| State and Local Govts |    2315 VIEWS  |
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Thursday,
September 24, 2020 / 5:04 PM / By BudgIT / Header Image Credit: BudgIT
2020
States' Fiscal Sustainability Index
Rivers
State Tops Ranking, followed closely by Anambra, Ogun and Lagos. Bayelsa, Osun,
Ekiti and Plateau rank lowest.
BudgIT, a
civic advocacy society that uses technology to intersect Citizen-engagement
with improved governance has launched the 2020 edition of its annual States of
States report titled Fiscal Sustainability and
Epidemic Preparedness Financing at the State level. This report is BudgiT's
signature analysis that provides policy makers with robust insights on ways to
implement financial and institutional reforms that will improve
states' fiscal performance and sustainability level.
Without a doubt,
soaring debt burden, imprudent fiscal planning, and Nearly a decade of
misplaced expenditure priorities have beaten a clear path
to fiscal crisis for many Nigerian states. This is veritably evident in our just released 2020 Fiscal Sustainability
Index where some states rank higher than others and most
are still below the sustainability
point. Rivers state occupies the number #1 position on the index, followed by
Anambra, Ogun and Lagos. Among the States that are not fiscally sustainable,
Bayelsa, Osun, Ekiti and Plateau occupy the least positions.
From our 2020
State of States analysis, 13 states were unable to fund their recurrent
expenditure obligations together with their loan repayment schedules due in
2019 with their respective total revenues. The worst hit of these 13 states are
- Oyo. Kogi, Osun and Ekiti States
while the other states on this pendulum are Plateau, Adamawa, Bauchi,
Gombe, Cross River. Benue, Taraba and Abia.
Furthermore, of the remaining
23 states that can meet recurrent expenditure and loan repayment schedules with
their total revenue, 8 of those states had really low (less than N6bn) excess
revenue, that they had to borrow heavily to fund their capital projects. The
worst hit are Zamfara, Ondo and Kwara who had N782.45m, N788.22m and N1.48bn
left, respectively
Based on their fiscal analysis,
only five (5) states - Rivers, Kaduna, Akwa Ibom, Ebonyi and Kebbi states -
prioritised capital expenditure over recurrent obligations while thirty-one
(31) states prioritised recurrent expenditure according to their 2019 financial
statements.
"Recurrent expenditures
are not necessarily a bad thing, especially when skewed towards sectors like
Health and Education. However, 9 of the states in this category had overhead
costs that were larger than their capital expenditures. These states are:
Ekiti, Kogi, Kano, Plateau, Kwara, Nasarawa, Taraba, Adamawa and Benue"
Said Abel Akeni, BudgIT's Research Lead
All 36 states' debts surged by
162.87% (N3.34tn), from N2.05tn in 2014 to N5.39tn in 2019, with 10 states
accounting for approximately half or N1.68tn of this increase. Seven of these
states are from the South while three are from the North.
"To achieve fiscal
sustainability, states need to grow their IGR as options for borrowing are
reduced due to debt ceilings put in place by the Federal Government to prevent
states from slipping into a debt crisis. There has to be a shift from the
culture of states' overdependence on FAAC" Said Damilola Ogundipe,
BudgIT's Communications Lead.
On subnational epidemic
preparedness, it is important for states to prioritize health financing
especially on Water, Sanitation and Hygiene (WASH). While COVID-19 has garnered
major attention in the last few months, it is worthy of note that states are
currently battling at least 6 other deadly diseases which already have vaccines
or known treatment. In 2019, all 36 states recorded 94,500 cases of the deadly
Cerebrospinal meningitis (CSM), measles, lassa fever, yellow fever, monkeypox
and cholera combined. It is in the self interests of State Governments to grow
their IGR and also invest in appropriate health systems through their budgets
and other sustainable methods.
BudgIT's Principal Lead, Gabriel
Okeowo, noted that though some States have seen some improvement in their IGR
between 2014 and 2019, there is still a need to put systems in place for
aggressive IGR growth within the subnational economies, especially as falling
crude oil prices, OPEC production cuts and other COVID-19 induced headwinds are
set to impact Federal Allocations over the next two years. This paints a bleak
outlook for Nigerian states who depend on FAAG allocation for their survival,
even though dwindling revenue will affect all states differently.
Three states - Bayelsa, Borno
and Katsina - will be worst hit by dwindling revenue as they relied on Net FAAC
for 89.56%, 88.30% and 88.16% of their total revenues, respectively in 2019.
Lagos, Ogun and Rivers state will be least affected as they relied on Federal
Allocation (Net FAAC) for only 22.82%, 35.31% and 53.02% of their total
revenues, respectively.
Download Here - 2020 State of States Report
Editor's Note:
Updated on
Monday 28th, 2020
BudgIT has issued an
apology to the government of Lagos State and retracted a graphic on the
ability of states to meet their recurrent expenditure which is considered not
to have provided a fair assessment of the state.
Below is the official
release from BudgIT
BUDGIT Apologises to Lagos State Government
BudgIT's State of States
report is a snapshot of the fiscal health of all 36 States in the country and
it uses four metrics or stress tests to provide a fair overall Fiscal
Sustainability Ranking of all the states.
A previous graphic on the
ability of states to meet their recurrent expenditure is hereby retracted.
According to Mr. Gabriel
Okeowo, BudgIT's CEO and Principal Lead, "No single metric, when isolated,
provides a fair assessment of any state; and none of the tests we used
evaluates state's fiscals for insolvency."
We are compelled to also
use this medium to tender our unreserved apologies to LASG for the misrepresentation that has trailed Lagos
State in the report.
Indeed, LASG cannot be
included in the category of States with a recurrent deficit; thus, not
borrowing to pay salaries.
Our metrics focused on NET
FAAC and IGR as published by the National Bureau of Statistics due to the
disparate nature of revenue framework among Nigerian states.
We also apologise for
including a special debt financing program as part of the recurrent expenditure
which might be a total representation of its finances.
We affirm that Lagos State
remains way ahead of many of its peers in terms of fiscal health and the
capacity to generate revenue internally; and it also has the least dependency
on federally collected revenue distributed through FAAC allocations.
We
regret this inconvenience; hence, the previous design is hereby retracted and a
review has been commissioned by our research team.
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