Rivers State has emerged as one of the best sub-national in the overall 2021 fiscal performance ranking according to an annual report by BudgIT on the state of states released on Tuesday.
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 the internally generated revenue (IGR) of both states as recorded by the NBS. Ebonyi state grew its IGR by 82.3% from N7.5 billion in 2019 to N13.6 billion in 2020, while Kebbi state grew its revenue by 87.02% from N7.4 billion in 2019 to N13.8 billion in 2020.
Meanwhile, 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 N472.63 billion (or 8.78%) from N5.39 trillion in 2019 to N5.86 trillion 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 N300.7 billion) of the net year-on-year sub-national debt increase of N472.63 billion 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.
They are Ebonyi, Rivers, Anambra and Cross River states in the south, and Kaduna in the north.
These states appeared at the top of the ‘Index D’ ranking.
According to the NGO, nineteen 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.
BudgIT is a Non-Governmental Organisation (NGO) which focuses on fiscal performances of both the federal and state governments.
