19 states CANNOT meet recurrent needs

Nineteen states are not in a position to meet their recurrent obligations, a comprehensive report by data-simplifying, civic organisation, BudgIT, has revealed.

Osun, which, for months, has been hurt by series of protests over non-payment of workers’ salaries, placed last on the table of states’ fiscal sustainability, followed by Plateau and ogun states. Lagos, Rivers and Delta led the chart.

Titled ‘State of States’ report, the report ranked all 36 states considering the size of their Internally-Generated revenue (IGR), derivation and Federation Accounts Allocation Committee (FAAC) receipts to cover their recurrent costs.

The 16 other financially weak states are Plateau, Ogun, Nasarawa, Oyo, Bayelsa, Adamawa, Akwa Ibom, Kwara, Ondo, Ekiti, Bauchi, Abia, Zamfara, Kaduna, Imo and Gombe.

Speaking with TheCable after the publication of the report, Atiku Samuel, a member of the report’s research team, said the weak financial positions of the 19 states means that will not be able to pay salaries of workers or even run a government without resorting to borrowing.

The methodology of the report focused solely on how much of  the revenue generated and collected centrally by the states could cover their recurrent expenditure, which most states struggle to meet. A minority weight was also attached to their debt-to-revenue ratio.

It stated that the current fiscal state of many states is not different from 1984 when then Major-General Muhamadu Buhari said in his coup speech: “Let no one however be deceived that workers who have not received their salaries in the past eight or so months will receive such salaries within today or tomorrow…”

In a session sub-titled ‘States Road to Insolvency’, the report observed that despite crude oil staying above $100 per barrel for 42 consecutive months, Nigeria’s federal, state and local governments failed to build adequate fiscal buffers, meaning the Excess Crude Account (ECA) failed to rise, as there was no excess revenue to save.

“The ECA has been a political pawn of sorts, with states’ commissioners of finance complaining repeatedly about the opacity and lack
of transparency in the administration of the account. The heightened pressure caused by lesser oil revenue further ensured Nigeria was highly dependent on this fiscal buffer, which came with more controversial clashes, mostly to do with the approval, disbursement and auditing of the ECA,” it said.

“During the period of the crude oil price boom, Nigeria struggled constantly to meet its production targets, due to associated problems
including crude oil theft, pipeline and production facility vandalisation, and poor metering. The resultant effect was that revenue fell
short and governments at federal, state and local level had to pull out resources from the country’s fiscal buffer – the ECA, depleting the treasury further.

“Over the period, state governments significantly increased the monies spent on salaries and allowances for bloated work forces.

“The price war launched by sovereign nations against shale oil producers depressed global crude oil prices, putting enormous strain on the
Nigerian government’s revenue. This is because approximately 80% of government revenue comes directly from crude oil sales, royalties on crude oil and petroleum profit tax.

“As debts piled up statewide, ECA had its contents shared and depleted, despite crude oil prices standing above budget benchmarks, a
situation which clearly called for financial prudence.”

The report indicted state governments for “failing to read these trends”, neglecting to improve IGR figures, despite compensation bills for their civil servants increasing significantly.

“State governments remained unwilling to diversify revenue sources beyond selling income generating assets, collecting personal income tax from voluntary payers, collecting road tax, e.t.c.,” it said.

“Despite this escalation of their fiscal problems, most states still kept their books sealed. Very few published audited financial statements, even when asked within the ambits of the law.”