Can Anambra achieve its ₦50 billion economic agenda?

Mar 18, 2022|Adesola Afolabi

Why are most Nigerian state governments accused of being broke and poorly run?

The short answer is that most are. Historically, Nigeria's state governments have invested very little in growing their state's income, relying on the Federal Government for their monthly handouts and leaving the burden of social development to the centre.

Some takeaways:

  • Anambra state, located in the south-eastern region of Nigeria, has the potential to be an economic powerhouse. But building economic hubs requires intentional funding—not volatile federal government income. 

  • Anambra recognises this as it has grown its internally generated revenue by 83% between 2016 and 2020 and was one of only three states that could fund its operating expenses using IGR and VAT income.

  • But growing income is not enough to fund development plans that will create half a million jobs. Revenue leakages must be plugged. And a commitment to funding infrastructure, being credit and capital worthy and facilitating peaceful dialogue among agitators are further ingredients to enable businesses in the state to thrive.

However, revenue is vital to develop facilities that make economic activities thrive. For instance, a state that specialises in commerce and trading commodities requires well-maintained transport infrastructure like roads and ports. This helps manufacturers obtain raw materials and parts and deliver finished products to consumers.

In 2020, the Federation Account Allocation Committee (FAAC) was responsible for an average of over 70% of Nigerian states’ revenues, with Internally Generated Revenue (IGR) contributing less than 30%. National Bureau of Statistics (NBS) data also shows that FAAC has provided over 60% of the total revenue for all but six of the country’s 36 states since 2017.

Granted, laws determine which tiers of government can collect particular taxes and revenues, so states don’t have the avenue to generate as much income as they would like. For instance, the federal government collects petroleum profit taxes, company income tax, withholding tax on companies, and Value-Added Tax (VAT). On the other hand, states collect road taxes, capital gains tax, and personal income taxes like PAYE (Pay-As-You-EARN). With this, you can already see that states don't have access to a lot of revenue generated on their soil, leading to the FAAC dependence.

Still, the income states get from the federal government is hardly enough to cater for needs like salary payments, infrastructure development, and other economic stimulating activities, even after including the IGRs.

Some states still try to break the mould. The idea is that, if they can raise their IGR significantly, they can achieve their dreams of being economic powerhouses. For instance, Anambra State, the

Invest with Confidence, Operate with Precision.

Access economic and industry data & insight for global organisations.

Trusted by leading global organisations