The aggregate internally generated revenue of the 36 states in the country and the Federal Capital Territory Administration fell by 37bn in two years, data obtained from the National Bureau of Statistics have shown.
As of the end of 2018, states’ IGR stood at N1.68tn, while by the end of 2020, the total IGR fell to N1.31tn.
This means that the total IGR of states declined by 22.02 per cent within the review period.
Findings showed that during the period under review, the IGR of the states and the FCT came primarily from Ministries, Agencies and Departments and tax.
In 2018, MDAs contributed N265.7bn to the total IGR for that year, while revenue generated from tax stood at N909.5bn.
A breakdown of the revenue generated from tax shows that Pay As You Earn, which is a form of personal income tax, stood at N669.2bn at the end of the stated year, direct assessment was N44.26bn, road taxes; N23.95bn and other taxes such as ‘levies on market traders, land registration and other land related fees’ contributed the sum of N165.7bn.
Similarly, in 2020, a larger part of the IGR was generated from tax; PAYE, N851.7bn, direct assessment, N37bn, road taxes, N28.3bn and other taxes, N176.4bn totaling N1.08tn, while N218.3 was generated from MDAs.
Further analysis show that in 2018, the top revenue generating states were Lagos with N382.1bn, Rivers with N112.7bn, Ogun with N84.5bn, FCT with N65.5bn and Delta with N58.4bn.
In 2020, Lagos again led with N418.9bn, thus recording 32.08 per cent increase in IGR, followed by Rivers with N117.2bn (8.97 per cent rise), FCT with N92.0bn (7.05 per cent rise), Delta with N59.7bn (4.57 per cent rise) and Kaduna with N50.7bn (3.89 per cent rise).
However, it was also observed that the revenues of Ebonyi, Kaduna and Zamfara States grew by more than 70 per cent, within the period under examination.
Between December 31 2018 and December 31 2020, Ebonyi recorded 121.3 per cent increase in revenue generation from N6.14bn to 13.6bn; Kaduna’s revenue rose from N29,4bn to N50.8bn, representing a 72.4 per cent while Zamfara’s total IGR jumped from N8.2bn to N18.51bn, indicating an increase of 125.4 per cent.
Financial experts who spoke to our correspondent urged states to be less dependent on Federal Government revenue allocations and focus on shoring up their IGRs.
They advised state governments to devise effective strategies to improve their tax collection and create enabling economic environments that could attract domestic and foreign investors.
A professor of economics and public policy at the University of Uyo and the Chairman of the Foundation for Economic Research and Training, Prof. Akpan Ekpo, in a telephone interview, said, “Most states depend of the Federal Government revenue. The last time I did some studies, I found out that only Lagos and Kano can survive without Federal Government allocations. It is difficult to increase IGR because states have become so used to collecting money from the centre.
“If states can bring in investors who will create more businesses, then more employment can be generated and therefore more taxes, because companies within a state pay their taxes to the states and not to the Federal Government, which can improve the IGR.”
He added that state governments could harness the resources in their states to shore up revenue.
Another expert and the Managing Director of Cowry Asset Management, Johnson Chukwu, stated that while the fall in states’ IGR in the previous year can partly be attributed to the economic impacts of COVID-19 pandemic, a downward trend had been observed in recent times.
Chukwu therefore called on state governments to boost tax generation and drive increased economic activities to increase revenues.
He said, “Last year we had COVID-19 which affected all revenues, including revenue and it affected economic activities. So last year’s drop in IGR can be explained by the COVID-19 induced economic crisis. However, beyond that, states have to improve their tax collection and management system.
“Also, the second aspect is that for a sustainable growth in IGR, we should be talking about increasing the level of economic activities in the country because it is basically then businesses that exist that can pay taxes.”