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State Governments Revenue To Be Strained over High Debt-To-Revenue Ratio

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Eniola Olayemi

 
The revenue of the states in the country will be further strained in the coming months owing to their rising debt portfolio and cost of servicing those debts.

This is coming on the back of the latest report on the states’ internally generated revenue by the National Bureau of Statistics (NBS), tagged, “Internally Generated Revenue at State Level”, which showed a high debt to revenue ratio for the first half of 2018 (H1’18).

The report showed that total states’ Internally Generated Revenue, IGR, grew by 27.7 percent year-on-year (y/y) to N579.40 billion from N453.83 billion in H1’17.

Of the 36 states, 28 states grew their IGRs, while states such as Ebonyi, Anambra, Benue, Abia and Kebbi recorded declines in IGR by 21.79 percent to N2.46 billion, 21.62 percent to N7.07 billion, 18.86 percent to N6.06 billion, 12.29 percent to N6.98 billion and 10.85 percent to N2.03 trillion respectively in H1 2018.

Lagos retained its number one spot, with an IGR of N196.4 billion, up 16.9 percent y/y and Rivers State recorded N60.9 billion, the second largest state by IGR.

The report showed that not much changed in terms of revenue sources as federation account allocation inflows continued to account for more than 70 percent of the total revenue (FAAC + IGR) for most states. Net federation accounts allocation to states grew y/y by 65.14 percent to N1.23 trillion in H1 2018 from N0.74 trillion in H1 2017 amid increases in production and price of crude oil.

The states’ total debt stood at N4.78 trillion in the year under review, comprising of N1.30 trillion external debt and N3.38 trillion domestic debt.

The high debt to revenue ratio, according to economy watchers, will put more pressure on fiscal operation of the states and also make implementation of capital expenditure more difficult.

In his reaction, Mustapha Wahab, a research analyst at Cordros Capital Limited, explained that adding growing debt to servicing cost and to the already depressed state revenues will put pressure on their fiscal operation. He said: “Currently a number of states can’t cover their recurrent expenditures on the back of insufficient FAAC allocations despite gains from higher crude prices relative to last year and significantly low internally generated revenues.

“Adding growing debt service cost to the already depressed state revenues will further put pressure on fiscal operations of the federating units, the impact of which will not only make capital expenditure, CAPEX, implementation a tall order but overhead spending also.”

According to him, the situation would mean growing risk of default on interest and principle payment for the states. He urged the states to increase their IGR to reduce the impact of declining crude oil price. “With IGR to FAAC ratio remaining abysmally low, states government must ramp up internally generated revenues to reduce the impact of volatile oil earnings on fiscal performance by significantly expanding the tax base and considerably monitoring revenue generating state owned corporations to effectively block all loopholes,” he said.

Cowry Asset Management, a Lagos-based investment banking firm, said: “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.

In spite of the y-o-y increases in IGR and net Federation Accounts Allocation to the states by 27.7 percent and 65.14 percent respectively, the states’ average total debt to gross revenue still remained high at 2.75 times in H1 2018.

“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.”

In a report titled, “State of States IGR in H1’18: Creating more “Lagos” across Nigeria”, analysts at United Capital Plc, another investment banking firm, emphasised the need for the state to up their IGR in line with Lagos State while expressing concern at the underwhelming performance of other states.

They also pointed out the need to expand the revenue base across states, saying that it would reduce dependence on FAAC inflows, which is largely exposed to the vagaries of the oil market. Increasing the revenue base of the states, according to them, would limit future fiscal crisis. “In addition, this would boost the credit ratings of states and enhance their ability to finance developmental projects,” they said.

“Further analysis of the IGR report indicated that Pay As You Earn, PAYE, is two times the size of FAAC inflow in Lagos and 1.1 times in 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,” they asserted.

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VETERAN BANKER, JIM OVIA, APPOINTED CHAIRMAN OF NIGERIAN EDUCATION LOAN FUND BY PRESIDENT TINUBU

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AJAGBE ADEYEMI TESLIM

SPONSORED BY: H&H


President Bola Tinubu has approved the appointment of the Founder and Chairman of Zenith Bank Plc, Jim Ovia, CFR, as the Chairman of the Board of the Nigerian Education Loan Fund (NELFUND). This was announced in a State House Press Release by the Special Adviser to the President on Media and Publicity, Chief Ajuri Ngelale on April 26, 2024.


