Lagos, 3 others lead fiscal sustainability index in Nigeria
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A recent analysis on the fiscal condition of Nigeria states revealed that Rivers, Delta, Bayelsa and Lagos topped the 2018 fiscal sustainability index ranking, as analysed by BudgIT.
In the report, BudgIT noticed that states fiscal account generally improved on the back of increasing oil revenue. Also, “State governments should amongst others, embrace a high level of transparency and accountability, reduce overheads, and cut down on debt accumulation without a concrete repayment plan.” as stated in the report.
Rivers, Bayelsa, Delta, Lagos, Akwa Ibom, Edo and Ondo ranked top positions in the BudgIT’s 2018 Fiscal Sustainability Index as a result of their revenue profile and manageable recurrent expenditure obligation.
BudgIT also observed a commendable appearance of fewer states with low expenditure outlay and sizeable debt such as Anambra, Enugu and Katsina.
“We also noticed that Abia had tightened its recurrent projection, providing it with the opportunity to leap on our sustainability rankings”.
The index looked at the ability of states to meet their recurrent expenditure obligations with their Value-added tax (VAT) revenue, IGR and advantage income. It also looked at the ability of states to sustainably manage their debt profiles.
“The Index tries to see the extent to which today’s revenue can service outstanding debts.” as stated in the report.
Lagos declined to 4th position from 2nd in 2017 ranking on the fiscal sustainability index despite its economic advantage. Its Internally Generated Revenue (IGR) is relatively high when compared to its peers.
Lagos IGR as at January to June 2018 was N166.9 billion. At the end of 2017, the state’s IGR was N333.9 billion, from 2016 levels of N287billion.
Lagos overheads cost and debt which is unusually elevated weighed down its revenue and its performance on the 2018 index.
However, BudgIT is extremely concerned with the poor fiscal management thinking in Cross River with its budget plan of N1.3 trillion that severely weighed it down on the index. The report also showed that Osun State was still ranked 35 out of the 36 states.
In conclusion, “States need to look beyond rhetoric and commit to a reduction in its operating costs, including significantly slashing its unreasonable overheads bill while freeing up more spending for social and economic infrastructure.”
“States also need to link future borrowing to sustainable projects, which can pay back the capital cost of its current loans and improve the overall income profile of the state.
Economic planners at the state level are also advised to improve tax collection efficiencies and realign budgeting with state-wide plans.
Significant investment is needed to improve the overall economic performance at the state level, which invariably could create jobs that feed into states’ IGR.
“Improve spending is also critical for VAT revenue. Export opportunities in aquaculture, agriculture, manufacturing, trade, logistics and tourism abound across states, but it seems states lack the rigour and foresight to explore them.”