The 36 states are finding it dif-ficult to fulfill their obliga- tions because of what has been described as the “burdensome” N18,000 minimum wage.
Citing the Debt Management Office (DMO) 2014 report, which puts states’ domestic debts, excluding bonds, at N1.71 trillion, FBN capital, an investment and research firm, said the minimum wage, which was approved in 2011, remains a strain on states’ budgets.
FBN Capital’s Head of Markets Olubunmi Ashaolu, urged states to boost their revenue internally to be able to cope.
He noted that Lagos State “has steadily generated over half of its revenue internally,” adding that the oil price crash has reinforced the need for state, to up their internally generated revenue (IGR).
In a report titled: “Urgent need to bolster states’ IGR’’Ashaolu said some states are owing salaries because of a drop in their Federal Allocation.
States, he said, may consider diversifying their revenue base by encouraging economic activities in sectors, such as, solid minerals and fisheries.
The analyst said the Central Bank of Nigeria (CBN) data for 2013 revealed that IGR provided 15.3 per cent of the total revenue of the 36 states and the Federal Capital Territory, as was the case in 2012.
He said the aggregate IGR grew by seven per cent to N586 billion from N548 billion in 2012. Again, Lagos emerged as the leading state achieving an IGR/total revenue ratio of 53 per cent; Kano, Ogun and Rivers achieved 35 per cent, 31 per cent and 26 per cent. “We stick with the CBN series for ease of comparison although it is dated and several individual states show different (generally higher) percentages,” he said.
He said states’ successful efforts to boost IGR leave them better placed to pursue their capital programmes without overdependence on the oil-driven monthly distributions from the FAAC, and to tap the domestic bond market.
Meanwhile, the Finance Minister Ngozi Okonjo-Iweala has said domestic debt is expected rise this year as it borrows more to meet a shortfall in revenue caused by the plunge in the price of oil, its main export, said.
“‘Our income is still coming from a source that is not diversified. Because of the drop in oil prices we will have a difficult year. The additional domestic debt will go toward paying the salaries of government employees. You cannot throw people out on the streets,’’ Okonjo-Iweala said.
Nigeria depends on crude exports for 70 per cent of government revenue and more than 90 percent of foreign income, making it vulnerable as prices plummeted more than 50 percent since last year’s peak in June. Pressure has mounted on the naira, which has weakened 7.5 percent this year, the most among 24 African currencies tracked by Bloomberg.
‘‘A year ago before the fall in prices we said that we should save but we were not listened to,” Okonjo-Iweala said, referring to lawmakers who had opposed her moves to use a lower oil price for budgeting and save the rest. “Today they’re saying we didn’t save.”
