Twenty states can’t cover recurrent expenditure without borrowing —Report

No fewer than twenty states in the country would not be able to cover all recurrent expenditure without resorting to borrowing.

This was contained in the 2018 State of States Report by BudgIT, a Nigerian civic technology organization, and launched on Tuesday.

Recurrent expenditure refers to payments other than for capital expenditure including goods and services, wages and salaries, employer contributions, interest payments, subsidies and transfers.

According to the report, only sixteen states could cover all recurrent obligations without borrowing funds.

Among the states are Ekiti, Ondo, Ogun, Osun, Oyo, Cross Rivers, Abia, Imo, Jigawa, Sokoto, Zamfara, Adamawa, Bauchi, Gombe, Taraba, Benue, Kogi, Kwara, Nasarawa, Plateau, and Ogun state.

The report, which measures the fiscal sustainability of the 36 states of the federation, used three indices as methodology for its ranking.

Index A, which was assigned 35 percent weight, looks at the ability of states to meet their recurrent expenditure obligation with state-owned revenue like value added tax, 13 percent derivation and IGR.

Index B, with 50 percent weight, examines states’ ability to cover all recurrent expenditure obligations without resorting to borrowing, while index C, assigned a weight of 15 percent, focuses on states’ ability to manage their debts sustainably.

Rivers states, with 18.44 index points, was ranked first in the 2018 states’ fiscal sustainability index owing to its robust revenue profile and manageable recurrent expenditure obligation.

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“Rivers is also one of Nigeria’s most vibrant, in terms of crude oil deposits; this position comes with a significant share of annual Federal Account Allocation Committee (FAAC) allocations.

“The state’s actual revenue of N209.12 billion in 2017, when juxtaposed with its recurrent expenditure obligation of N141 billion in the same year, indicates Rivers is fiscally stable, and able to cover its recurrent expenditure without borrowing,” the report read.

Delta state ranked second with 17.65 index points, while Bayelsa state was placed third having recorded 11.41 index points.

It said in spite of Lagos state high Internally Generated Revenue (IGR), accounting for 35.86 percent of total IGR collected in 2017, the state continued to undermine its fiscal sustainability potential due to its increased debt, causing it to drop from second position to fourth place on the Fiscal Sustainability Index.

The report also listed Akwa Ibom, Edo, Ondo, Kano, Ogun, Enugu among the top ten states in the fiscal suitability Index ranking.

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