BudgIT, a civic-tech organization dedicated to fiscal transparency, reveals that 14 Nigerian states derive at least 70% of their total revenue in 2023 from allocations through the Federation Account Allocation Committee (FAAC).
In a statement released on Tuesday, BudgIT presents insights from its newly launched 2024 State of States Report, which evaluates the fiscal performance of all 36 states and ranks them based on financial sustainability. The report underscores the significant reliance of many states on federal transfers, exposing their vulnerability to fluctuations in oil revenue and external economic challenges.
The data indicates that 32 states rely on FAAC receipts for over 55% of their total income, while 34 states obtain at least 62% of their recurrent revenue from FAAC funds, excluding Lagos and Ogun. This heavy dependence raises concerns about fiscal sustainability, particularly as these transfers are sensitive to crude oil market volatility. The report shows that states like Akwa Ibom, Imo, Bayelsa, and Jigawa require more than five times their internally generated revenue (IGR) to cover operational costs.
Total Revenue Reaches N8.66 Trillion in 2023
In 2023, the combined revenue of Nigeria’s 36 states increases by 31.2%, rising from N6.6 trillion in 2022 to N8.66 trillion, partly due to the removal of the fuel subsidy. FAAC receipts grow by 33.19% year-on-year, contributing N5.4 trillion to the states’ total revenue.
Lagos leads with N1.24 trillion, accounting for 14.32% of the total subnational revenue and also ranking highest in expenditures at over N1.49 trillion. BudgIT states, “In the 2023 fiscal year, the combined revenue of all 36 states increases significantly, with Lagos State contributing N1.24 trillion.”
The report notes that 32 states depend on FAAC receipts for at least 55% of their total revenue, with 14 states relying on FAAC for at least 70%. It further details that for 34 states, transfers from the federation account constitute at least 62% of their recurrent revenue, excluding Lagos and Ogun, highlighting the states’ reliance on federally distributed revenue.
Rising Expenditures and Debt Trends
Total expenditure across states reaches N9.78 trillion in 2023, a 21.19% increase from the previous year’s N8.07 trillion. Personnel costs rise by 12.9%, while capital expenditure sees a significant increase of 37.3%, totaling N4.04 trillion.
The report also indicates that subnational debt increases by 38.1% to N10.01 trillion by the end of 2023. Rising foreign debt obligations, worsened by exchange rate fluctuations, add financial pressure, especially for states with significant dollar-denominated loans like Lagos, Kaduna, and Edo.
BudgIT states, “The total debt stock of the 36 states surges by 38.1%, driven by a N606.12 billion increase in domestic debt, resulting in an average year-on-year growth rate of 11.4%.” By the end of 2023, total domestic debt stands at N5.86 trillion, while foreign debt rises by 4.1%, increasing from $4.43 billion in 2022 to $4.61 billion in 2023.
The report reveals that Lagos State holds the highest foreign debt, making up 26.9% of the total foreign debt, equivalent to $1.24 billion. The analysis shows significant variances in debt repayment obligations due to exchange rate changes, putting states at risk if a substantial portion of their debt is dollar-denominated.
BudgIT advises states to curb foreign borrowing and improve internal revenue generation strategies. In healthcare, despite a combined allocation of N2.3 trillion to the sector, states spend only 58.16% of the budget, raising concerns about underfunding and highlighting the urgent need for increased investment in healthcare infrastructure and personnel.
BudgIT concludes that enhancing fiscal sustainability requires states to reduce their reliance on federal allocations by leveraging public-private partnerships, technology, and effective resource management.
