By Adebimpe Balogun

These are the types of statements expected of our State Governments given the current direction of the economy. Taking a short step back into history, it is clear that Oil became the major source of Nigeria’s revenue in the 1970s while other sectors of the economy which had put Nigeria on the map in the past slowly became redundant. A prime example of one of the sectors sacrificed on the ‘altar of oil’ is the Agricultural sector.

The Agricultural sector was spread across four regions; North, East, West and the Mid West. Each region was known for key export oriented agricultural produces as follows; The North was known for its groundnut, cotton, hides and skin; the East for its palm produce and coal; the West for its Cocoa and the Mid West for its rubber and timber.

At that time, the resources were mainly used for individual regions and the Revenue balance remitted to the Federal Government. Unfortunately, there is now a reversal of sorts as almost all State Governments rely primarily on statutory allocations to perform basic functions. Many States become totally handicapped in terms of running costs without these Federal monthly allocations.

Where we are today (Image source:- Presentation to the Media on January 13, 2015 by Forum for Inclusive Nigerian Development)

It is no longer news that Nigeria’s “oil is depleting”. Furthermore, the reduction in global oil prices and volume demands has now made diversification of the Nigerian economy from over-dependence on oil a mandatory policy issue. Oil Revenue dependence has essentially ‘milked the cow dry’.

Statistically, State Governments generate only 15% of their Revenue and depend on Federal Allocation for further sustenance. Unfortunately, this is no longer sustainable.

With the forthcoming elections in focus, every Governorship candidate debate should be focused on the planned strategy for a miraculous turn-around from Oil dependence to self sustainability. There is no doubt that a deliberate plan to stop leakages, wastages and corrupt practices in the system is imperative but this will only make sense where the inflow is certain. This therefore means that there is a greater need for the State Governments to consider alternatives for Revenue Generation.

A review of the figures (see attached table) from the National Bureau of Statistics, NBS, show that in 2012, the IGR, for the 36 states of Nigeria was about N 555 billion, out of which the 19 states of the  North generated  N87billion or 15%; the South West generated N261.2 billion or 47%; the South-South accounted for N150 billion or 27% and the South East N45 billion or 8%. In other words, the South generated N468 or 85 % of the total IGR for 2012.

Eight states, namely Anambra, Bauchi, Bayelsa, Ebonyi,  Jigawa,  Kano, Kwara, and Sokoto, had no data for 2012. The reason for this may not be totally unconnected to political reasons or inefficiency in the administrative machineries of the states. Whatever the reasons the people of these States must hold their Governors accountable.

Lagos, as expected, generated the highest IGR in 2013, bringing in N384.259billion equivalent to 76.9% of its 2013 budget of N499.10 billion. South-South: Rivers N87.9 billion, South-East: Enugu N20.2 billion, North-Central: Kwara N13.83 billion, North-West: Katsina N6.85 billion, and North-East: Taraba N3.34 billion.

This is the significance of the difference between Lagos and other states in the federation. Ultimately, a single State had Revenue 86.22% higher than some of the 13 states together (N 206.344billion in that year). The NBS data showed that no other state was able to go beyond the 30 percent mark for IGR as a percentage of budgeted expenditure for 2013. This implies that most states will be unable to pay salaries if the slide in oil prices persists.

Further analysis of the NBS IGR data shows the following;

• Akwa Ibom’s IGR of N15.39 billion was equivalent to 3.25% of its 2013 budget of N470.1 billion.
• Bayelsa’s IGR of N10.5 billion is equivalent to 3.45% of its 2013 budget of N304.05 billion,
• Delta States IGR of N50.2 billion is equivalent to 10.63% of its 2013 budget of N472 billion.
• Anambra State’s 2013 IGR of N8.73 billion is only equivalent to 7.87% of its 2013 budget of N110.9 billion,
• Taraba’s IGR of N3.34 billion is equivalent to 4.57% of its 2013 budget of N73 billion, and
• Yobe’s IGR of N3.072 billion represents just 3.46% of its budgeted N88.6 billion for 2013.
• Plateau State comes in at just 6.3% as IGR as percentage of the N133.4 billion it budgeted for 2013, while
• Katsina’s IGR of N6.85 billion is equivalent to 6% of its 2013 budget of N114.1 billion.

The analysis only corroborates the assertion that most Nigerian states are not viable without oil allocations from the centre. The ‘curse’ of the oil dependency only encouraged government officials to pay little attention to growing the economic base which would have helped the States become more independent (Agu, 2011).

Where we need to be

It is generally accepted that ‘adversity breeds creativity’. Lagos State did not receive its Federal Allocation for a period of about five years or more and it was forced to become self-sufficient as a State. It is hoped that the pressure to diversify and focus less on the center will force States to explore alternatives to improving their revenue base.

Today, Lagos remains self sufficient and generates at least 75% of its Revenue from its IGR. This has been facilitated by implementing a customized database with the associated infrastructure based on cutting-edge technology. The technology simplifies revenue collection and tax administration in the following ways;

• Eliminates  all sources of revenue leakages especially through Taxpayers, Revenue officials, and Banks.
• Created an online Database in respect of Taxpayers whose taxpaying habits

are monitored real-time.

