State of States IGR in H1-18: Creating More “Lagos” Across Nigeria

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Earlier, the National Bureau of Statistics (NBS) published its periodic Internally Generated Revenue (IGR) report at the State level for H1-18. According to the report, total States IGR (excluding FCT) grew by 19.9%y/y to N544.2bn. Not much changed in terms of revenue sources as FAAC inflows continued to account for more than c. 70% of the total revenue (FAAC + IGR) for most States with a notable exception in Lagos (23.3%) and Ogun (30.7%).

State of States IGR in H1-18: Creating More “Lagos” Across Nigeria - Brand Spur

Expectedly, given its position as the commercial hub of the country, Lagos retained its number one spot, with an IGR of N196.4bn, up 16.9% y/y and 3.2x of Rivers State’s N60.9bn – the 2nd largest State by IGR. The continued underwhelming performance of other States remains worrisome. Thus, the need to expand the revenue base across States is apparent as this will reduce dependence on FAAC inflows, which is largely exposed to the vagaries of the oil market – and limit future fiscal crisis. In addition, this would boost the credit ratings of States and enhance their ability to finance developmental projects.

Further analysis of the IGR report indicated that PAYE is 2.0x the size of FAAC inflow in Lagos and 1.1x in the Ogun States, implying that both States are significantly benefiting from a dominant formal sector relative to other States. Hence, to create more “Lagos States” across the country, there is a need for a concerted effort to develop the formal sector in the rest of the country. Put differently, tax authorities in other States may need to find creative ways to boost revenue from the informal sector going forward.

 

United Capital Research