WRITTEN BY PROF. ANTHONY EZE
Recently, Vice President Yemi Osinbajo stated the obvious with his disclosure that without the monthly allocations by the Federal Accounts Allocation Committee (FAAC), it would be extremely difficult for some states in Nigeria to survive. No doubt, Professor Osinbajo’s concern is valid and merits a careful reflection.
It should be a matter of great concern to all Nigerians how far some states in the country can stay afloat with overdependence on the monthly ‘handouts’ from the Federal Government. Official figures from the National Bureau of Statistics reveal that the 36 states of the federation realized nine hundred and thirty-one point two billion naira as internally generated revenue (IGR) in 2017. Though it is an increase of one hundred billion naira over the eight hundred and thirty-one billion naira recorded in 2016, it is still grossly inadequate to meet the financial obligations of the states.
According to the NBS, state governments generate only 15 per cent of their revenues and look up to FAAC every month for 85 percent of their financial requirements, including payment of workers’ salaries and pensioners’ entitlements. With the exception of few states, others are practically living on bailouts and loans to meet their financial obligations to workers.
A recent FAAC report showed a sharp decline in states’ allocations, which made it expedient for states to look towards diversifying their revenue bases. A quarterly review of the revenues received by the states compiled by the Nigeria Extractive Industries Transparency Initiative (NEITI) shows that in one year, allocations to the states declined by almost 50 per cent between June 2017 and June 2018.
Even though the states have right to the monthly allocations, in accordance with the 1999 Constitution (as amended), their survival will be more on their own efforts than having to run to Abuja every month for subventions. As Professor Osinbajo rightly observed, since the discovery of oil and the revenues accruing from it, some states have become somewhat parasitic on the federation account for their operations.
Regrettably, this was not the case before the discovery of oil when the different regions in the country generated sufficient revenues through taxes from agricultural produce such as palm oil, cocoa, groundnuts and rubber and yet contributed money to run the central government. Thus, some states, such as Anambra, which have prioritized agriculture in their policy document, must be commended.
That era may have gone, but the Federal and State governments need to revive the spirit and visions of that ‘beautiful old days’, especially the practical lessons of fiscal independence of the states and the diversification of our economy away from oil revenues. Currently, about 80 per cent of government’s total revenue receipts come from oil.
Going forward, a few issues need to be addressed urgently. The restructuring of the country has become more expedient now than ever before. Sadly, the Federal Government has been foot-dragging on this matter in spite of recommendations of the 2014 National Conference and the recent All Progressives Congress (APC) Nasir el-Rufai’s committee on restructuring. The two reports provided the way forward for the country and how to improve the economies of the states and make them less dependent on the centre.
As long as the present federal structure and allocations remain skewed in favour of the federal government, so long will the federating units (the states) continue to depend almost entirely on the federal allocations for survival. The current federal structure does not bode well for the country. The earlier the states do something to remedy the situation, the better. As a wasting asset, oil money will not be here forever. For the umpteenth time, the state governments need being reminded that they can exploit some of the solid minerals in their domains now that the Federal Government has shown its willingness to remove the legal bottlenecks in the extant laws that hitherto vested the sole approving authority of mining licences and their regulation on the Federal Government for their financial independence.

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