World Bank Cuts Nigeria’s GDP Growth Rate; States’ IGR Rises to N579.4 billion in H1 2018…


World Bank, in its Nigeria bi-annual economic update released on Wednesday, November 28, 2018, revised its earlier forecasted 2.1% growth rate for Nigeria’s Gross Domestic Products (GDP)
in 2018 to 1.9%.

The cut in projected GDP growth rate by the multilateral institution was
adduced to disruption of agricultural activities in the North East and North Central amid challenges of insecurity.

Its revised 1.9% growth rate in
2018 was a lot lower than 3.5% growth rate projected by the Federal Government of Nigeria in its 2018 Budget.

The Bretton Woods institution also stated that the Federal Government’s budget deficit would increase amid sustained low revenues and increased spending on projects ahead of the 2019 general elections.

On the local scene, the National Bureau
of Statistics (NBS), in its 2018 report tagged “Internally Generated Revenue At State Level” made available in the week, revealed that Nigerian states’ internally generated revenue (IGR) for H1 2018 rose year on year (y-o-
y) by 27.7% to N579.40 billion from N453.83 billion in H1 2017.

Of the thirty-six states, twenty-eight states grew their IGRs, especially five states that grew theirs by more than 60% in the year under review: Ondo (85.45%),
Kano (67.04%), Kaduna (66.07%), Imo (65.86%) and Akwa Ibom (61.51%) to N9.42 billion, N18.55 billion, N16.00 billion, N7.01 billion and N11.83 billion respectively.

The increase in their IGRs were chiefly driven by higher revenues from income sources such as Pay As You Earn (PAYE) and Ministry, Departments and Agencies

On the flip side, states such as Ebonyi, Anambra, Benue, Abia and Kebbi recorded declines in IGR by 21.79% to N2.46 billion, 21.62% to N7.07 billion, 18.86% to N6.06 billion, 12.29% to N6.98 billion and 10.85% to N2.03 trillion respectively in H1 2018.

Further analysis of the report showed that only four states generated
IGR above N20 billion: Lagos state generated the highest IGR of N196.40 billion, while Rivers, Ogun and Delta
states generated N60.91 billion, N42.52 billion and N27.79 billion respectively.

However, Yobe, Kebbi, Gombe, Taraba, Zamfara and Ekiti generated the least IGRs of N1.62 billion, N2.03 billion, N2.39 billion, N2.61 billion,
N2.66 billion and N2.74 billion respectively.

Meanwhile, net Federation Accounts Allocation to states grew y-o-
y by 65.14% to N1.23 trillion in H1 2018 from N0.74 trillion in H1 2017 amid increases in production and price
of crude oil.

Given states’ IGR of N579 billion and net Federal Accounts Allocation of N1.23 trillion in H1 2018,‘dependency multiple’, FAAC to IGR, was 2.13 times.

Inspite of the y-o-y increases in IGR and net Federation Accounts Allocation to the states by 27.70% and 65.14% respectively, the states’ average total debt to gross revenue still remained high at 2.75 times in H1 2018.

The states’ total debt was N4.78 trillion in the year under review, comprising of N1.30 trillion external debt (using CBN official rate – N305.75) and N3.38 trillion domestic debt.

Total external debt in US dollars was USD4.25 billion which largely constituted Lagos state debt of USD1.45
billion (34.43%) and Edo, Kaduna as well as Cross River states contributing USD0.28 billion (6.62%), USD0.23
billion (5.53%) and USD0.19 billion (4.60%) respectively.

Total debt to gross income ratio of fourteen states
exceeded 300% at the end of H1 2018: Osun (1,111.29%), Ekiti (714.84%), Cross River (685.15%), Plateau (486.30%), Kogi (405.66%), Bauchi (395.09%), Zamfara (377.43%), Lagos (375.60%), Nasarawa (337.13%), Edo (330.51%), Imo (321.59%), Benue (319.91%), Adamawa (316.64%) and Kaduna (202.36%).

We opine that high debt to gross revenue ratios of the states would further increase their debt servicing costs
which in turn would burden future generated income of the affected states going forward, given that most of
the borrowed fund would have gone into recurrent expenses such as payment of salaries.

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