October 26, 2023/CSL Research
Based on the Internally Generated Revenue (IGR) report published by the National Bureau of Statistics (NBS) recently, all the states of Nigeria inclusive of the Federal Capital Territory (FCT) recorded total IGR of N1.93tn, which is 1.57% y/y higher than the total IGR of N1.90tn in FY 2021. Looking at the performance of individual states and the FCT, Lagos, Rivers and the FCT all recorded the highest performances, reporting ₦651.15bn, ₦172.82bn and ₦124.37bn in IGR respectively in 2022 while the least three performing states during the year were Kebbi, Taraba and Yobe with the value of ₦9.1bn, ₦10.2bn, and ₦10.5bn respectively.
The main sources of IGR in Nigeria came from Pay-As-You-Earn (PAYE), Direct Assessment Road Taxes, Other Taxes and Revenue from Ministries, Departments and Agencies (MDAs). Most states depend on monthly allocations from the Federation Account to fund a significant part of their budgets and therefore experience financial difficulties whenever FAAC allocations decline due to lower oil receipts. Many state governments are working to increase IGR by improving tax collection and expanding the tax base. Some of the initiatives being implemented include digitizing tax administration, implementing a single taxpayer identification number (TIN) system, expanding the use of tax stamps, Introducing new taxes etc.
The increase in IGR is important for states because it will help reduce their dependence on oil revenue but we believe a focus on tax to increase IGR can be detrimental to states especially if the focus is on creating new taxes. Multiple taxation can lead to businesses relocating outside the state and can impact the standard of living of the populace. We however agree that states can work to expand the tax net and reduce leakages through automating the tax collection system. That said, states should also look to other sources outside of tax to improve IGR.
Kindly click on the below link to download the full report.
CSL Nigeria Daily – 26 October 2023 – Government Revenue.docx.pdf
