Seven Northern states, one oil-producing state risk Bankruptcy
Seven Northern states and one Southern state have been declared bankrupt based on their internally generated revenue in comparison with their Federal Accounts Allocation (FAA).
Jigawa, Katsina, Adamawa, Yobe, Niger, Taraba and Benue were tagged insolvent states alongside oil-producing Bayelsa State by the Annual State Viability Index (ASVI) of Economic Confidential.
The status of the states were determined by percentage arrived at when their IGR and FAA was compared, and states with IGR of less than 10 percent of their federal allocation are classified insolvent.
Bankrupt states in Nigeria by 2020
Bayelsa topped the list of the poorest states in Nigeria as it received a total of N152.54 billion as FAA in 2020, but generated only N12.18 billion as IGR – this represents 8.0 percent of earnings from FAA.
Jigawa State came next with IGR of N8.6 billion in contrast to the N107 billion it received as allocation during the same period – this represented 8.1 percent of total earning.
Katsina recorded 8.8 percent after generating N11.3 billion against the N130 billion federal allocation.
Adamawa received N91 billion of FAA, but could only generate N8.3 billion IGR, putting the differences at 9.1 percent.
Yobe state recorded N7.7 billion IGR, but got N84 billion federal allocation – this represented 9.2 percent in total receipt.
Niger State was next with 9.6 percent as its internally generated revenue was put at N10.5 billion compared to N109 billion of FAA.
Taraba generated N8.1 billion as IGR, but was given N82 billion from federal allocation, putting its difference in earnings at 9.8 percent.
Benue completed the list with IGR of N10.46 billion, far below the N106 billion it received as FAA, representing 9.8 percent last year.
Best performing states in Nigeria
Lagos state topped the list of best performing states in Nigeria as its IGR, N418 billion, surpassed its N299 billion federal allocation, putting its earnings difference at 139 percent in 2020.
Rivers State came next with N117 billion to comparison to the N198 billion secured from the FAA – this represents 58 percent difference.
Ogun State finished last year with N50 billion as internally generated revenue, falling below the N88 billion FAA it received, but its revenue difference stood at 57 percent.
Kaduna State is fourth on the list, obtaining N124 billion federal allocation, while generating N50 billion IGR, representing 40 percent difference.
Oyo made the list with 29.7 percent difference having generated N38 billion in IGR, but received federal allocation to the tune of N127 billion.
Anambra State’s internally generated revenue was put at N28 billion, but it got N94 billion as federal allocation, representing 29.6 percent in earnings.
More problem for the seven insolvent states
The seven states are believed can’t survive without federal allocation, which is set to drop following a Rivers State court ruling that the Federal Government is not authorised by the constitution to demand and collect non-import value added taxes.
Justice Stephen Pam, who presided over the ruling stated that the Concurrent Legislative List of the constitution empowered only states and its agent(s) to collect non-import vat within their region.
This will reduce the tax revenue shared by FG to states by N1.64 trillion if the ruling stands, and it will reduce the total allocation of low-income generating states like Bayelsa, Katsina, Adamawa, Yobe, Niger, Taraba, Benue, Kano and others