State of the states: 7 key points

In from Stanley Azuakola . . .
With the global crash of crude oil prices in the international market, Nigeria’s revenue has been adversely affected with a drastic reduction in earnings. This has trickled down to the states, with many depending on the federal allocation, with little or nothing coming from Internally Generated Revenue (IGR).
The governors yesterday besieged the presidency for a further bailout to meet their financial responsibilities, especially in the area of payment of salaries, which they have also lamented, that they may be unable to sustain the payment of N18, 000 as minimum wage.
This has raised questions about the sustainability of existing states in the country, in the wake of agitations for creation of more states. A civic organisation, BudgIT, has released the first edition of its State of the States report, which highlights the condition of finances of Nigeria’s 36 states and rates them with the first ever Sustainability Index.

Lead researcher for the report, Atiku Samuel, stated that one of the organisation’s hopes in releasing the report is that economic managers and analyst will begin to “use facts built around public finance indicators to benchmark performance instead of using perception.”
The 66-page report rated the states using various indices like the amount of money received from the Federation account, internally generated revenue and State debt stock, among others, and presented seven key points:

1. With a Sustainability Index of 14.85, Rivers state emerged as the most sustainable state in the country.
With average monthly revenue of N18.93bn and a recurrent expenditure bill of N9.92bn, the state makes enough surplus to be crowned as the most sustainable. Rivers also has a debt stock of N100.6bn, making it the fourth most indebted state in the country. However, only Lagos generates more revenue internally than Rivers state, which generated almost N90bn last year.
A flashpoint however is the fact that in just one year, Rivers state, under Gov. Rotimi Amaechi, drew down from its savings/fiscal buffer from a peak of N55bn to about N1.24bn, and there is no public record of what the funds were used for.

2. At number 5 on the list, with a Sustainability Index of 8.53, Katsina is the most sustainable state in the North of the country. In fact, according to the index, Katsina is the only Northern state in the top 10. It is even more sustainable than oil producing states like Akwa Ibom and Bayelsa.
The lower rung of the sustainability ladder is dominated by Northern states which make up 7 out of the bottom 10. The only three Southern states among the bottom 10 are the South West states of Ogun (28th); Ekiti (32nd) and Osun (35th).

3. Plateau state was ranked as the least (36th) sustainable state in Nigeria, and it is the eight most indebted states with debt of N84.57bn. The only other Northern state which is among the top 10 most indebted states is Kaduna at number 10, with a debt stock of N63.33bn.
Katsina, which is the most sustainable state in the North, is also one of the least indebted states in the country, with a debt burden of N16.29bn.

Read also: Again, govs besiege Buhari for bailout

4. However there is no correlation between debt stock and sustainability. Even though Plateau has huge debts and is not sustainable, and Katsina has less debts and is sustainable, we also have a state like Yobe, which has the lowest debt portfolio in the country (N7.85bn), but is also one of the least sustainable states (27th). On the other hand, there’s Lagos, Nigeria’s most indebted state with total debt of N500.8bn, yet it is the second most sustainable state in the country with a sustainability index of 11.33.

5. Year after year, on several indices, Kano underwhelms and underachieves. With a population of 9.38m, Kano is officially the state with the largest population in Nigeria and is referred to as “the commercial capital of the North”. Yet, Kano only generated an IGR of N13.66bn in 2014, which is 20 times less than what Lagos generated and 6.5 times less than Rivers state. Kano was the 11th most sustainable state on the index.

6. Something else highlighted in the report is the number of states which accessed the recent FG bailout package of N662bn. The bailout comprised of N338bn CBN loans at an interest rate of 9% and conversion of the debts of 11 states to long term bonds at a rate of 14.83% payable over 20 years. The only states which have not/did not access the bailout package are Lagos, Rivers, Akwa Ibom, Yobe, Kaduna, Anambra and Jigawa.
Osun state accessed the highest bailout of about N120bn, followed by Delta, Ogun, Imo and Kogi states with approximately N80bn, N76bn, N64bn, and N52bn respectively.

7. Final takeaway: There are 18 states whose monthly revenues are less than their monthly recurrent expenditure (salaries and commitments). It’s not a surprise to see Osun, Plateau and Borno on that list. However, it is shocking to see that a state like Bayelsa (with low population and huge oil funds) is on the list. Also on the list were the states of Akwa Ibom and Kaduna.
Meanwhile on the other end of the spectrum which comprised of states that make surplus money monthly than their recurrent expenditure, it was surprising to see Yobe and Ebonyi listed alongside the usual suspects like Lagos, Rivers and Enugu.

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