According to the statement, ‘‘the President believes Mr. Ovia will bring his immense wealth of experience and professional stature to this role to advance the all-important vision of ensuring that no Nigerian student suffers a capricious end to their pursuit of higher education over a lack of funds and of ensuring that Nigerian youths, irrespective of who they are, have access to higher education and skills that will make them productive members of society and core contributors to the knowledge-based global economy of this century.’’


Jim Ovia, CFR, is the Founder and Chairman of Zenith Bank Plc, one of Africa’s largest banks with over $21.4 billion in assets and shareholders’ funds of over US$2.4 billion as at December 2023.

Zenith Bank is a global brand listed on the London Stock Exchange and the Nigerian Stock Exchange.

In addition to major operations in Nigeria and other West African countries, the Bank has sizeable operations in London and Dubai.


Jim Ovia is the Founder and Chancellor of James Hope University, Lekki, Lagos which was recently approved by the National Universities Commission (NUC) to offer postgraduate degrees in business courses.

James Hope University commenced activities in September 2023.


Through his philanthropy – the Jim Ovia Foundation – he has shown the importance he accords good education.

In support of the Nigerian youth, Jim Ovia Foundation offers scholarships to indigent students through the Mankind United to Support Total Education (MUSTE) initiative. Most of the beneficiaries of Jim Ovia Foundation scholarship are now accountants, business administrators, lawyers, engineers, doctors etc.
He is the author of “Africa Rise and Shine”, published by ForbesBooks.

The book which encapsulates Zenith Bank’s meteoric rise, details the secrets of success in doing business in Africa.

He is an alumnus of the Harvard Business School (OPM), University of Louisiana (MBA), and Southern University, Louisiana, (B.Sc. Business Administration). Jim Ovia is a member of the World Economic Forum (WEF) Community of Chairpersons, and a champion of the Forum’s EDISON Alliance.


In recognition of Jim Ovia’s contributions to the economic development of Nigeria, in 2022, the Federal Government of Nigeria honoured him with Commander of the Federal Republic, CFR. Also, in May 2022, Jim Ovia was conferred with the National Productivity Order of Merit (NPOM) Award by the Federal Government of Nigeria.

Earlier, he has been conferred with the national awards of Member of the Order of the Federal Republic, MFR, and Commander of the Order of the Niger, CON, in 2000 and 2011, respectively, as a testament to his visionary leadership and contributions to Nigeria’s financial services sector.


The National Student Loan Programme is a pivotal intervention that seeks to guarantee sustainable higher education and functional skill development for all Nigerian students and youths.

The Nigerian Education Loan Fund, the implementing institution of this innovation, demands excellence and Nigerians of the finest professional ilk to guide and manage.

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PRESASS 2024 Ends In Abuja As Aviation Minister Keyamo Tasks Participants On Downscaling Climate Information

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AJAGBE ADEYEMI TESLIM

SPONSORED BY: H&H

Honourable Minister of Aviation and Aerospace Development, Festus Keyamo, has tasked participants at the Regional Forum Workshop on Seasonal Forecasts of Agro-hydro-climatic characteristics of the rainy season for the Sudanian and Sahelian zones of West Africa and the Sahel (PRESASS), to downscale outcome of the workshop to their local communities.

Left to Right: Director General of Nigeria Hydrological Services Agency (NIHSA), Engr. Clement Nze, Representative of AGRHYMET DG, Dr. Abdou Ali, Director General/Chief Executive Officer of the Nigerian Meteorological Agency (NiMet), Professor Charles Anosike, Honourable Minister of Aviation and Aerospace Development, Festus Keyamo, Dr. Rowland Abah, Representative WMO Rep. For North, Central and West African Regions, and ECOWAS Commission Representative,
Gbenga Erin, at the closing session of 2024 Regional Forum Workshop on Seasonal Forecasts of Agro-hydro-climatic characteristics of the rainy season for the Sudanian and Sahelian zones of West Africa and the Sahel (PRESASS), in Abuja on Friday, 26th April, 2024.

Mr Keyamo who spoke in Abuja during the closing ceremony of the workshop on Friday, 26th April 2024, said;
“The outcome of the Regional Climate Outlook Forum for West Africa and the Sahel is a great planning tool for governments and policymakers across the region. We are very aware of the great challenge of the 21st Century, climate change, extreme weather events and food security to mention a few. To combat these challenges, it has become imperative that weather and climate information are not only accurate but also produced and disseminated early. Thus, the need for Early Warnings. It is based on this that the Nigerian Government deemed it fit to provide all the necessary support through the Nigerian Meteorological Agency (NiMet), the Nigerian Hydrological Services Agency (NIHSA) and AGRHYMET Regional Centre to host this year’s forum here in Abuja”.