• Generates with a high degree of accuracy projected revenue of future periods from all sources.
• Generates reports showing revenue distribution by revenue type and revenue agency.
• Shows distribution of revenue collected geographically

Many States are not enhancing their capacities to collect or expand their tax bases. Every year the same figures are projected as total internally generated revenue in their budgets while corresponding personnel costs increase. Any reduction in the collection of statutory revenue from the federation account will result in personnel costs being unpaid. This makes such States not economically viable for existence (El Rufai, 2012).

The challenges associated with IGR collection are as follows;

• Lack of adequate information on taxpayers. Taxpayers can easily avoid reporting their income to the State.
• Lack of cooperation from the taxpayers. Many Nigerians (even within the tax net) do not feel obligated to Government; therefore they do not consider paying tax as a civic responsibility.
• Insufficient information on the logic and significance of taxes. Certain taxpayers who might be willing to pay are not motivated to do so.
• Lack of uniformity in the incidence of taxation. Most taxpayers believe that they are unfairly levied. There are no standard structures and modalities for tax assessment in Nigeria, and the problem has created distrust between collectors and payers.
• Complexity of the tax system and a lack of explanation with respect to tax obligations by the Nigerian government. Most taxpayers do not understand what is required of them. Many taxpayers cannot distinguish between PAYE, WHT or VAT, even among the intellectuals much less calculate the tax base or tax liability in any of these cases.
• Inadequate training and preparation of tax inspectors. Most tax officials tend to be poorly educated and lack the basic knowledge and techniques to communicate. Many Tax inspectors tend to be very aggressive, thereby putting the taxpayer on the defensive.

Some States have commenced the process, by partnering with some Banks for the collection purposes. This reduces the high level of leakage associated with the collection of cash by Government agencies. However, there is a need to establish this process with the following activities;

• Introduce electronic data processing of all Taxpayer information. This will create easy access to taxpayer information and gain the same advantages as Lagos State
• Training and retraining Revenue Officers in the use of enabling laws
• Improving the administrative machinery to eliminate bottlenecks and bureaucracy in process flows
• Improving Taxpayer Service and Education

All States of the Federation have the potential to survive on IGR if the right parameters are set out for them. States are often considered weak in the IGR management because most of them don’t have comprehensive data on who should pay tax or the key economic activities that can generate tax income, issues such as this has always affected the revenue flow from internally generated sources .It is therefore important for these governments to look inwards and start to engage in resource development by encouraging Public-Private Partnership within their localities. Apart from improving economic activities it also creates an expanded tax base.

Conclusion

The belief in many quarters is that it is the statutory allocations that can make a State perform its civic duties. States that have the 13% derivation allocated to them are considered as having the leverage to perform better but this has not been the case. The potentials of states are hidden within their territories and must be explored and exploited urgently. History has also shown the possibilities. It should be noted that Lagos State does not enjoy the extra allocation (13% derivative) from oil, yet it remains the highest performing State.

If the right parameters are set out all states in the federation can generate enough revenue without depending on the statutory allocations from the central government (Omoigui Okauru, 2012). However, if there is insufficient data on eligible taxpayers and the major activities that can generate tax, most states would not be able to maximise their tax potential for revenue generation.

The state boards of internal revenues should also be empowered to provide a one-stop shop for tax collection. Other sources of revenues like stamp duties; levies and fees collected by the state and local government should be enhanced. The use of information technology should be introduced across board to ensure a comprehensive data base for the tax payers. (Oseni Michael, 2013).

This is the time for us as Nigerians to call on leadership both at the Federal and State levels to:

• Create transparent, evidence-based plans to support economic diversification
• Implement those plans with public oversight, transparency and accountability
• Move from direct ownership of economic assets to regulating private sector investment
• Make complementary investments in public infrastructure and human capital
• Diversify revenue sources by broadening the tax base and collecting taxes efficiently, transparently and fairly

It is important to remember that, well-targeted public policies, regulations and investments in key sectors can contribute to growth, and this growth will contribute to government revenue.

While good governance cannot be over emphasized, the citizenry also needs to be aware that there is a need to;

• Advocate for transparent, evidence-based plans to support economic diversification
• Hold leaders accountable for implementing those plans with public oversight, transparency and accountability
• Advocate for high quality public investments and effective service delivery in education, health, transport, power, etc.
• Advocate for fair and efficient taxation, and pay taxes as a citizen investing in the future of the country

This write up has focused mainly on the importance of Internally Generated Revenue at State Levels but this is not to the exclusion of the responsibilities of both Nigerian leaders and Citizens to be accountable as outlined above.

The big question now is how much of this is being discussed in political manifestos to enable the electorate consider and determine who has their best interest at heart and who knows exactly what to do.

Nigerians!!!!! the CALL is ours NOW.

• Adebimpe Balogun, Managing Partner/CEO Saffron Professional Services; Member, Forum for Inclusive Nigerian Development (FIND).