13 states lack revenue capacity to fund recurrent expenditure‎‎… BudgIT report

Thirteen states in the country lacked the revenue capacity to fund their recurrent revenue in 2019, according to  BudgIT’s State of the States Report, 2020.

The 13 states, according the report which was released on Thursday, are Lagos, Oyo, Kogi, Osun, Ekiti, Plateau, Adamawa, Bauchi, Gombe, Cross River, Benue, Taraba and Abia.

The report noted that from analysis, the total revenue of the 13 states was not enough to fund their recurrent expenditure obligations, including salaries, overhead, debt service obligations, and meet loan repayment schedules that were due in 2019.

“The worst hit of these 13 states are Lagos, Oyo, Kogi, Osun and Ekiti. Others are Plateau, Adamawa, Bauchi, Gombe, Cross River, Benue, Taraba and Abia,” the report said.

The report observed that the development could indicate early signs of distress particularly for states who have very low revenue generation capacities.

“Without cutting down certain components of their recurrent expenditure or radically growing their internally generated revenue, the affected states will have to borrow to fund parts of their recurrent expenditure, all of their capital expenditure and also borrow to pay back old loans or service old debts as was observed from their 2019 financial statements,” the report warned.

BudgIT also observed that the total debt for all 36 states surged by 162.87 per cent or N3.34tn, from N2.05tn in 2014 to N5.39tn in 2019, with 10 states accounting for approximately half or N1.68tn of the increase.

The 10 states that accounted for N1.68tn of the debt increase are Lagos, Rivers, Akwa Ibom, Imo, Kogi, Edo, Osun, Cross River, Kaduna and Adamawa.

‎Noting that the fall in oil prices has led to a decline in federal revenue, BudgIT urged the states to grow their internally generated revenue.

Lagos, Ogun and Rivers will be least affected by dwindling federal revenue due to their higher IGR profiles, while Bayelsa, Borno and Katsina would be worst hit, according to the report.

Rivers State occupied the number one position on BudgIT’s 2020 Fiscal Sustainability Index as it was able to meet its recurrent expenditure with only internally generated revenue (IGR) and value added tax (VAT).