A recent report by a civic-tech organization has disclosed that the majority of Nigeria’s states heavily rely on allocations from the Federation Account Allocation Committee for a significant portion of their revenue. The report emphasizes the risks associated with this over-dependence, especially on oil revenue and federal disbursements.
The report, released in Abuja, provides an in-depth analysis of states’ fiscal sustainability, examining their balance between internally generated revenue and federal allocations. It highlighted that many states relied on these allocations for a substantial percentage of their total revenue, making them vulnerable to economic shocks.
The total revenue generated by all states increased by over 30% in 2023, primarily due to a rise in FAAC allocations following the removal of the petrol subsidy. However, the report warns that the heavy reliance on these allocations exposes states to fluctuations driven by oil prices and other external factors.
Lagos State emerged as the top contributor to total state revenue, with only a few states like Rivers being able to cover their operating expenses with internally generated revenue. States such as Akwa Ibom, Bayelsa, and Taraba required significant multiples of their IGR to meet expenses, relying heavily on federal transfers and external aid.
Regarding expenditures, the report noted a substantial increase in total spending by states, with rising costs in personnel, overheads, and capital investments. It highlighted the need for states to enhance fiscal sustainability by boosting IGR, reducing reliance on FAAC, and improving debt management practices.
The report calls for innovative resource management and revenue mobilization strategies to help states navigate economic challenges and maintain financial stability. It stresses the importance of evaluating states’ fiscal decisions, particularly in managing resources amidst increasing revenue. The report also delves into subnational investments in healthcare, revealing significant allocations to the sector in 2023, with a portion left unspent.