Get ready for a wake-up call! A new report from the BudgIT Foundation is shining a spotlight on Nigeria’s state finances, and the numbers might surprise you. It turns out, a whopping 21 states are practically living paycheck to paycheck, heavily relying on allocations from the Federation Account Allocation Committee (FAAC) for more than 70% of their total income. That’s a huge chunk of change coming from one source!
This eye-opening study, titled “A Decade of Subnational Fiscal Analysis: Growth, Decline and Middling Performance”, paints a clear picture of where our states stand financially. Here’s a quick rundown of the key takeaways:
- Heavy FAAC Reliance: Over 21 states depend on FAAC for at least 70% of their revenue.
- Broader Dependence: A total of 29 states count on FAAC for over half of their income.
- Revenue Growth: The total FAAC receipts for 35 states jumped to N6.44 trillion in 2024 from N5.4 trillion in 2023.
- Top Earners: Delta, Bayelsa, Akwa Ibom, Lagos, and Oyo raked in a significant portion of the FAAC pie.
- IGR Champions: Some states are really stepping up their game with Internally Generated Revenue (IGR), showing impressive growth.
- Fiscal Independence: A few states are leading the pack with strong fiscal independence, meaning they don’t have to lean so hard on FAAC.
- Spending Woes: Operating expenses are on the rise, and debt servicing is a major concern for many states.
Nigeria’s States: How Much Do They Really Earn Themselves?
Let’s get real: Nigeria’s economy is vast, but how well are our states managing to generate their own funds? The BudgIT Foundation’s latest report, “State of States 2024,” dropped a bombshell, revealing that a staggering 21 out of 36 states are extremely dependent on the Federation Account Allocation Committee (FAAC). We’re talking about more than 70% of their entire revenue coming directly from these federal allocations. Imagine your household income relying that heavily on one single source – it’s a risky business!
The report doesn’t stop there. It also highlights that a total of 29 states find themselves relying on FAAC for at least half of their revenue stream. This level of dependence can make states vulnerable to fluctuations in oil prices and federal fiscal policies. When FAAC money is tight, many states feel the pinch immediately, affecting everything from salaries to development projects.
FAAC Allocations: The Numbers Game
According to the report, the gross FAAC receipts for 35 states in 2024 reached a hefty N6.44 trillion. That’s a nice increase from the N5.4 trillion received in 2023. But who are the big winners? Wealthy states like Delta (N1.19tn), Bayelsa (N794.43bn), Akwa Ibom (N1tn), Lagos (N670.99bn), and Oyo (N425.6bn) collectively grabbed about 35.93% of the total FAAC distributed to these subnational governments. It shows a clear pattern in how federal resources are shared.
Some states have seen some serious growth in their FAAC receipts between 2023 and 2024. Enugu is leading the pack with an incredible 381.44% growth, followed by Bayelsa (173.69%), Abia (129.37%), Osun (98.37%), and Kano (85.90%). These spikes can be due to various factors, including changes in revenue collection or specific revenue generation initiatives.
Boosting Internally Generated Revenue (IGR): The Path to Freedom
While FAAC is a major source, the real test of a state’s financial health often lies in its Internally Generated Revenue (IGR). BudgIT’s report points out that certain states are really shining in this area. Between 2015 and 2024, states like Borno, Ogun, Nasarawa, Ekiti, Enugu, Zamfara, Bayelsa, Bauchi, Osun, and Niger all recorded over a 500% growth in IGR. That’s some serious homegrown success!
Look at Lagos and Ogun – these two states alone generated a colossal N1.46 trillion in IGR. That’s almost as much as the combined IGR of 24 other states! This clearly shows the potential for states to become more financially independent when they focus on robust IGR strategies. On the flip side, states like Imo, Kogi, Jigawa, Benue, and Yobe are flagged for needing serious improvement in their IGR collection or a significant cut in their operating expenses. It’s a tough but necessary reality check.
Where Does the Money Go? Spending Habits and Debt Burdens
It’s not just about how much money comes in, but also how wisely it’s spent. The report sheds light on the states’ spending habits, and it’s a mixed bag. Aggregate operating expenses for the states jumped by a whopping 48.13%, climbing from N4.64 trillion in 2023 to N6.62 trillion in 2024. This is a significant increase and points to rising costs of governance.
When we look at total expenditure, it surged by 64.69%, from N9.49 trillion in 2022 to N15.63 trillion in 2024. What’s concerning is that a substantial 26.45% of this amount, roughly N2.11 trillion, went into debt servicing. Ouch! Personnel costs also saw a rise of 23.24%, while overheads and capital expenditure saw even bigger jumps of 62.66% and 119.88%, respectively.
The Debt Picture: States’ Financial Liabilities
Nigeria’s states are carrying a heavy debt load. The total debt stock for the 35 states increased by 6.87%, moving from N10.01 trillion in 2023 to N10.57 trillion in 2024. While domestic debt saw a drop of 35.98%, a worrying trend is that 24 states have over half of their total debts denominated in foreign currency. This exposure to foreign exchange fluctuations can be a real headache. Kaduna, Jigawa, and Ondo are leading this particular chart with the highest foreign-debt-to-total-debt ratios.
The average subnational debt per capita also nudged up from N40,469 in 2023 to N41,766. And let’s not forget the outstanding liabilities, which include billions in contractor arrears, pension and gratuity arrears, unpaid salaries, and judgement debts. This is a lot of outstanding bills!
Sectoral Spending: Health and Education Lagging?
How are states prioritizing key sectors like health and education? The report reveals some interesting, and perhaps concerning, figures. Collectively, states allocated N1.31 trillion to health but only managed to spend N816.63 billion – that’s a budget performance rate of 61.98%. For education, they allocated a massive N2.4 trillion but spent N1.61 trillion, achieving a 67.08% budget performance. While these figures aren’t terrible, they do suggest room for improvement in translating allocations into actual service delivery.
Ultimately, the BudgIT report serves as a crucial reminder for Nigerian states to critically assess their fiscal strategies. Strengthening IGR, managing expenses efficiently, and reducing reliance on FAAC are key steps towards achieving true financial independence and sustainable development for all Nigerians.
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