A recent report from civic-tech organization BudgIT reveals that in 2023, Nigeria’s 36 states saw a combined revenue increase of 31.2%, rising from N6.6 trillion in 2022 to N8.66 trillion.
Despite this growth, 32 states relied on the Federal Account Allocation Committee (FAAC) for at least 55% of their revenue, underscoring a dependence on federal funds and highlighting their vulnerability to economic shocks.
BudgIT’s “2024 State of States” report, released Tuesday, showed that while 14 states depended on FAAC for over 70% of their revenue, 21 states relied on federal transfers for at least 80% of their recurrent revenue. Only Lagos and Ogun managed to generate more of their recurrent revenue independently, with the rest primarily sustained by federal allocations.
Lagos led in revenue generation, contributing N1.24 trillion, or 14.32% of the national total. The report attributed a significant portion of the year-on-year revenue growth to a 33.19% increase in gross FAAC allocations, which rose from N4.05 trillion in 2022 to N5.4 trillion in 2023.
“Thirty-two states relied on FAAC receipts for at least 55% of their total revenue, while 14 states depended on these receipts for at least 70%,” the report noted. “This over-reliance on federal funds accentuates state governments’ vulnerability to crude oil and other external shocks.”
BudgIT’s analysis also found some improvement in internally generated revenue (IGR) capacity, with states collectively raising IGR by 20.33% to N2.19 trillion, up from N1.82 trillion in 2022. However, growth varied, with six states, including Zamfara (which saw an increase of 240.22%), experiencing substantial gains, while seven states, led by Jigawa, reported negative growth.
Only Lagos and Rivers generated sufficient IGR to cover their operating costs, with ratios of 118.39% and 121.26%, respectively. In contrast, states like Akwa Ibom, Bayelsa, and Taraba relied on more than five times their IGR to meet expenses, illustrating a high dependency on federal support.
To ensure fiscal sustainability, BudgIT urged states to enhance internal revenue mobilization by leveraging resources, technology, public-private partnerships, and efficient tax collection.
“The states would need to digitize revenue collection, eliminate cash transactions, use tax intelligence to enumerate tax liabilities, particularly among high-net-worth individuals, and enforce compliance,” the report advised.
BudgIT also recommended that states streamline taxes and fees, fully operationalize treasury single accounts, and improve business conditions to secure more stable revenue sources.
