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Nigeria: Huge Recurrent Expenditure Affecting States’ Capacity to Develop – NEITI

A report by the Nigeria Extractive Industries Transparency Initiative (NEITI) has expressed serious concerns over states’ recurrent expenditure, noting that the huge expenses was affecting their capacity to develop.

In its just-released 2020-2021 Fiscal Allocation and Statutory Disbursement (FASD) Audit Report, NEITI stated that the states must implement strategies to boost their Internally Generating Revenue (IGR) for their survival.

The total recurrent expenditure of the states for the period, NEITI said, was N2.10 trillion, increasing by 22.97 per cent to N1.16 trillion in 2021.

On a state by state basis, Delta, Akwa Ibom, Bayelsa, and Rivers States’ expenditure represented 63.01 per cent of the total recurrent expenditure, with individual state’s recurrent expenditure increasing across board in 2020, NEITI stated.

“The high recurrent expenditure by the various state governments negatively affected their ability to carry out capital projects needed to accelerate economic growth and development in the States .

“Therefore, it has become imperative for state governments to make increased allocation to capital expenditure a priority in order to bridge infrastructural gaps. This could be achieved through the formulation and enforcement of policies that would balance the state expenditure pattern,” NEITI added.

According to the report, total capital expenditure by the states for the period was N1.59 trillion or 39.81 per cent of the total expenditure.

According to the organisation, statutory allocations of the states also left them vulnerable to dislocations in their developmental plans, advising that they should find solid alternative sources of revenue.

The report showed that aside statutory allocations from the Federation Account, the only other sources of revenue for the various state governments were their Internally Generated Revenues (IGRs), grants, donations, internal and external loans.

As revealed by the report, the performance of the nine representative states selected from across the six geopolitical zones in the country, namely, Akwa Ibom, Bayelsa, Delta, Gombe, Imo, Nasarawa, Ondo, Rivers and Kano, showed that most of the states were highly vulnerable to unforeseen shocks.

An analysis of the nine selected states revealed that statutory allocations from the Federation Account, which amounted to about N2.12 trillion, or 62 per cent of the total revenue receipts for the period, grew by 15.99 per cent in 2021, from 2020.

Further details from the analysis showed that Delta State, which collected the highest statutory allocation of N454.59 billion between 2020 and 2021, depended on the Federation Account allocation by over 78.13 percent.

However, the data showed that Delta only realised N127.21 billion as IGR for the period, same as Bayelsa State, which was able to generate a paltry N31.09 billion, against N333 billion it collected as statutory allocation for the period.

In the same vein, Akwa Ibom State, which collected over N320.88 billion from the Federation Account for the period, generated only N62 billion as IGR, depending on the Federation Account revenue by about 83.81 per cent.

Rivers state also depended on the Federation Account allocation by 56.25 per cent as a result of collecting a total of N322.72 billion for the period, against an IGR of N250.99 billion.

Despite collecting over N196.57 billion for the period, the report said Kano State was dependent on the statutory allocation from the Federation Account with only N72.22 billion contribution to its purse as IGR, the same thing as Imo State, which depended on statutory allocation from the Federation Account by 82.15 per cent, having collected N137.94 billion from the Federation Account, against its IGR of N29.98bn only.

During the period, Ondo state relied on statutory allocation from the Federation Account by 70.31 per cent, having collected N131.83 billion and generating IGR of N55.68 billion.

Also, Nasarawa state depended on the Federation Account to the tune of 74.54 per cent with N119.63 billion statutory allocation collection, against N40.87 billion IGR.

NEITI therefore recommended that state governments should explore alternative sources of revenue, by creatively developing strategies and leveraging existing laws, and regulations to improve non-federal revenue/receipts.

Details of the report showed that Delta, Akwa Ibom, Rivers, and Bayelsa States received 67.47 per cent of the total Federal Allocation during the period, while Gombe, Nasarawa, and Ondo states got the least allocations.

For internally generated monies, NEITI stated that the states realised a total of about N695.22 billion, representing 20.37 per cent of the total states’ receipts for the period, with Rivers, Delta, Kano and Akwa Ibom accounting for 74.64 per cent.

Imo State had the highest increase in IGR of 115.73 per cent during the period, while Nasarawa State had the least increase of 4.04 per cent.

According to the report, the state governments borrowed to the tune of N747.22 billion, with Rivers, Kano, Delta and Imo States accounting for 81.69 per cent of the total, increasing by 258.68 per cent in 2021, an indication of over-dependence on borrowing by the states.

“Bayelsa and Nasarawa states did not receive loans in 2020, while the loan receipts by Rivers, Akwa Ibom, Gombe and Imo States, rose the highest, accounting for 935.27 per cent, 680.91 per cent, 435.39 per cent and 390.46 per cent, ” NEITI added.

The report observed that a significant increase in loan receipts for most of the states during the period was an indication that they were yet to build a corresponding revenue expansion base to augment shortfalls in revenue.

It stated that this may impact negatively on their abilities to deliver services to their citizens.

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