With a combined proposed budget of N4.907 trillion for 2017 presented by 25 states in the country, it is clear that many states are now looking inwards to fund their spending as they plan to source N1.493 trillion of these from internally generated revenue (IGR) sources.
An analysis of the spending plans of 25 states which have presented their budgets for the 2017 fiscal year, some of which have already been signed, showed that state governments are beginning to look away from federal government allocations which were not sufficient to meet their needs in 2016.
Following the abysmal decline in the price of crude oil in the outgone year, a situation which affected federal revenues and consequently, allocations to the states, states which had been lax on IGR are now setting high targets for their revenue boards. While grants and borrowing as well as federal allocations still dominate the revenue plans of the states, the government of these states have plans to step up on their tax drive in 2017.
This is a deviation from the past when the 36 states earned N3.5 trillion over a period of six years.
LEADERSHIP reports that a total sum of N3.5 trillion was earned as IGR by the 36 states of the federation between January 2011 and June 2016.
An analysis of the states’ IGR report obtained from the National Bureau of Statistics revealed that the IGR of the 36 states recorded a sharp increase between 2011 and 2013, after which it declined steadily up to 2016.
In 2011 for instance, the sum of N499.08 billion was earned by the states. The figure rose to N567.99 billion and N800 billion in 2012 and 2013, respectively. However, in 2014 and 2015, the states’ combined revenue dropped by N92.15 billion and N25.18 billion to N707.85 billion and N682.67 billion, respectively.
For the year under review, Lagos State which has the largest budget among the states, having signed a spending plan of N813 billion, said it planned to generate N447.94 billion internally during the year. The commercial nerve centre of the country, known for its high tax drive, is accounting for 36 per cent of the IGR to be generated by these states this year.
The state’s commissioner for finance, Akinyemi Ashade, who is also the commissioner overseeing the Ministry of Economic Planning and Budget, gave this indication while giving a breakdown of the budget after it was signed.
He said the 2017 budget would largely be driven by IGR made up of taxes, rates, levies and others.
Lagos is focusing its budget on continuous promotion of massive investments in security, infrastructure, transport/traffic management, physical and social infrastructural development, environment, health, housing, tourism, power, e-governance, education, agriculture and skills acquisition.
Rivers, Ogun, Cross River and Oyo states also plan to significantly increase their IGRs in 2017 as they plan to source N168.85 billion, N114.34 billion, N144.97 billion and N107.2 billion respectively through taxation and other internal funding sources in 2017.
Rivers State governor, Nyesom Wike, who presented a budget of N470 billion for the 2017 fiscal year, said: “We are projecting an aggregate sum of N220 billion from FAAC (Federal Account Allocation Committee), distributed as follows: N23 billion from statutory allocation; N102 billion from 13 per cent mineral derivation fund; N16.5 billion from Value Added Tax (VAT), N8 billion exchange gain; N70 billion for Paris Club and other reimbursements, and N400 million from capital receipts.
“We are also projecting to generate an aggregate sum of N168.857 billion from IGR.”
Bauchi and Yobe states which have a spending plan of N145 billion and N69.4 billion for 2017, respectively, have the lowest proposed IGR as the states will raise N11.2 billion each through taxes.
According to the Yobe State governor, Ibrahim Gaidam, the state is expecting N35.3 billion from statutory allocation, N3.8 billion from IGR and N7.4 billion from VAT.
Yobe State’s 2017 budget of N69.4 billion is 22 per cent below its N88.9 billion spending plan in 2016. Governor Gaidam explained that it was due to the economic realities of the country and the state.
“Government intends to spend the sum of N27.407 billion, or 39.5 per cent, to cater for capital expenditure, while the sum of N41.9 billion, or 60.5 per cent, is earmarked for recurrent expenditure,” he said during the budget presentation.
The Bauchi State commissioner for information, culture and tourism, Alhaji Idris Abdullahi, had stated that the 2017 budget would be funded by an opening balance of N250 million; statutory allocation/excess crude of N56 billion; VAT, N16.5 billion; independent revenue, N11.182 billion; aids and grants, N18.012 billion; capital receipts, N13.881 billion; internal loans, N21.460 billion and external loans, N8.160 billion.
Giving the details of sectoral allocations in the budget, Abdullahi noted that N27.451 billion will be spent on education; N23.409 billion will go to health while N20.905 billion will be spent on road construction and infrastructure development.
In Jigawa, Governor Badaru Abubakar, who tagged the state’s annual expenditure, ‘Budget of Economic Diversification and Self-sufficiency’, said it would be based on the consolidated position of the revenue projections. According to him, a total amount of N128 billion is to be derived from various income sources and expended on the various expenditure components of the budget.
The governor noted that the total retained revenue of N127.07 billion would be shared among the recurrent and capital expenditure components of the budget while N800 million was set aside for stabilisation and contingency funds.
The Jigawa governor further stated that the budget projection would be based on the expectation that the state’s IGR in 2017 would be N12.439 billion while the statutory allocation and VAT is N45.908 billion, while local government contributions for primary education personnel and primary healthcare staff is N17.417 billion.
He added that the opening balance for the 2017 fiscal year, including funds in project accounts such as the Universal Basic Education Grant, stands at N19.066 billion while internal and external loans stand at N9.150 billion.
Meanwhile, experts have urged state governors to be more creative in their IGR drives as it has become clear that with dwindling federal allocation, it may be difficult for them to provide the needed infrastructure and social services to enhance the living standard of the people.
In a chat with LEADERSHIP yesterday, a financial expert and lecturer at Babcock University, Ilisan Remo, Ogun state, Dr Tayo Bello advised the states to stop being over-reliant on federal allocations. He added that the states can generate more money by ensuring that taxable adults pay correct taxes.
Another expert, Mr Wale Abe, said the situation in the nation’s economy should be able to spur the states into thinking deeper on how to generate money, particularly in the payment of taxes.