States And Revenue Generation

The current state of revenue generation in the country is giving Nigerians genuine cause for concern. A recent report revealed that only two states, Lagos and Rivers, are economically viable. This means the remaining 34 states heavily depend on monthly federal government allocations to pay salaries and carry out other essential activities. This is a worrying trend that must be addressed urgently.

According to the latest data released by the National Bureau of Statistics (NBS), the 36 states of the federation and the Federal Capital Territory (FCT) generated N2.43 trillion internally in 2023. The Internally Generated Revenue (IGR) for 2023 is 26.03 per cent higher than the N1.93 trillion recorded in 2022. However, the data shows that only two states and the FCT are economically viable to cover their spending.

The data released by the statistics agency claimed that Lagos retained its top position as the state with the highest IGR in the period under review, followed by FCT and Rivers. Taraba generated the lowest IGR in 2023, followed by Yobe and Kebbi

The data also indicated that Lagos’s IGR in 2023 (N815.86 billion) is more than the combined IGR of 18 states and more than the total amount generated in three regions: the Southeast, the North West, and the North East. South West generated the highest IGR (N1.12 trillion) in the period under review, followed by South South (N468.74 billion), North Central (N387.65 billion), North West (N206.22 billion), South East (N142.95 billion), and North East (N104.35 billion).

These figures also mean that the respective wage bills of the affected states surpassed their various IGRs, raising concerns about state governments’ efficiency in internal revenue generation.

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This disclosure stresses the point that states need to invest in solid minerals and other natural resources. The whole idea of IGR is not about taxes. You don’t have to tax the poor to generate revenue. States should think creatively by exploring opportunities and putting in place an enabling environment for economic activities to thrive.

In Nigeria, as is the case elsewhere, IGR is the money state governments generate through economic and other activities within their jurisdiction. Tax revenues, non-tax revenues, and other miscellaneous sources are among the different sources of internal income accessible to state governments. Pay As You Earn (PAYE), direct assessment, withholding tax, property tax, capital gains tax for individuals, sales or consumption tax, pool betting taxes, lottery and casino taxes, business premises and registration fees, development levies for taxable individuals, fees for right of occupancy on State-owned urban land, market taxes, and levies are all examples of tax income. Earnings and sales, penalties and fees, licenses, rent on government buildings, and interest repayment and dividends are all examples of non-tax income.

It is no secret that Nigeria is rich in natural resources, with vast oil reserves and a large agricultural sector. However, despite these resources, many states have failed to generate enough revenue to sustain their economies. This is primarily due to a lack of creativity and a failure to diversify revenue streams.

One of the major problems facing many states in Nigeria is their over-reliance on federal allocations. This has created a situation where many states cannot generate enough revenue to meet their obligations, leading to a cycle of debt and economic stagnation. This dangerous trend must be reversed if Nigeria is to achieve its full economic potential.

To address this issue, state governments must begin to think outside the box for alternative revenue sources. This could include investing in tourism, developing local industries, and promoting entrepreneurship. Additionally, states must embrace technology and digital innovation to create new revenue streams and improve their overall efficiency.

It is also imperative that state governments tackle corruption and promote transparency in their revenue generation efforts. Corruption has been identified as a significant barrier to economic growth in Nigeria, and state governments must take a firm stance against it. This will improve revenue generation, boost investor confidence, and promote economic development.

Nigeria’s current revenue generation situation is worrying; urgent action is needed to address this issue. State governments must embrace creativity and innovation, tackle corruption, and explore alternative revenue sources to ensure sustainable economic growth. With the right policies and a firm commitment to change, Nigeria can unlock its full economic potential and become a prosperous nation for all its citizens.

The major challenge, in our opinion, is that there is an undue reliance on political patronage by entrepreneurs who are averse to risk-taking and the attendant patience required to guide an investment through its gestation period.

For most entrepreneurs, the haste for immediate return on investment hamstrings the ability to invest and wait. But this can be undone by state governments granting incentives to investors in the hope that, eventually, the business will pay off obligations to the investor and the government by yielding results that are measurable and beneficial to all.

That is one major way of generating revenue internally without the tax burden.