BudgIT, a prime civic-tech organisation leading the advocacy for fiscal transparency and accountability in Nigeria, has launched the 2024 edition of its annual State of States Report with the theme ‘Moving Healthcare Delivery from Suboptimal to Optimal’, a flagship research product, which assesses and ranks the 36 States’ fiscal performance from most to least sustainable.
For the 2024 edition, the civil society organisation maintained the five metrics for ranking all 36 states, where Index A examines states’ ability to meet Operating Expenses (Recurrent Expenditure) with only their Internally Generated Revenue. Index A1 looks at the percentage year-on-year growth of each state’s Internally Generated Revenue. Index B reviews states’ ability to cover all operating expenses and loan repayment obligations with their Total Revenue (Internally Generated Revenue + Statutory Transfers + Aids and Grants) without borrowing. Index C estimates the debt sustainability of the states using four major Indicators. A. Foreign Debt as a % of Total Debt. B. Debt as a % of Revenue. C. Debt Service as a % of Revenue, and D. Personnel Cost as a % of Revenue. Index D evaluates the degree to which each state prioritises capital expenditure over its operating expenses (recurrent expenditure).
In this edition, the fiscal performance ranking saw a reshuffling of the top positions, with Cross River joining the top five while Rivers State maintained the number one spot. Kebbi State achieved the most remarkable improvement, jumping 12 places from 28th to 26th, while Jigawa State experienced the steepest decline, dropping 16 spots to land at the 36th position. Rivers and Lagos were the only two states that generated more than enough Internally Generated Revenue (IGR) to cover their operating expenses, with IGR to operating expense ratios of 121.26% and 118.39%, respectively.
Several other states, including Ogun, Anambra, Cross River, Kwara, Kaduna, and Edo, managed to generate IGR sufficient to cover at least 50% of their operating costs, with the rest relying on federal transfers. In contrast, states such as Akwa Ibom, Imo, Taraba, Yobe, Bayelsa, and Jigawa required over five times their IGR to meet operating expenses, highlighting significant dependence on FAAC revenues and aid and grants. Of note is that all 36 states managed to raise enough revenue—comprising IGR, federal allocations, aid, and grants—to fully cover their recurrent expenditures. This indicates that no state needed to borrow to fund any portion of its recurrent spending.
In the 2023 fiscal year, the combined revenue of all 36 states in Nigeria increased significantly by 31.2% from N6.6tn in 2022 to N8.66tn. This growth rate exceeded the previous year’s increase of 28.95%, indicating a notable improvement in fiscal performance. Of the total revenue generated in 2023, Lagos State contributed N1.24tn, representing 14.32% of the cumulative revenue of the 36 States. Gross FAAC, which grew by 33.19% from N4.05tn in 2022 to N5.4tn in 2023, contributed to 65% of the year-on-year growth of the combined revenue of the 36 states. This increase indicates the additional revenue accrued to states, albeit moderate, due to discontinuing the petroleum subsidy.
Also, 32 states relied on FAAC receipts for at least 55% of their total revenue, while 14 states relied on FAAC receipts for at least 70% of their total revenue. Furthermore, transfers to states from the federation account comprised at least 62% of the recurrent revenue of 34 states, except Lagos and Ogun, while 21 states relied on federal transfers for at least 80% of their recurrent revenue. The picture painted above buttresses the over-reliance of the state governments on federally distributable revenue and accentuates their vulnerability to crude oil-induced shocks and other external shocks.
The total expenditure across all 36 states reached N9.78tn, marking a 21.19% increase from the previous year’s N8.07tn. Lagos State led the spending, disbursing over N1.49tn, which accounted for 15.23% of the overall subnational expenditure. The year saw different growth rates across spending categories, with personnel costs rising by an average of 12.9%, overhead costs by 26.75%, and capital expenditure seeing the most significant increase at 37.30%. Personnel cost rose to N1.99tn from N1.75tn in 2022, while overhead expenses climbed to N1.52tn from N1.24tn, and capital expenditure increased to N4.04tn, up from N3.47tn the previous year.
The aggregate operating expenses of the states, which formed 47.36% of the aggregate expenditure, increased by 21.17% from N3.8tn in 2022 to N4.64tn in 2023. Additionally, N1.25tn, representing 12.8% of the cumulative spending of the states, was used to service debts. Interestingly, N287.56bn, not captured by states as part of their expenditure for the 2023 fiscal year, was utilised to offset contractor arrears, pension and gratuity arrears, and other outstanding liabilities.
