The NBS has released its report on internally generated revenue (IGR) for 1H '21. As well as the data by individual state (see below), it shows revenue by source. Since companies' tax is the responsibility of the FGN, the largest source for the states is the collection of PAYE (pay-as-you-earn). The second is the revenue gathered by the states' ministries, departments and agencies (MDAs). Self-assessment (for the self-employed and small businesses) comes a very distant third. The category of others in the table includes road tax, land registration dues, lottery fees, stamp duty and consumption tax for hotels and restaurants. Taxes on what we might term the microeconomy are collected by local governments. For large companies such as the mobile operators, multiple taxation is a sensitive issue.
The collection of IGR by state tells a familiar story. Lagos alone accounted for 31.5% of the total and collected almost four times the number two in the table (the FCT's 8.1%). The next three collected between NGN40bn and NGN60bn in the half-year. The balance of NGN359bn combines the remaining 32 states. Yobe State managed just NGN4bn.
Lagos has more businesses, and more middle and high-income households to tax, and therefore tops the table. Other states are not so fortunate: however, in many cases they could do more to improve tax administration and attract new investors.
States' collection of IGR is on an upward trend and, according to the last consolidated numbers we have seen, represents about one quarter of their total revenue. To be schoolmasterly just once, there is room for improvement.
Our commentary on the monthly payout from the Federation Account Allocation Committee, the main source of funds for all states with a few exceptions such as Lagos, routinely makes the point that the distribution is inadequate. Last month the
States received NGN274bn (including NGN54bn for the oil producers) whereas their aggregate monthly spending averaged NGN397bn in 2019 (Good Morning Nigeria, 02 November '21). The dispute in the courts between the states and the FGN over the collection (and distribution) of VAT is another mark of the squeezing of subnational finances.
The NBS and the Joint Tax Board together derive their data from state governments' revenue boards. The CBN also covers state government finances: its data are not strictly compatible with the NBS reports and have become less timely.
States' IGR by source (H1 '21; % shares)
Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research
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