Ways to improve Nigerian states’ revenue generation

A recent news report highlighted the fact that no fewer than 24 states will not be able to pay the salaries of their workers in 2024 without waiting for allocation from the federal government through the Federation Account Allocation Committee (FAAC). This means these affected states of the 36 states that make up the federation have to wait for the deliberations of the FAAC before they can pay salaries and even carry out infrastructure development projects. Only about 12 out of the 36 state governments of the federation can independently pay their workers’ salaries without depending on federal allocations, according to an analysis of the state governments’ approved budgets for the 2024 fiscal year.

The states with robust internal revenue are Lagos, Kano, Anambra, Edo, Enugu, Imo, Kaduna, Kwara, Rivers, Osun, Ogun and Zamfara. According to the 2024 budget, 24 states cannot fund salaries payments from their Internally-Generated Revenues (IGRs) and, as such, will have to resort to Federal Government allocations or borrowing from banks and related institutions (internally or externally) or sell bonds to the public. The problems of the states which are not financially independent are that their respective wage bills surpass their various IGRs and that they cannot pay the pensions and gratuities as at when due, raising concerns about workers productivity and state governments’ efficiency in internal revenue generation (financial management).

As examples, Oyo State will pay N132.67 billion to workers after generating N92.79 billion as IGR. The state will need additional funding of N39.88 billion to be able to pay the salaries alone. Niger State with projected revenue of N61.87 billion will need a loan to pay its civil servants N70.24 billion while Nasarawa will pay its workers N54.45 billion from its projected revenue of N43.3 billion and source the balance through other means. Further analysis of the budgets showed that states such as Kogi will pay its workers N65.07 billion from its revenue of N30.23 billion and federal allocation, while Kebbi will pay N37.3 billion as salaries from its N17.8 billion internal revenue and the balance from federal allocation.

Katsina will spend N56.3 billion on salaries from its N40 billion internal revenue and federal allocation, while Jigawa will pay its workers N64.84 billion from its revenue of N50.64 billion and federal allocation. Gombe must pay salaries worth N35.27 billion from its anticipated revenue of N22.32 billion and federal allocation. Ekiti will spend N2.78 billion on salaries from its N1.5 billion revenue and federal allocation. Ebonyi’s N28.16 billion wage bills surpass its revenue of N25.1 billion, while Borno will pay its workers N50.28 billion from its revenue of N27.5 billion and federal allocation.

Furthermore, Benue State with revenue of N23.9 billion will pay N56.9 billion as salaries, while Bauchi must pay salaries worth N46.9 billion from its anticipated revenue of N37.1 billion and federal allocation; Adamawa will spend N52 billion on salaries from its N26.9 billion revenue and federal allocation; Akwa-Ibom will spend N127.8 billion on salaries from its N60 billion revenue and federal allocation while Delta with projected revenue of N110.3 billion must seek assistance to pay its workers N164.3 billion. Also, Abia with revenue of N32.14 billion will pay N47.83 billion as salaries while Cross Rivers with projected revenue of N34.7 billion must seek external funding to pay its workers the N67.75 billion required.

Revenue generation, in recent times, has been the bane of states’ infrastructural development, salaries, wages and pension payments; employment generation and welfare programmes in Nigeria. The states have comparative advantages in agricultural development, industrial development and solid minerals which they have neglected to develop. All states, including the twelve states that can conveniently pay their workers’ salaries without getting allocation from the federal government can also still improve their internally generated revenue. States in Nigeria have advantages of having at least a river or a water-body (blue infrastructure) running through them. States like Kogi, Benue, Kaduna, Rivers, Bayelsa, Cross River, Edo, Akwa Ibom, Borno, Ondo, Ogun and Lagos can produce the fish that we so much import in Nigeria and save us the $1.2 billion that we spend yearly on importation.

All states have good arable land that can be used for palm kernel plantation, groundnut, beans, maize, cassava, cocoa, cashew, pineapple, orange, yam, banana, plantain, teak tree, rubber tree etc. Most of the states in Nigeria fall within the tropical rain forest zone and have abundant timber that can be efficiently managed to generate foreign exchange. In a true democracy, states will not depend on the federal government to fund the salaries of their workers; rather, the federal government will depend on states to fund the exclusive list functions of the federal government like security of the nation, external affairs, central administration of the nation, maintenance of our foreign reserves etc. It is high time that the states that cannot pay the salaries of their workers started thinking outside the box and look for means of generating enough money to be sustainable. A day is coming when it will not be possible to rob Paul to pay Peter, and states will have to eat what they bring to the dining table!

All states in Nigeria have one mineral resource or the other. While states like Zamfara, Jigawa and Osun have gold, states like Ogun, Ondo, Oyo and Ekiti have rocks that can be blasted into granites (gravels) for construction of buildings and roads. Nigeria is sitting on a land area of 923,768 square kilometres. With a population of about 230 million people, states can generate enormous amounts through effective land management. States like Lagos, Ogun and Osun have enacted Land Use Charge Laws. Land Use Charge is a consolidation of tenement rate, which local governments are empowered to demand and collect by Section 7 (4th Schedule) of the 1999 constitution of the Federal Republic of Nigeria; and Taxes and Levies (Approved List of Collection) Act No. 2 of 1998, Neighbourhood Improvement Tax and Ground Rent (Land Use Act of 1978).

Lagos State has the best opportunities and structure for the collection of land use charges in Nigeria followed by FCT and Rivers State. Studies have found that Lagos State has not gotten to 10 percent of the total amount that is collectible on Land Use Charge as at December 2023! With the engagement of experts in land-based taxes, states in Nigeria can do better in land-based taxes including land use charge. If states can see their region as a piece of estate and engage professional estate managers to consult for them on the potentials of their land holdings, all states in Nigeria will be viable.

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