The total debt stock of the 36 states surged by 38.1%, from N7.25tn in 2022 to N10.01tn. This growth was partly driven by a N606.12bn increase in domestic debt, resulting in an average year-on-year growth rate of 11.4%. By December 31, 2023, the total domestic debt stood at N5.86tn. The situation was further complicated by rising foreign debt, which increased by 4.1%, from $4.43bn in 2022 to $4.61bn in 2023. The liberalisation of the exchange rate exacerbated the financial strain on states, significantly raising their foreign loan repayment obligations in Naira terms.
Lagos State remained the most indebted in foreign currency, accounting for 26.9% of the total foreign debt, equivalent to $1.24bn. Further analysis of the debt landscape revealed a considerable variance of N2.74tn in debt repayment obligations when comparing the exchange rate shift from N899.39 per dollar as of December 31, 2023, to the new rate of N1,492.9 as of June 2024. The devaluation exposed many states to heightened financial risk, particularly the eight states where more than 50% of the total debt is dollar-denominated. Kaduna and Edo had the highest foreign debt-to-total debt ratios, at 86.06% and 60.54%, respectively. The other states in this group—Ondo, Bauchi, Lagos, Enugu, Ebonyi, and Anambra—had ratios ranging from 50% to 59%.
The debt burden also varied significantly across the country, with the average subnational debt per capita reaching N40,469 in 2023. Twelve states exceeded this benchmark, with Lagos having the highest debt per capita at N138,034. In addition to the existing debt stock, the states have exiting liabilities totalling N1.19tn: N408.69bn is owed in contractor arrears, N521.36bn is owed in pension and gratuity arrears, N79.64bn is owed in salary and other staff claims, N4.36bn is owed in judgement debt and other pending litigation, and other payables and liabilities amount to N182.79bn.
Commenting on the report’s findings, BudgIT’s Head of Research and Policy Advisory, Iniobong Usen, said: “The fiscal viability and long-term sustainability of states heavily depend on their capacity to mobilise revenues internally by effectively leveraging their natural resource endowments, technology, public-private partnerships, human capital, and effective consequence management. This capacity is crucial for financing essential infrastructure, investing in human capital development and social protection, meeting the new minimum wage and its consequential adjustments, and repairing the fractured social contract.
“To achieve debt sustainability, states must also curb their reliance on foreign loans, especially in light of exchange rate volatility and shrinking fiscal space, to minimise exposure to unfavourable exchange rates. Additionally, states should establish robust frameworks for debt transparency and accountability, ensuring that borrowed funds are allocated to high-impact projects with clear economic returns”, he added.
On health, cumulatively, all 36 states allocated N2.3tn to the health sector but spent N1.39tn, representing a 58.16% budget performance. On the purchase of medical equipment, an aggregate of N35.72bn was spent; however, nine states had no record of expenses for this purchase in their 2023 budget implementation reports. Those states include Edo, Ekiti, Katsina, Ogun, Ondo, Osun, Oyo, Yobe and Zamfara.
Furthermore, N104.27bn was spent on constructing and rehabilitating hospitals and clinics across the subnationals. On the purchase of drugs and medical supplies, a combined amount of N15.31bn was spent, excluding Delta, Ebonyi and Niger States, which held no records. Investments in healthcare are still very far from the ideal and need to be prioritised.
A vital aspect needing attention is the subnational physical health infrastructure. The National Health Facility Registry records an aggregate of 38,182 hospitals across the 36 states of the country, of which 25.92% are privately owned and 74.08% are government-owned, with 27,022 facilities being primary health centres and 1188 being secondary and tertiary. The public primary health facilities serve an estimated ratio of 8,960 people to one facility. Although not above the WHO recommendation of 10,000 people to a basic facility, it is, however, essential to note that this ratio puts significant pressure on the existing facilities and infrastructure, highlighting the need for more supply across the country, especially as the PHCs are not evenly distributed across states.
Nigeria is undoubtedly facing the challenge of inadequate health professionals, with a doctor-to-patient ratio of four doctors to 10,000 patients, which is against the WHO recommendation of 1:600 patients. There is a severe shortage of professionals across the country. While Taraba boasts of just 201 doctors, leaving the state at a doctor-to-patient ratio of 1:17,959, only 10.9% of hospitals and clinics in Bauchi can boast of having at least one general medical doctor.
In addition to inadequate infrastructure, limited availability of drugs and medical supplies, and shortage of medical professionals, the states struggle with adequate capacity to address chronic and infectious diseases. Malaria is one major contender, having severely dealt with states like Kogi, Plateau, Niger, Ondo, Borno, Ebonyi and Plateau mainly during the rainy seasons, with Borno State alone reporting 527,305 cases in 2023, 15,036 of which majority were severe. Other diseases bedevilling the states include cholera, tuberculosis (32,297 cases reported in Kaduna in 2023), and measles, which occur more in northern states. Infectious diseases such as CSM seem to have a foothold in Yobe State, while Lassa fever is present in Kogi and Anambra.
