The 2018 Fiscal Sustainability Index (FSI) report by BudgIT, a civil organization committed to transparency and accountability in Nigeria’s public finance system, has seen Lagos State, the most economically vibrant state nationwide, losing its ranking by two points, dropping from 2nd position in 2017 to 4th position this year.
The FSI analysed the fiscal condition of states and noticed that states fiscal account generally improved on the back of increasing oil revenue.
To sustain the positive trend, BudgIT pointed out that it was critical that state governments embrace a high level of transparency and accountability, develop workable economic plans, take cuts – especially on overheads – expand their internally generated revenue (IGR) base, and cut down on debt accumulation without a concrete repayment plan.
In the latest report, Rivers, Bayelsa, Delta, Akwa Ibom, Lagos, Edo and Ondo were ranked high in the BudgIT’s FSI due to their robust revenue profile and manageable recurrent expenditure obligations.
BudgIT noted that states with low expenditure outlay and sizeable debt such as Anambra, Enugu and Katsina deserved some commendation, while also noticing that Abia had tightened its recurrent projection, providing it with the opportunity to leap on its future sustainability rankings.
Curiously, Lagos dropped from 2nd to 4th place on the FSI report notwithstanding its economic advantages at all comparative levels with other states.
For instance, BudgIT noted that Lagos’s internally-generated revenue, when compared to many of its peers, remained relatively high.
According to the FSI report, Lagos’ IGR as at the end of 2016 grew to N287 billion, up from 2015 levels of N268.2 billion, adding that in the current fiscal year, the state government is planning a recurrent expenditure spending of N305 billion or N25 billion monthly.
BudgIT stated further: “With its IGR not expected to grow significantly above N300 billion, while its share of revenue from FAAC in the first six months of 2017 was N6.6 billion, Lagos overheads cost and debt which is unusually elevated weighing down on its revenue and its performance on the 2018 fiscal sustainability index.
“BudgIT is extremely concerned with the poor fiscal management thinking in Cross River with its bogus budget plan of N1.3 trillion, which severely weighed it down on the index. Our research also showed that Osun State is not out of the woods as it still ranks 35 out of the 36 states”, it added.
The organization advised states to look beyond rhetorics and commit to a reduction in their operating costs, including significantly slashing unreasonable overheads bill while freeing up more spending for social and economic infrastructure.
In addition, it recommended that states also needed to link future borrowing to sustainable projects, which can pay back the capital cost of their current loans and improve the overall income profile of the state.
BudgIT canvassed further: “Economic planners at the state level are also advised to improve tax collection efficiencies and realign budgeting with statewide plans. Significant investment is needed to improve the overall economic performance at the state level, which invariably could create jobs that feed into states’ internally generated revenue.
“Improve spending is also critical for value-added tax 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”, it concluded.
