A new report from civic tech organization BudgIT has unveiled a stark financial reality for Nigeria’s states.
The 2024 State of States Report, launched in Abuja on Tuesday, reveals that only Lagos and Rivers can operate without heavy reliance on federal funding.
According to the report, Lagos and Rivers stand out for their ability to cover all operational costs using only their Internally Generated Revenue (IGR).
This financial independence makes them the only two states in Nigeria that can function without the need for funds from the Federation Account Allocation Committee (FAAC).
“Rivers and Lagos were the only two states that generated more than enough internally generated revenue (IGR) to cover their operating expenses, with IGR to operating expense ratios of 121.26 percent and 118.39 percent, respectively,” the report stated.
This means that for every N100 they need to operate, Rivers and Lagos generate N121.26 and N118.39, respectively, without relying on federal support.
Meanwhile, the report highlighted the dependence of other states on FAAC for survival.
BudgIT revealed that 34 states lean on federal allocations to fund 62 percent of their recurring expenses.
For 32 of these states, FAAC funds make up at least 55 percent of their total revenue.
This number rises even higher for 14 states, where federal allocations provide over 70 percent of their entire income.
“This heavy reliance on FAAC funds reveals a lack of financial independence among the majority of Nigerian states,” BudgIT explained.
Experts warn that this over-reliance on federal funds leaves many states vulnerable to shifts in national revenue.
BudgIT’s report also mentions states like Ogun, Anambra, Cross River, Kwara, Kaduna, and Edo, which have achieved some level of self-sufficiency.
These states generate enough IGR to cover at least 50 percent of their operating expenses.
Still, without significant support from FAAC, they struggle to meet their full financial needs.
In fact, BudgIT’s analysis showed that for 21 states, over 80 percent of their recurrent revenue comes from FAAC.
BudgIT’s 2024 report also highlighted a positive trend in state revenues.
For the 2023 fiscal year, the combined revenue of Nigeria’s 36 states surged by 31.2 percent, rising from N6.6 trillion in 2022 to N8.66 trillion.
This increase reflects efforts by several states to boost their IGR through various local economic initiatives.
However, BudgIT’s findings raise pressing questions about financial sustainability among states.
For years, FAAC has been a crucial lifeline for states, helping them meet payrolls, fund infrastructure, and support healthcare and education.
Yet, experts argue that depending so heavily on FAAC may not be sustainable in the long run.
BudgIT emphasized that states must develop independent revenue sources and manage resources more efficiently.
“This report should serve as a wake-up call to all states. Financial independence is achievable, and Lagos and Rivers prove that it is possible,” said a representative from BudgIT.
Financial analysts agree, stressing that without substantial investment in local industries, many states will continue to struggle.
Nigeria’s economy relies significantly on oil revenues, which fluctuate due to global market changes.
This dependency impacts the funds available for FAAC distribution, leaving dependent states at risk when oil revenues fall.
BudgIT’s report encourages states to diversify their economies, focus on local businesses, and develop policies to improve tax collection.
The report also calls for accountability in revenue management to ensure that funds benefit local communities directly.
