.
The total at end-2014 was reduced last year by the restructuring of many states’ bank borrowings into FGN bonds. This operation, supervised by the DMO, was then balanced, even undermined in the eyes of some, by the CBN rescue facility for the states.