FAAC Allocation, Oil Revenue Is Why Many States Ain’t ‘Viable’- Osinbajo

In apparent agreement with the recent call by the Central Bank of Nigeria CBN), as well as experts, for the government to stop the monthly revenue sharing among the three tiers of government, Vice President Yemi Osinbajo has challenged state governments in the country to focus on improving internally generated revenue.
In a lecture at the National Defence College Course 28 lecture on Friday, January 31, 2020, Osinbajo said state governments have no excuse for not focusing on IGR, he lamented a situation where today, very few states and even the Federal Government see no need to be aggressive in revenue generation.
“The reason why States are not generating as much as they should is that there is something coming from the Federal Government every month. If there is nothing coming from the Federal government, the States will pull their weights.
“If the Federal Government itself did not have oil revenue, we will pull our weight,” he added, unlike in the old regional arrangement, where the sub-nationals “paid all of their bills from internally generated revenues, tax and agriculture mostly.”
The situation today, the Vice President continued, is that the various tiers of government “are not as aggressive because whether we work or not, something will come from federal allocation and that is why there is need to ensure that we hold ourselves to account for revenue generation. A country of this size certainly can do far more than we are generating at the moment.
He stressed that although the Federal Government plans to spend N10.6tr this year, from the previous N8.9tr, aggregate revenue is projected at N8.4tr, resulting in an estimated N2.2tr a shortfall.
Since the government is not making enough to fund the budget from its regular sources- oil proceeds and taxes, it has resorted to borrowing, especially to fund our capital projects; just as most States cannot generate enough revenue to pick their bills in one month.
He noted the cases of some states in Adamawa with Internally Generated Revenue (IGR) of N6.2bn, or N517m monthly on the average in 2018, the same year the state’s expenditure was N14.8bn a month; just like Benue with 2018 total IGR of N11.2bn, or about over N900m a month, as against a monthly expenditure of about N14.9bn, resulting in a huge financing gap.
That means, he stressed, while both the Federal and states governments badly need revenue there is a huge deficit, they are simply not collecting enough, which is why, he believes the Finance Act will address the issue of domestic revenue mobilization, and help improve the ease of doing business in the country.
The Finance Act, he noted, also raised the Value Added Tax (VAT) rate to 7.5%, a move expected to “give additional much-needed revenue to State Governments as well” to fund the hike in the national minimum wage to N30,000. Of the total VAT revenue, 50% goes to State Governments, 35% to Local Governments, and 15% to the Federal Government.

Pix: Osinbajo in a meeting with governors of southwest states.