States helpless in the face of the fiscal tsunami as data on IGR shows

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Tuesday, October 27, 2015 3.10 PM /FBN Capital Research

The National Bureau of Statistics (NBS) has updated its series on internally generated revenue (IGR) at state government level to include 2014. We do not see any evidence that the majority of states strengthened their defenses last year to resist the fiscal implications of the oil price slide. Total IGR collected by the 36 states (excluding the Federal Capital Territory) in 2014 increased by 6.9% to N708bn. Its share of states’ total revenue was probably little changed from the 15% posted in both 2012 and 2013.

Another weakness emerges from the new NBS data, which is that the collection remains heavily skewed towards a handful of states. The five-year total for 2010-14 of N2.84trn was dominated by Lagos (38.0% of the total), Rivers (12.2%) and Delta (7.0%).

The NBS also provides a breakdown of the IGR in 2014 for 28 states. For the other eight states, we assume that the Joint Tax Board and the state boards of internal revenue, the data sources cited, did not share the relevant numbers.


Lagos derived 55.6% of its IGR from PAYE salary deductions, 3.4% from direct assessment (of entrepreneurs), 1.7% from road taxes and 39.3% from all other sources. Rivers, in contrast, generated 76.7% from PAYE, 5.9% from assessment, 0.1% from road tax and 17.3% from other levies.


Lagos has a very large number of personal income taxpayers but has also tapped other revenue sources such as property. This has been possible because the state hosts by far the largest concentration of private sector, non-oil companies in the country. We should not overlook, however, its generation of revenue collection systems and its provision of local services, which tends to make taxpayers more likely to meet their obligations.

The NBS figures show why most states accepted the bailout offered by the DMO and the CBN when they could no longer meet their salary, pension and other obligations. IGR has to be expanded but on a long term basis. States should develop systems, for example, for registering and taxing eligible property rather than targeting soft targets such as mobile operators.

We close with a statistical comparison of the estimates of IGR in 2013 from the NBS and the CBN. The former shows a total of N662bn and the latter N586bn, the principal difference being their respective figures for Lagos State (N276bn and N157bn). The state itself doubtless has a third figure.

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