ECONOMY: States Internally Generated Revenues Plunged to N612.87 billion in H1 2020 amid COVID-19 Pandemic…

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Freshly released data by the National Bureau of Statistics (NBS) showed that total value of the 36 states’ internally generated revenues and that of the Federal Capital Territory (FCT) Abuja moderated to N612.87 billion in H1 2020, down from N693.91 billion it printed in H1 2019.

The decline in the states’ revenues can chiefly be blamed on the novel disease – COVID-19 which nearly brought global economic activities to a halt, especially in the second quarter of the year.

Notably, the states’ total revenue was
subcategorised into Pay As You Go (PAYE);
Direct Assessment; Road Taxes; Other taxes; and Revenue from Ministries Departments and Agencies (MDAs).

Of the multiple income streams, PAYE contributed most to the pool, 68.24% (N418.21 billion). Revenue from MDAs constituted 13.72% (N84.11 billion), followed by Other taxes, Direct Assessment and Road Taxes contributuing 13.37% (N81.95 billion), 2.67% (N16.39 billion) and 1.99% (N12.21 billion) respectively.

Revenues from Sokoto, Niger and Benue States recorded the sharpest declines of 61.9%, 56.0% and 55.9% respectively. However, Gombe, Yobe and Ebonyi States printed the largest increase of 81.5%, 77.8% and 61.7% respectively.

Perusing the data on quarterly basis, total states’ revenues also contracted by 26.5% to N259.73 billion in Q2 2020, from a high of N353.14 billion in Q1 2020.

In another development, data from the Central Bank of Nigeria (CBN) depository corporations survey showed a 1.62% month-on-month (m-o-m) rise in Broad Money Supply (M3 money) to N37.19 trillion in August 2020.

This resulted from a 13.38% increase in Net Foreign Assets (NFA) to N8.66 trillion; however Net Domestic Asset (NDA) decreased m-o-m by 2.46% to N42.17 trillion.

The decrease in NDA was chiefly driven by a 2.27% m-o-m moderation in Net Domestic Credit (NDC) to N38.67 trillion, accompanied by a 4.51% m-o-m decline in other assets net to N3.48 trillion in August 2020.

Further breakdown of the NDC showed a 10.21% m-o-m decline in Credit to the Government to N8.55 trillion; however, Credit to the Private sector rose marginally by 0.24% to N30.13 trillion.

On the liabilities side, the 1.62% m-o-m increase in M3 Money was driven by the 3.33% m-o-m increase in M2 Money to N34.22 trillion, but was partly offset by a 14.70% fall in treasury bills held by money holding sector to N2.97 trillion.

The increase in M2 was propelled by a 4.62% rise in Narrow Money (M1) to N13.14 trillion (of which Demand Deposits increased by 6.02% to N11.64 trillion, however currency outside banks fell by 2.66% to N1.97 trillion), and a 2.54% increase in Quasi Money (near maturing short term financial instruments) to N21.08 trillion.

Reserve Money (Base Money) further rose m-o-m by 2.02% to N13.69 trillion as Bank reserves increased m-o-m by 2.68% to N11.32 trillion, however currency in circulation moderated by 1.04% to N2.37 trillion.

On the global scene, WTI crude price rose week-on-week (w-o-w) by 6.38% to USD41.19 a barrel amid a 1.34% w-o-w rise in US crude oil input to refineries to 13.85 mb/d as at October 2, 2020 (albeit fell by 11.52% from 15.66 mb/d as at October 4, 2019).

We saw Brent price increase by 5.89% to USD43.34 a barrel even as Bonny Light rose by 6.78% to USD41.58 a barrel as at Thursday, October 8, 2020.

However, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose marginally w-o-w by 0.10% to 492.93 million barrels (and increased by 15.83% from 492.93 million barrels as at October 4, 2019).

We feel that the decline in States IGRs was chiefly due to the negative impact of COVID-19 pandemic on the social and economic activities in the country.

However, we believe that more income would be generated if states are empowered to control their resources, rather than the current system of awaiting allocations from the FG.

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