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The Uphill Battle for IGR Collection

Proshare

Wednesday, August 30, 2017 9:15AM / FBNQuest Research

Our look today at state governments’ internally generated revenue (IGR) shows a decline in the aggregate collection from N801bn to N756bn in 2015. Collection as a proportion of total revenue improved but perhaps the more important trend is that a minority of states is moving away from the rest. Both Ogun and Enugu joined Lagos in achieving a ratio for IGR/total revenue above 50% in 2015. One other state (Rivers) managed 40%, three 30% (Kano, Oyo and Abia) and five 20%.

We are working with the data provided in the CBN annual reports, and sourced from the states themselves as well as the office of accountant-general of the federation. Although not the most recent data, we stick with the CBN series for the sake of historical comparisons


States’ own figures quoted in the local media may not always be consistent with the CBN series. Enugu is reporting IGR of N12.4bn in H1 2017, compared with a statutory allocation for the same period of N13.4bn and IGR of N14bn for 2016 (12 months).


The narrative from the Enugu state government is that it has been rewarded for prudent management and cooperation between its various collection agencies. Others have chosen different routes to generate wealth and employment. Kaduna is privatizing state-owned companies, selling state housing and borrowing from the World Bank, having already overhauled its revenue service. An alternative is borrowing from government bodies, an example being a N4bn MoU signed by Ebonyi state government and the Bank of Industry.


States have received a one-off boost from the Paris/London club refunds for overpayments dating back to 2005. A first distribution of N523bn was made in December, conditional upon an undertaking by the states to allocate 50% of receipts for salaries and pensions, and a second of N244bn has followed. Delta State has pledged to disburse half its latest refund accordingly, with the balance for priority projects and the payment of contractors. Some distributions by states have attracted negative comments.


Babatunde Fowler, chairman of the Federal Inland Revenue Service and of the Joint Tax Board, has called upon state governments to devolve more authority to their revenue agencies. We endorse his call, which requires state governors to take a broader view of their obligations.


While a minority of states is ahead of the field in racing terms, more than one third (13) collected less than 10% of total revenue in 2015. These are not all states one would regard as resource-less and impoverished.


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