Rivers, Ebonyi, others top states’ 2021 fiscal performance ranking

COMFORT EKELEME

The latest report from BudgIT has shown that Rivers state has again, topped the overall 2021 Fiscal Performance Ranking, indicating that the fiscal fundamentals of this state, compared to others in the country, are more prudently managed.

BudgIT in the 2020 edition of its annual States of States report titled “Fiscal Options for Building Back Better” said, in the overall ranking, two states, Ebonyi and Kebbi made it as new entrants to the top 5 categories.

This was driven largely by growth in both states’ Internally Generated Revenue (IGR) as recorded by the National Bureau of Statistics (NBS).

Ebonyi state grew its IGR by 82.3per cent from N7.5billion in 2019 to N13.6billion in 2020, while Kebbi state grew its revenue by 87.02per cent from N7.4billion in 2019 to N13.8billion in 2020.

Meanwhile, Ogun state (now 19th) and Kano state (now 22nd), dropped out of the top 5 category due to a sharp decline in their IGR in 2020.

This report is BudgIT’s signature analysis that provides citizens, CSOs, stakeholders, and policymakers with robust insights on ways to implement financial and institutional reforms that will improve states’ fiscal performance and sustainability levels.

Chief Executive of BudgIT, Gabriel Okeowo said “For this year’s report, we examined states’ fiscal health using four metrics namely; the ability of states to meet their operating expenses with IGR and Value Added Tax (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.

While speaking about States’ fiscal viability, BudgIT’s Research & Policy Advisory Lead, Abel Akeni noted that only three states in the country could meet their operating expenses obligations with a combination of their IGR and VAT as measured in our ‘Index A’ ranking; these states are Lagos, Rivers, and Anambra.

Cumulatively, the 36 states’ total debt burden increased by N472.63billion (or 8.78per cent) from N5.39trillion in 2019 to N5.86trillion 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.

“States with the highest foreign debt were significantly hit due to negative exposure to exchange rate volatility.

“These states include Lagos, Kaduna, Edo, Cross River, and Bauchi. Furthermore, five states accounted for more than half (that is 63.63per cent or N300.7billion) of the net year-on-year subnational debt increase of N472.63billion for all the states between 2019 and 2020: the states are Lagos, Kaduna, Anambra, Benue, and Zamfara.” Akeni said.

According to the report, based on each Abel Akeni state’s 2020 revenue, five states prioritized investment in infrastructure by spending more on capital expenditure than operating expenses.

The states are Ebonyi, Rivers, Anambra, and Cross River states in the south and Kaduna state in the north.

These states appear at the top of the ‘Index D’ ranking. 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.

A critical first step for states would be to rapidly block financial leakages that could further drain the little available revenue or future revenue.

From the Annual Performance Assessment (APA) results of states under the State Fiscal Transparency, Accountability And Sustainability (SFTAS) program, released in Q2 2021, only 7 states in Nigeria had functioning Treasury Single Accounts (TSA), an otherwise critical fiscal strategy that gives states more control over their revenues and could help states reduce leakages.

The results were better for states that had introduced reforms to block leakages, due to the existence of “ghost workers” and other forms of payroll fraud. About 24 states and 27 states respectively, had introduced “Biometric use in payroll management” and “Bank verification number use in payroll management”.

“Procurement processes are one of the biggest areas through which revenue leakages can occur. Hence, the need for states to adopt open contracting principles to minimize instances of inflated contracts and other forms of procurement and procedural fraud,” Okeowo added.