The Nigerian state is currently struggling to meet its basic financial obligations to the citizenry. As a stopgap measure, business executives resorted to a credit frenzy, in which they could access funds from the pension fund, China, the Central Bank of Nigeria (CBN), multilateral agencies such as the World Bank, so that the state can largely pay for its consumption.
While lending observers in the country have raised concerns about the long-term impact of these domestic and overseas lending, we must ask why the internally generated revenue (IGR) processes of the 36 states and the Federal Capital Territory (FCT) are not getting the attention they want received by the media, civil society organizations and citizens at large, as important as it is as a source of income.
It is revealing that the National Bureau of Statistics (NBS) said that in 2020 the combined revenue of the 36 states and the Federal Capital Territory, internally generated revenue, totaled N1.31 trillion. According to the Bureau, the 36 states and the FCT-IGR number hit N1.31 trillion in 2020, up from N1.33 trillion in 2019. This represents negative growth of -1.93 percent year over year. Lagos State has the highest IGR at N 418.99 billion, closely followed by Rivers at N 117.19 billion, while Yobe State had the lowest internally generated revenue.
According to this newspaper, the numbers are impressive given the low economic activity in most parts of the world due to the coronavirus pandemic in the reporting year (2020).
However, experts argue that these numbers can be higher if state governments can apply best practices in collecting and using revenue from their respective jurisdictions.
Weak institutions drain the IGR. of the states
Unfortunately, in the country’s 36 states and the Federal Capital Territory (FCT), politicians have been observed to use their cronies and political thugs, most of whom have no formal training in revenue collection procedures.
The LEADERSHIP results showed that many states use their cronies and political loyalists to collect revenue as political compensation, as opposed to using professionals and transparent technology-based systems that would report more revenue to these states. In many cases, much of the revenue generated by these political allies is not paid into the treasury and is grossly underestimated where it is paid. This unprofessional approach to revenue management explains in part why the 36 states and the FCT panic every time they fail to receive the revenue they are entitled to from the association’s account.
This observation is corroborated by a study highlighting some of the internally generated revenue challenges in Nigeria such as non-remittance of revenue, poor internal control measures, bribery and corruption, lack of accountability, insufficient public awareness among others.
In today’s information age, institutionalizing revenue collection using models that have worked elsewhere shouldn’t be a difficult solution. Experts argue that governments should be able to raise more funds through taxes at all if they allow professionals to run the financial administration (IRS) instead of outsourcing financial administration to incompetent political cronies.
In the prevailing situation, we must ask, could some of the states have left the Leaks on purpose to serve as a source of kickbacks to serve their political and other interests? From this perspective, we call on the state governments to urgently reform the way revenue is collected; decoupling non-state actors and political thugs; Engage professionals and account to citizens for how the revenue is used.
We urge state governments to expand the revenue stream by providing micro, small, and medium-sized businesses with start-up kits, funds, and training, and with guidance on how to register these businesses so they can: to be able to pay revenue in the near future.
Similarly, the prevailing culture of hiring thugs, harassing market women and men, shopkeepers, drivers and other petty traders for day-to-day sales, needs to be phased out and replaced with technology-driven measures such as tax vouchers and point-of-sale machines.
We want to reiterate that IGR deserves more than the cursory attention it has always received from Nigerians as the federal government scours the globe for more loans. If the federal and state governments can block all revenue collection leaks and use the collected revenue for permanent infrastructure, the nation will see higher revenue and citizen compliance will be higher.
If the 36 state governors and FCT ministers are genuinely committed to strengthening and repositioning their economies for sustainable economic growth ahead of a post-Covid-19 era, reforming the IGR collection system is a surefire way to go.
