Boosting States’ Internally Generated Revenue

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The Federal Inland Revenue Service (FIRS) during the State Accountants-General Summit in Abuja on July 13, 2011, highlighted the low level of Internally Generated Revenue by state governments, urging them to pay closer attention to often neglected revenue sources and other methods of tackling leakages in the revenue generation process.

At the summit, the Chairperson of FIRS, Mrs Ifueko Omogui-Okara, cited dismal statistics from the Central Bank of Nigeria (CBN) on IGR by states in 2008 and 2009. According to the chairperson, “some states have IGR total revenue percentage that is as low as three per cent of their annual budgets, adding that, only two states had an IGR ratio above 40 per cent. She presented the raw records of their respective states in IGR as well as the implications of this to their continued existence as political entities.

Worried by this under-performance in revenue generation, she charged state governments to strive to wean themselves of dependence on federal allocations and resist the temptation of anticipatory spending.

We are aware that most state governments are faced with enormous challenges. To some, it is extremely difficult to pay the bloated emoluments of public officials and also meet the wage bills of the civil servants. Even the task of providing enduring physical infrastructures to drive sustainable development is greatly undermined by dearth of funds.

Unfortunately, most state governments have, for decades, ignored other revenue potentials available to them from the enormously untapped human and natural resources. Indeed, over-dependence on revenues accruing from oil has beclouded their ability to exploit other economic alternatives.

It is regrettable that, today, crude oil accounts for about 90 per cent of the country’s exports and over 85 per cent of the government’s revenue. And with the nation operating the subsisting revenue sharing formula in a federation that tilts more to the centre, it follows that virtually all the states might well have resorted to dependence on federal allocations to survive and also deliver development to their people. The consequence of this has been the continued neglect of other revenue sources, especially by the states and other tiers of government.

This is in spite of the fact that there abound many other precious, money-spinning natural resources in virtually all states of the federation, awaiting exploitation. Apart from limestone, feldspar, marble, kaolin and granite, which fall under the Exclusive List in the 1999 Constitution, as amended, there are other resources available to states which would not require Federal Government permission to exploit, and that way, boost their internally generated revenue profile.

For instance, good investments in agriculture, eco-tourism, commerce and industry, transportation, housing development, the upstream and downstream sectors of the oil and gas industry, power generation, among others, have the spiraling effect of reviving and boosting the suffocating economies of the states, creating enormous employment opportunities and wealth while, also reducing crime rate. Indeed, the Rivers State Government’s Songhai Farm Initiative and the Kwara State Government’s Commercial Agriculture Initiative otherwise called the Zimbabwean Farms Project are tacit examples of strategic efforts by states to provide alternative sources of revenue to oil.

We believe that improving the IGR status of states would widen the space and allow governments to invest in quality road networks, stable power supply, potable water and improved sanitation, ensure security of lives and property, and promote good transportation system and housing development for the people.

To achieve these, state governments must work out a water-tight procedure for collecting accruable revenues. Governments must check corruption in their revenue collection machinery not just to curb tax evasion but also to ensure that all revenues collected find their way into genuine government coffers for development purposes. Situations where leakages exist in state internal revenue boards do not augur well for the stability of the economies of the states and the development of the nation.

We also urge state governors to cut down on their foreign trips and those of their aides as a veritable means of shoring up available money for funding development projects and addressing other state needs. Besides, they must do all that is necessary to prone frivolous expenditures and contracts, and direct their energies on policies, programmes and projects with most cost-effective and positive impact on the majority of the people.