BudgIT: Only four states — Kano, Katsina, Rivers and Lagos — can pay salaries without borrowing

Only four states in Nigeria can pay salaries without resorting to lending, a new report by BudgIT,  a civil society organisation, has shown.

The report, State of State 2017, was launched on Thursday and released to the public on Friday.

“Important is states’ ability to meet their recurrent expenditure obligation with all revenue source — a test of prudent fiscal management. Kano, Katsina, Rivers and Lagos top that portion of the index.

“In effect, only four states could meet their recurrent expenditure obligation without resorting to borrowing or tapping donor funds and other extra-budgetary revenue sources.”

In September, TheCable had reported that 11 states lost large portions of the federal accounts allocation committee (FAAC) monthly allocation to deductions.

“Bonds issued by the states are usually assisted by Irrevocable Standing Payment Orders (ISPOs), which legally empower the accountant general of the federation (AGF) to withdraw sums due to debt holders from state governments’ revenue accounts with the federal government, including interest and capital repayments,” BudgIT’s report further read.

“As about 83% of states’ revenues are collected by the federal government, what accrues to states’ coffers is the balance left after obligations to debtholders are deducted from each state’s share of revenue.

“The effect of huge debt supported by ISPOs is already eating deep into the account of Lagos, Cross River and Osun states. Osun’s net allocation is even in the negative terrain, which invariably puts more pressure on future revenue.

“Also, the index looks at the ability of states to sustainably manage their debt profiles. The index tries to see the extent to which today’s revenue can service outstanding debts. Anambra and Yobe top the index.

“Osun trails the overall index. The state’s inability to meet its recurrent expenditure obligations, its heavy debt profile and inefficiency in the collection of internally generated revenue weighed seriously on the state.

“Kwara’s rapid improvement in its internally generated revenue helps the state’s performance on the index. Also noticeable is the 22.56%, 52.18%, 2.29% and 2.78% fall in the debt profile of Delta, Kebbi, Gombe and Ebonyi states, respectively.”