State government revenue up 9.19% year on year – BudgIT

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The combined income of the 36 Nigerian states in the federation increased by 9.19% from 4.69 trillion naira earned in 2020 to 5.12 trillion naira in 2021, according to BudgIT, a Nigerian civic organization that applies technology for citizen engagement with institutional improvement to facilitate societal change.

BudgIT revealed this in its 2022 State of the States Rankings report, which saw Lagos leading among states that have a relatively limited reliance on federally distributed revenue for their operations.

However, most states still rely heavily on federally distributed revenues to execute their budgets.

While at least 50% of total revenues in 33 states were federal transfers, 13 states relied on federal transfers for at least 70% of their total revenues.

“In the face of declining revenues due to Nigeria’s subsidy regime and volatile crude oil prices, the overreliance on federal transfers is becoming increasingly unsustainable. Therefore, states must urgently wean themselves off reliance on federally distributed revenue by significantly improving their ability to raise revenue internally,” Budgit said in the report.

On the expenditure side, the cumulative expenditure of the 36 states increased by 27% from 5.23 trillion naira in 2020 to 6.64 trillion naira in 2021.

While 31 states increased their total spending from the previous year, five states reduced their spending, with Zamfara decreasing the most by 15.59%.

Several states have implemented reforms to identify ghost workers and eliminate payroll fraud, resulting in lower annual growth in payroll costs for seven states, the report found.

However, the combined personnel costs of the 36 states increased by 5.38% from 1.46 trillion naira in 2020 to 1.54 trillion naira in 2021. Interestingly, nine states reduced their overhead costs compared to to the previous year, signaling a reduction in the cost of governance. . Conversely, 11 states increased their overheads by more than 40% over the previous year, with Akwa Ibom having the highest growth of 424.60%.

The report notes that the cumulative capital expenditure expenditure of the 36 states increased by 52.52% from 1.77 billion naira in 2020 to 2.70 billion naira in 2021.

Eight states increased capital spending year over year by more than 100%, however, only five states, including Anambra, Ebonyi, Cross River, Kaduna and Rivers, prioritized capital spending over operating expenses, signaling the prioritization of infrastructure investments. , job creation and human capital development.

Speaking of spending on critical social sectors like health and education, 24 states spent below the subnational average of N1977.07 for population per capita health expenditure.

Also Read: Representatives Probe Calculation of State and LG Revenue Allocation from 2012-2021

Similarly, education expenditure per capita of 22 states was below the subnational average of N3,954.99. With education expenditure per capita of N380.65 and N365.30 respectively, Imo and Ondo had the less investment in education per capita in 2021.

Regarding the outlook for sub-national debt, the report notes that the cumulative debt stock of the 36 states increased by 8.68% from 5.86 trillion naira in 2020 to 6.37 trillion naira in 2021.

A more disaggregated view of subnational debt shows that 11 states have reduced their total debt, with Delta State recording the most impressive drop of 33.84%. Four states – Oyo, Yobe, Ogun and Sokoto, increased their total outstanding debt by more than 40% compared to 2020.

The five most indebted states – Lagos, Kaduna, Rivers, Ogun and Cross River – are responsible for 37.09% of total subnational debt.

Kogi State, with an external debt growth of 85.65% year-on-year, ranked first among the 17 states that increased their external debt in 2021. The four states having the highest dollar-denominated debt ($250 million and above)—Lagos, Kaduna, Cross River, and Edo—are the most susceptible to exchange rate volatility. However, all states need to control their appetite for acquiring dollar-denominated loans, especially at a time of low foreign direct investment and dwindling foreign exchange reserves.

Six states – Plateau, Imo, Cross River, Osun, Kaduna and Ekiti – surpassed the 200% debt-to-income ratio solvency threshold in 2021. While Zamfara was the only state to exceed the service ratio solvency threshold debt/revenue ratio of 40%, no State exceeded the solvency thresholds of 40% and 60% respectively for the debt/GDP ratio and the staff costs/revenue ratio.

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