November 9, 2021/CSL Research
Based on the recent data published by the National Bureau of Statistics (NBS), the Internally Generated Revenue (IGR) of the 36 states of the federation and the Federal Capital Territory (FCT) increased by 38.5% y/y to N849.12bn in H1 2021 from N612.87bn in H1 2020. The improved performance fully reflects the economic recovery following the reopening of the economy, as lockdown measures implemented by most state governments in Q2 2020 left lasting scars on their revenue profile. The growth in IGR is in line with the country’s modest GDP growth in Q1 2021 (0.51%) and Q2 2021 (5.01%) from a deep contraction in 2020.
However, the recovery has been uneven across sectors and businesses. Further analysis of the data revealed that save for tax collections from PAYE which declined (down 7.7% q/q), other components of the IGR supported the 13.2% q/q increase in IGR in Q2 2021; Direct Assessment (up 15.8% q/q), Road Taxes (up 6.4% q/q), Other Taxes (up64.5% q/q) and MDAs Revenue (up 50.1% q/q). The increase in Direct Assessment explains the improved income level of self-employed individuals and informal businesses following the removal of movement and trade restrictions, as the self-employed daily wage earners were the most affected during the lockdown. Similarly, improved vehicular movements both within and out of states, reopening of markets, malls, recreational centres, and full running of revenue-generating MDAs during the second quarter supported the increase recorded across the other constituents of the total IGR of all states including the FCT.
Notably, 23 out of 37 states recorded quarterly growth in IGR during the second quarter, with Niger (up 168.6% q/q), Kastina (up 123.7% q/q) and Ondo (up 122.2% q/q) posting the highest quarterly growth while Ebonyi (down 42.0% q/q), Nasarawa (down 35.6% q/q) and Kwara (down 33.5% q/q) recorded the highest decline. Lagos State had the highest IGR with N267.23bn (equivalent to 31.5% of total IGR), trailed by FCT with N69.07bn (8.1%), Rivers with N57.32bn (6.8%), and Ogun with N54.82bn (6.5%). On the other hand, Gombe (N5.44bn; 0.6%), Taraba (N4.77bn; 0.6%) and Yobe State (N4.03bn; 0.5%) recorded the least IGR. IGR from Lagos and Ogun accounts form a significant part of the total revenue available to both states. We attribute this to the vast level of economic activities in both states, which translates to sizable tax revenues for the state governments, with Lagos being a commercial hub and Ogun notable for its high concentration of industrial estates.
