The quartet of Lagos, Rivers, the FCT and Delta states had a combined internally generated revenue more than all other 34 states of the federation, a May report by the National Bureau of Statistics (NBS) shows.
The report says of the N1.33 trillion combined revenue generated by the 36 states and the FCT in 2019, the aforementioned states accounted for about N685 billion, an equivalent of 51.02 per cent. Other states made a total of about N650 billion.
Lagos State alone accounted for about N400 billion of this figure. almost one-third of the total internal revenue of all the states and Abuja. The largest chunk of this was generated from taxes, especially those of formal sector employees, with only about 10 per cent generated by the state’s MDAs.
Sitting in far second is oil rich Rivers State which earned N140 billion, about half the amount generated by each of the Federal Capital Territory and Ogun State. As for Rivers and the FCT, taxes from the formal sector account for largest earning for the year; in Ogun, it is funds made from MDAs.
Behind these states are Delta which made N64 billion; Kaduna, N44 billion, Kano N40 billion, Akwa Ibom N32 billion; and Enugu N31 billion.
At the foot of the log are Taraba with N6.5 billion, Gombe with N6.8 billion, Kebbi N7.3 billion, Ebonyi N7.5 billion and Borno N8.2 billion — about the same amount made by Yobe, Katsina and Ekiti.
Federal allocations to states
Monthly, the federal government aggregates all its earnings from crude oil, customs and other taxes. Although, in line with the derivation principle, 13 per cent of any revenue made from natural resources is returned to the states from where those resources are gotten.
After associated costs have been deducted, the remaining funds are shared across the three tiers of government thus: 52.68% for the FG, 26.72 per cent for the states; and 20.60 per cent for local governments.
As for states, allocations are apportioned to them based on a “Horizontal Allocation Formula”.
First, every state gets an equal ration from the 40 per cent of what they are all due for. The remainder is determined by population (30%), landmass (10%), IGR (10%) and social development factors (10%), like school enrollment, the number of hospital beds and most peculiarly, the amount of rainfall in the state.
In 2019, about N2.5 trillion was shared among states as federal allocation, the NBS report shows. Oil-repleted Delta, Akwa Ibom, Rivers, Bayelsa and Nigeria’s economic hub Lagos got the largest cut.
IGR vs Federal Allocation
Many states pool the funding for their budgets from federal allocations. But because most federal revenue comes from oil, whose prices are volatile, a drop in prices have ripple effects on states as well.
In 2017, a report by the Economic Confidential magazine found that, up from 14 the previous year, at least 17 states cannot survive without federal allocations due to their low internally generated revenue, which was below 10 per cent of what they received from the federal government.
The effect of this is months of unpaid salaries and pensions as well as the widened gap in infrastructural deficits across states. Sometimes, the federal government wade in to bail the states out,like it did in 2015.
NBS’ 2019 breakdown of state-by-state earnings shows that only Lagos, Ogun and FCT generated more IGR than its FAAC allocations. Lagos made more than three times its FAAC allocation as IGR. Ogun made double. FCT made N4 billion more.
Other states that did comparatively well in terms of IGR and federal earnings include Rivers which earned about 89 per cent of its federal allocation as IGR. Kwara earned 71 per cent of FAA as IGR. Kaduna made 66 per cent.
Others include Enugu and Cross River, both of whom earned 61 per cent and Ondo, 52 per cent.
On the other hand, oil rich Akwa Ibom, Bayelsa and Delta respectively earned N32 billion, N16 billion, N64 billion from IGR. But from the federal purse, they got N171 billion, N140 billion, N219 billion in that order.
Borno State on its part made N8 billion IGR while federal allocation amounted to N61 billion. Katsina State generated N8 billion from IGR and N63 billion federal allocations. Kebbi State earned N7 billion internally and N52 billion from the federal government.