The World Bank has said that Nigerian states will likely lose N18.8bn in oil and gas revenues in 2022. As worsening revenue collection at the federation level increases budgetary pressures for the states.
The Washington-based bank said this in its Nigeria Development Update report, titled, ‘The Continuing Urgency of Business Unusual’.
According to the lending bank, the declining revenue from the federation level had put many states in a fiscal position. The bank warned that many states would be unable to meet up with their expenditures. Adding that there was an increase in debt servicing expenditures of States.
The financial institution also warned that there would be a 2.7% decline in FAAC transfers in 2022. When compared to 2021, adding that this decline would push states to borrow more and slash discretionary expenditure.
“Lower transfers will cause state governments to incur debt or drastically slash discretionary expenditure. Although states receive the majority of VAT revenues, VAT increases would not make up for the loss of net oil revenues.
As a result, in 2022, the average state in Nigeria will lose N18.8bn in oil and gas revenues, while optimistic projections place average gains from VAT and the electronic money transfer Levy at N7.1bn per state, and average increases in each state’s independent revenues at N6.7bn. As a result, the average state can expect to lose N5bn in revenue in 2022,” the report stated.
“Some states would struggle to pay salaries, especially states that are heavily dependent on federal allocation. Some may have to lay off some of their work force. Many will struggle to meet their financial obligations as sub-nationals.”
A political economist and former presidential candidate, Prof Pat Utomi, urged states to create an environment for wealth creation. Rather than depend solely on the federal allocation.
He said, “States must focus more on creating the environment for wealth creation.
-Punch.
