Rivers Tops States’ Fiscal Performance Ranking

Rivers State has emerged the best sub-national in the overall 2021 Fiscal Performance Ranking.
The ranking was contained in the report of the BudgIT annual report on the State of States, released, yesterday.
BudgIT is a non-governmental organisation (NGO) which focuses on fiscal performances of both federal and state governments in the country.
In its “State of States Report 2021, BudgIT noted that Rivers State topped the overall 2021 Fiscal Performance Ranking, while adding that only three states in the country can meet their operating expenses obligations from their revenues.
“Rivers State once again topped the overall 2021 Fiscal Performance Ranking despite Covid-19 induced fiscal shocks to its IGR, indicating that the fiscal fundamentals of this state, compared to others in the country, are more prudently managed.
“Two states made it, as new entrants to the Top 5 category in the overall 2021 ranking – Ebonyi state emerged in 2nd position; up from 6th position in 2020 ranking, and Kebbi state emerged in 5th position, up from 11th position in 2020”.
It stated that 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, pushing their cumulative IGR down by 3.43percent, except for Lagos State that recorded 5.08percent IGR growth in the period.
According to the report, “The fiscal fundamentals of this state (Rivers), compared to others in the country, are more prudently managed.”
In the overall ranking, two states – Ebonyi and Kebbi – made it as new entrants to the top 5 category.
This was driven largely by growth in both states’ IGR as recorded by the NBS.
Ebonyi State grew its IGR by 82.3% from N7.5billion in 2019 to N13.6billion in 2020, while Kebbi state grew its revenue by 87.02% from N7.4billion in 2019 to N13.8billion in 2020.
However, 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.
Only three states in the country could meet their operating expenses obligations with a combination of their IGR and Value Added Tax (VAT) as measured in BudgIT’s ‘Index A’ ranking.
They are Lagos, Rivers, and Anambra.
According to the NGO, “For this year’s report, we examined states’ fiscal health using four key metrics namely; the ability of states to meet their operating expenses with IGR and 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.
“Cumulatively, the 36 states total debt burden increased by N472.63billion (or 8.78%) 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”.
The report identified the states as: Lagos, Kaduna, Edo, Cross River and Bauchi.
“Furthermore, five states accounted for more than half (that is 63.63% or N300.7billion) of the net year-on-year sub-national debt increase of N472.63billion for all the states between 2019 and 2020: the states are Lagos, Kaduna, Anambra, Benue and Zamfara.
“Based on each 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 appeared at the top of the ‘Index D’ ranking”.
According to the NGO, 19 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,” BudgIT said.
The BudgIT report stated, “Economic shocks from the Covid-19 pandemic took a toll on states’ IGR and their share of federally collected revenue in 2020. Cumulatively, all 36 states saw a 3.43% decline in their IGR from N1.26trillion in 2019 to N1.21trillion in the year 2020 under review.
“In total, 18 states saw a decline in their year-on-year IGR while 18 other states could weather the fiscal storm induced by the pandemic, growing their revenue — in some cases by as high as 87.02%.
“Worthy of note is Lagos State, which despite being the epicentre of the pandemic; saw a 5.08% growth in its IGR, a testament to the resilience of its fiscal strategy.
“In the 2021 Performance Ranking, two states dropped out of the Top 5 in overall ranking; Ogun State (now 19th) and Kano State (now 22nd), due to a sharp decline in their IGR in 2020”.
On states comparative viability, BudgIT stated, “Only three states in the country can meet their operating expenses obligations with a combination of their IGR and Value Added Tax (VAT), these states are Lagos, Rivers, and Anambra.
“In contrast, states at the bottom of the ranking need to do more to rapidly consolidate on any ongoing strategies to improve their IGR and by extension, their viability as federating entities. This is necessary considering the comparative size of their operating expenses and the global push to transition away from fossil fuels like crude oil, a key source of federally distributed revenue.
“These states at the bottom ranking include Jigawa, Delta, Benue, Taraba and Bayelsa.”