Oil Revenue Shortfall: Time for state governments to grow IGR


The state of the Nigeria’s economy has been in a shallow of itself, following the global sharp drop in the crude oil price, which has adversely effected the nation’s oil revenue, excess crude account and contribution to sovereign wealth fund thereby increasing sovereign risk, and making it difficult for most of the state governments and private sector operators to pay workers salaries.

Barely a year now, the then Minister of Finance and Coordinating Minister for the Economy (CME), Dr. Ngozi Okonjo-Iweala, denied that Nigeria is broke but before the end of the Goodluck Ebele Jonathan’s administration, she eventually realized that the country  was going broke, with less than only $3.6 billion left in the excess crude account.

She lamented that Nigeria’s governors’ insistence on sharing money that accrues to the federation account as stipulated by the constitution is running the country aground and unhealthy for the nation’s economy.

Even when the crude oil prices were good, she had wondered why most of the governors were not creative in generating revenue and be able to save money. Warning that should the price of oil drop, Nigeria would have no cushion.

Buhari’s prounounceent on economy

President Muhammadu Buhari recently admitted that Nigeria is indeed broke. He said that the country is at the moment struggling to pay workers’ salaries even as he says he wants to be remembered as a Nigerian president who fought corruption to a standstill, assuring Nigerians, who are not  corruptly enriching themselves with public funds, not to be afraid.

However, one of the main talking points at a one-day summit in New Delhi, where the president made the disclosure was the provision of over $10 billion grant  India had set aside for African countries.

FG’s bailout

It is pertinent to note that the Federal Government has helped 27 states out of 36 to pay salaries.

According to President Muhammodu Buhari, “Nigeria cannot pay salaries; the Federal Government itself has to summon the Governor of Central Bank on how it could pay salaries.”

Learning from Lagos how to grow IGR

As at 1999, the Internal Generated Revenue (IGR) of Lagos State was about N500 million per month, but today, it is about N20 billion per month and its working towards pushing it further.

The states have said that without determination and desire not to be too dependent on allocations from the federation account, that it would not have achieved that.

As the current record from the National Bureau of statistics (NBS) has revealed that Lagos State government is the highest internal revenue earner in the country in 2014.

The centre of excellence topped the NBS chart on the detailes of internally generated revenue with the sum of N276, 163,978,765.95 which was placed on the agency website recently.

Nigerian NewsDirect notes that the report gives an update on detailed breakdown of states IGR for 2014 with the remaining 13 states recently updating theirs. The states which submitted late include: Abia, Adamawa, Borno, Cross River, Ebonyi, Edo, Gombe, Jigawa, Kano,Kwara, Ondo, Taraba and Yobe.

Lagos state government had generated a huge amount of fund from  road taxes with N4, 577,146,136.00 in 2014, while N9, 392,939,866.44 was generated from the direct assessment within the state.

Rivers state was ranked second with N8 9,112,448,347.58 as its total income with N15, 467,493,816.10 coming from the road taxation. Its direct assessment revenue was N5, 260,640,383.32.

Delta, Ogun, and Akom Ibom states were also among the top earners of internal generated revenue with N42, 819,209,025.24, N17, 497,620,787.521, and N1 5,676,502,423.00 following respectively.

Analysts opinion

Finance experts have identified dwindling crude oil prices, as a factor responsible for sharp drop in the Federal Government revenue would limit government ability to implement its budget.

For instance, government oil revenue, which increased by 5.67 per cent from N570.15 billion to N602.47billion between May and June, 2014, has nose-dived.

However, recent initiatives by the government have sought to open up prospective areas that could guarantee more activities and expand the economic space.

Widespread reforms, largely hinged on privatization and deregulations, have been implemented in various sectors including agriculture, SMEs and manufacturing, among others.

It is imperative that these initiatives are sustained considering the volatile nature of the energy market and the implications for government revenue, foreign exchange reserves and the value of the Naira.

Nigerians react

President Muhammadu Buhari’s recent pronouncement that the nation is broke to the extent that some State governments are unable to pay workers months of salaries is unnecessary lamentation. Though its veracity is not in contention, such digression is uncalled for.

What Buhari has said on the economic situation of the country was public knowledge even before the 2015 general elections that brought him to power. In the build-up to the March 28 presidential poll, the price of crude oil, our major source of revenue earner, had crashed in international market.

Rebuilding the economy, job creation, fighting corruption and ending the insurgency in the North-East were some of the major campaign promises of the then General Muhammadu Buhari and his APC prior to the 2015 polls, in which he was victorious.

FG’s swift response

Swiftly, responding to the claim by many Nigerians that he is given the country bad name by saying nation is broke. President, said: “I think that the economy as I have seen it now since my sitting here for the last four months, that we are so much battered. Although some people are saying I am giving bad publicity and scaring away investors.

“Any investor who is interested in investing in Nigeria will seem to know more about the economy more than ourselves. So, when I come and tell the truth about the position of the economy of the country, I am going out looking for investors.

“But I am confirming to them that we are truthful,

that we need them to come and help us  by get ting in industries, manufacturing and services. They know our needs. The economy of human resources, I believe will make them eventually come and help us”, he said.