Continuing, Mr Keyamo said;
“The Government of the Federal Republic of Nigeria has taken seriously the issuance of Early Warnings for its citizenry to de-risk sectoral activities and avert losses. Earlier in the year, the Government through NiMet had a public presentation of the Seasonal Climate Prediction (SCP), an early warning tool that highlights vital Weather and Climate information that may affect socio-economic activities in air, land, and water transportation, agriculture, water resources, disaster management and mitigation, health, tourism, sports, power & energy etc. A similar event was recently held by NIHSA where the Annual Flood Outlook was released to Nigerians”.

“As we settle down to listen and discuss the details of the forecast produced for West Africa and the Sahel Region for the 2024 rainy season, my message is that as we return home to our various countries with the informationand forecast from this year’s forum, we should ensure that these products don’t end up inside the shiny offices in our capital cities. The real work of downscaling them to our local and rural communities just started. This is the only way the United Nations’ target of Early Warning for All (EW4ALL) by 2027 can be met”, Mr Keyamo concluded.

In his own remarks, the Director General/Chief Executive Officer of the Nigerian Meteorological Agency (NiMet), Professor Charles Anosike, commended AGRHYMET and ACMAD for sustaining the Regional Climate Outlook since 1998. He congratulated them and the local organising committee for putting together a successful forum.

Mr Rowland Abah who represented the World Meteorological Organisation (WMO) Representative for North, Central and West Africa, said; “The output of this workshop provides additional Early Warning information for the countries in West Africa and the Sahel to support localized forecast and effective planning to mitigate climate-related hazards envisaged in 2024”.

Concluding, Mr Abah remarked that; “Climate change poses existential threats, and this is why the United Nations Secretary General has urged all countries to ensure that Early Warning Systems cover all citizens by the year 2027”.

The Director General of Nigeria Hydrological Services Agency (NIHSA), Clement Nze, and other representatives of other related agencies were present at the closing ceremony.

This year’s PRESASS brought together participants from 16 countries from the West African region and lasted from 22nd to 26th April, 2024.

For more on NiMet, visit www.nimet.gov.ng

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World Malaria Day: LAWMA Boss Makes Case for Clean Environment

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AJAGBE ADEYEMI TESLIM

SPONSORED BY: H&H

The Managing Director/CEO of the Lagos Waste Management Authority (LAWMA), Dr. Muyiwa Gbadegesin, has underscored the importance of maintaining a clean environment, to combat the spread of malaria.

He said this in a statement marking this year’s World Malaria Day, themed: ‘Accelerating the fight against malaria for a more equitable world’.

The World Health Organization (WHO), had noted that approximately 249 million cases of malaria were reported worldwide in 2022, with an estimated 608,000 deaths, occurring mostly in tropical and sub-tropical regions, and remaining a major global challenge.

He said that while malaria was primarily transmitted through the bite of infected mosquitoes, the prevalence and severity of the disease could be significantly reduced through preventive measures, anchored on a clean environment, as one of the most effective strategies.

According to him, “In the fight against malaria, prevention is key. One of the most effective preventive measures is to eliminate mosquito breeding sites by ensuring a clean and hygienic environment. Mosquitoes breed in stagnant water, waste dumps, and other unhygienic areas. By keeping our homes and surroundings clean, we can significantly reduce mosquito population and consequently, the transmission of malaria.”

Gbadegesin urged residents to actively participate in efforts to maintain a clean environment, by shunning indiscriminate refuse disposal, cleaning their surroundings, and patronising assigned PSP operators, adding that individual actions could have a significant impact on public health outcomes.

“Each of us has a responsibility to keep our surroundings clean. By properly disposing of waste, eliminating stagnant water, and adopting good sanitation practices, we can protect ourselves and our communities from the devastating effects of malaria”, he stressed.

The LAWMA boss reaffirmed the authority’s commitment to promoting environmental cleanliness and public health, with effective collection, transportation, and disposal of solid waste across the state, while also implementing educational campaigns to raise awareness about the importance of environmental hygiene.

“As the world marks World Malaria Day, I want to reassure residents of LAWMA’s total commitment to promoting environmental sustainability and public health. Through collaborative efforts between government agencies, communities, and individuals, a cleaner and healthier environment can be achieved, leading to a significant reduction in the burden of malaria and other vector-borne diseases”, he stressed.

For more information about LAWMA’s initiatives and how to support efforts to maintain a clean environment, please visit www.lawma.gov.ng or call our toll-free numbers: 080000LAWMA (08000052962), 07080601020 and 617.

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