Internally-generated revenue (IGR), a composite of revenue sources (tax, royalties, custom duties and levies) that once sustained Nigeria and its federating entities, has become virtually neglected because of the flow of petroleum dollars. Many states in the federation simply do not see any reason to exert appreciable amount of energy to develop this time-tested source of revenue when they can get rich from their statutory share of the oil money without sweat.

Not all the states are guilty, as some have bested others in their duty to generate and collect IGR. In the Central Bank of Nigeria (CBN) Annual Report of 2011, total revenue of the state governments increased by 7.8 percent to N3,410.1 billion, or 9.6 percent of GDP, compared with N3,162.5 billion or 10.7 percent of GDP in 2010. The analysis of the sources of revenue indicates that allocation from IGR was N509.3 billion, or 14.9 percent. However, the IGR fell below the level in 2010 by 32.8 percent, indicating a slowdown in the drive for internal revenue.

The CBN further explained that in terms of tax efforts, measured as the ratio of IGR to total revenue (IGR/TR), Lagos State ranked highest with 54.9 percent, followed by Abia with 37.1 percent, and Ogun with 28.7 percent, while Borno State ranked the least with 3.4 percent. In terms of state governments’ effort at improving IGR, Ondo State topped, with an increased IGR/TR ratio from 2.1 percent in 2010 to 8.6 percent in 2011, followed in the second place by Kogi, and Bauchi in the third position. Overall, the consolidated IGR/TR ratio of the state governments fell from 24.0 percent in 2010 to 14.9 percent. For many states, it is still work-in-progress.

Maybe the ratio of IGR to total revenue shouldn’t just be a measure of tax efforts but to what extent a state is considered viable in the absence of petroleum dollars; and this is the crux of the matter. On this basis, it would seem that some of the states today may have been created purely for all other reasons other than their financial viability. And many more people still clamour for the creation of more states with, I believe, no consideration for internal fiscal capacity. If the states would capture the gains of today’s stream of revenue from oil to build tomorrow’s stream from non-oil sources, then we would have no problem, but that isn’t what we are seeing.

In a previous article in this column, I had observed that the question of whether the oil reserve will run out is no longer the issue, but whether the world will continue to need and buy our oil. I noted that the calculus of when the reserve will dry up has become moot and should no longer be factored into long-term planning. I advised that the assumption that we will have a glut of oil that nobody wants should be what drives our investment strategy. If the states pay enough attention, maybe they can begin to identify sources of internal revenue and reinvigorate their generating efforts.

In these efforts, every state shall be the architect of its own fortune. It is true that by virtue of age, location, infrastructural, natural and human endowments, some states have proven better placed than the others but each state can find within its boundaries areas where it holds a competitive advantage that could be well developed. And all states have the key to unlock that great agricultural or mineral potential that is Nigeria.

The answer is to open up the state economies to all comers, irrespective of their state of origin and nationality, through sound economic policies that are investor-friendly and devoid of discrimination in any manner whatsoever.

Ifueko Omoigui-Okauru noted in a paper she delivered at The Women Development Centre, Awka, Anambra State on October 11, 2010 thus: “Agricultural and farming potentials exist in all the eastern states and there is quite a large deposit of mineral resources among the states: large deposit of bitumen and laterite, phosphate, lead, zinc, copper, coal, iron, natural gas, gypsum, talc, iron, etc.” She also mentioned that “there are tourism potentials in all the states to boost the hospitality industry.” She concluded that “the states really do have the potentials for growth and development.” With the potentials, so also is the ability of each state in the federation to be fiscally self-sufficient.

Many states are indeed exploring all possible avenues to expand their IGR base – and progress and success are at different levels – but a majority of the states focus more on taxes and levies, which in themselves are riddled with sharp practices and are a source of discontent to many of their citizens. I will hope that the entire country will listen attentively to Omoigui-Okauru.

If today a severely conservative 10 percent IGR/TR threshold is used as a test of a state’s fiscal viability, more than a quarter of the states, some of which receive very generous share of the oil money, would flunk. This is the degree to which they rely solely on statutory allocations and a measure of their low preparedness to weather exogenous financial shock, if one does occur. Hence a lot of work remains to be done.

http://www.businessdayonline.com/NG/index.php/analysis/columnists/48182-igr-the-real-test-of-state-viability-

This is serious. It implies total disregard to planning 4 2moro, which is the essence of govt.