The State of States report released on Monday by BudgIT, a civic organization, that measures fiscal performances of both federal and state governments in the country has revealed that Rivers state emerged the best sub-national in the overall 2021 fiscal performance ranking.
According to the report, this comes as a result of the prudent management of its fiscal fundamentals compared to those of other states.
BudgIT expressed that economic shocks from the COVID-19 pandemic affected Internally Generated Revenue (IGR) of states, as share of federally collected revenue from states in 2020, declined by 3.43 percent, except for Lagos State that recorded 5.08 percent IGR growth in the period.
The organization explained that Ebonyi and Kebbi States made it as new entrants in the overall ranking, to also emerge in the top 5 category as a result of the growth in their Internally Generated Revenue(IGR) as recorded by the NBS.
Ebonyi grew its revenue by 82.3% from N7.5bn in 2019 to N13.6bn in 2020, while Kebbi grew its revenue by 87.02% from N7.4bn in 2019 to N13.8bn in 2020.
According to them, Ogun and Kano states, dropped out of the top 5 category due to a sharp decline in their IGR in 2020, leaving them in 19th and 22nd positions respectively.
Meanwhile, the report said that only three (3) states, which includes Lagos, Rivers and Anambra could meet their operating expenses obligations with a combination of their IGR and Value Added Tax (VAT) as measured in ths ‘Index A’ ranking.
“For this year’s report, we examined states’ fiscal health using four key metrics namely; the ability of states to meet their operating expenses with IGR and VAT, states’ ability to cover their operating expenses and loan repayment with their total revenue, how much fiscal room states have to borrow more, and the degree to which each state prioritises capital expenditure with respect to their operating expenses.
“Cumulatively, the 36 states total debt burden increased by N472.63bn (or 8.78%) from N5.39tn in 2019 to N5.86tn in 2020. This was driven largely by exchange rate volatility which saw the value of the naira jump from N305.9/$1 in 2019 to N380/$1 as of December 31st 2020.”
It explained that States with the highest foreign debt including Lagos, Kaduna, Edo, Cross River and Bauchi, were significantly hit due to negative exposure to exchange rate volatility.
Also, five (5) states Anambra, Benue, Lagos, Kaduna and Zamfara accounted for more than half (that is 63.63% or N300.7bn) of the net year-on-year sub-national debt increase of N472.63bn for all the states between 2019 and 2020.
However, based on each state’s 2020 revenue, five states prioritized investment in infrastructure by spending more on capital expenditure than operating expenses, which gave them a position at the top of the ‘Index D’ ranking.
“The states are Ebonyi, Rivers, Anambra and Cross River states in the south and Kaduna state in the north.”
According to NGO, Nineteen states, including eight oil-producing states, saw a year-on-year decline in their capital expenditure, while seventeen states were still able to improve their investment in capital expenditure, from 2019 levels despite fiscal constraints induced by COVID-19.
“Without a doubt, economic shocks from the COVID-19 pandemic took a toll on states’ Internally Generated Revenue (IGR) and their share of federally collected revenue in 2020; thus the need to explore options for building back the subnational economies cannot be overstressed.”
