- Safiu Kehinde
Rivers State has maintained its number one spot in Fiscal Performance Ranking out of the thirty-six states of the federation.
This is according to the latest 2024 Fiscal Performance Report released by BudgIT Nigeria on Tuesday.
Rivers maintained the number one spot and it recorded more Internally Generated Revenue to cover their operating expenses.
Following the South-South state on the table is Lagos state with IGR to operating expense ratios of 118.39% as against Rivers’ 121.26%.
Joining Lagos in the top five states are Anambra, Kwara, and Cross Rivers ranking third, fourth, and fifth respectively.
Meanwhile, Kebbi State achieved the most remarkable improvement, jumping 12 places from 28th to 26th, while Jigawa State experienced the
steepest decline, dropping 16 spots to land at the 36th position.
According to the report, several other states, including Ogun, Anambra, Cross River, Kwara, Kaduna, and Edo, managed to
generate IGR sufficient to cover at least 50% of their operating costs, with the rest relying on federal
transfers.
However, states such as Akwa Ibom, Imo, Taraba, Yobe, Bayelsa, and Jigawa required over five times their IGR to meet operating expenses, highlighting significant dependence on FAAC revenues and aid and grants.
The 2024 fiscal report, however noted that all 36 states managed to raise enough revenue—comprising IGR, federal allocations, aid, and grants—to fully cover their recurrent expenditures.
This indicates that no state needed to borrow to fund any portion of its recurrent spending.
In the 2023 fiscal year, the combined revenue of all 36 states in Nigeria increased significantly by 31.2% from N6.6tn in 2022 to N8.66tn. This growth rate exceeded the previous year's increase of 28.95%, indicating a notable improvement in fiscal performance.
Of the total revenue generated in 2023, Lagos State contributed N1.24tn, representing 14.32% of the cumulative revenue of the 36 States. Gross FAAC, which grew by 33.19% from N4.05tn in 2022 to N5.4tn in 2023, contributed to 65% of the year-on-year growth of the combined revenue of the 36 states.
This increase indicates the additional revenue accrued to states, albeit moderate, due to discontinuing the petroleum subsidy.
Also, 32 states relied on FAAC receipts for at least 55% of their total revenue, while 14 states relied on FAAC receipts for at least 70% of their total revenue.
Furthermore, transfers to states from the federation account comprised at least 62% of the recurrent revenue of 34 states, except Lagos and Ogun, while 21 states relied on federal transfers for at least 80% of their recurrent revenue.
The picture painted above buttresses the over-reliance of the state governments on federally distributable revenue and accentuates their vulnerability to crude oil-induced shocks and other external shocks.
The total expenditure across all 36 states reached N9.78tn, marking a 21.19% increase from the previous year’s N8.07tn. Lagos State led the spending, disbursing over N1.49tn, which accounted for 15.23% of the overall subnational expenditure.
The year saw different growth rates across spending categories, with personnel costs rising by an average of 12.9%, overhead costs by 26.75%, and capital expenditure seeing the most significant increase at 37.30%. Personnel cost rose to N1.99tn from N1.75tn in 2022, while overhead expenses climbed to N1.52tn from N1.24tn, and capital expenditure increased to N4.04tn, up from N3.47tn the previous year.
The aggregate operating expenses of the states, which formed 47.36% of the aggregate expenditure, increased by 21.17% from N3.8tn in 2022 to N4.64tn in 2023.
Additionally, N1.25tn, representing 12.8% of the cumulative spending of the states, was used to service debts. Interestingly, N287.56bn not captured by states as part of their expenditure for the 2023 fiscal year, was utilised to offset contractor arrears, pension and gratuity arrears, and other outstanding liabilities.
On debt profile, the total debt stock of the 36 states surged by 38.1%, from N7.25tn in 2022 to N10.01tn.
This growth was partly driven by a N606.12bn increase in domestic debt, resulting in an average year-on- year growth rate of 11.4%. By December 31, 2023, the total domestic debt stood at N5.86tn.
The situation was further complicated by rising foreign debt, which increased by 4.1%, from $4.43bn in2022 to $4.61bn in 2023. The liberalisation of the exchange rate exacerbated the financial strain on states, significantly raising their foreign loan repayment obligations in Naira terms.
Lagos State remained the most indebted in foreign currency, accounting for 26.9% of the total foreign debt, equivalent to $1.24bn.
Further analysis of the debt landscape revealed a considerable variance of N2.74tn in debt repayment obligations when comparing the exchange rate shift from N899.39 per dollar as of December 31, 2023, to the new rate of N1,492.9 as of June 2024.
The devaluation exposed many states to heightened financial risk, particularly the eight states where more than 50% of the total debt is dollar-denominated. Kaduna and Edo had the highest foreign debt-to-total debt ratios, at 86.06% and 60.54%, respectively. The other states in this group—Ondo, Bauchi, Lagos, Enugu, Ebonyi, and Anambra—had ratios ranging from 50% to 59%.
The debt burden also varied significantly across the country, with the average subnational debt per capita reaching N40,469 in 2023.
Twelve states exceeded this benchmark, with Lagos having the highest debt per capita at N138,034. In addition to the existing debt stock, the states have exiting liabilities totalling N1.19tn: N408.69bn is owed in contractor arrears, N521.36bn is owed in pension and gratuity arrears, N79.64bn is owed in salary and other staff claims, N4.36bn is owed in judgement debt and other pending litigation, and other payables and liabilities amount to N182.79bn.