By Chinwendu Obienyi
Economic analysts have said the decline in State Government’s Internally Generated Revenue (IGR) report released by the National Bureau of Statistics (NBS) could escalate a negative impact on the labour market to in turn weigh on the Pay-AS-You-Earn (PAYE) system in Nigeria.
This was even as they attributed the decline to the effects of the COVID-19 pandemic on the various states of the federation, as they tried to implement lockdown protocols to curb the spread of the disease across the country.
According to the recently published IGR report by the NBS, total IGR of the thirty-six states and the FCT printed at N1.31 trillion in 2020 represented a decline of 1.93 per cent when compared to N1.33 trillion generated in 2019.
The marginal decline in States IGR according to the experts was due to the declines across Other Taxes (-24.4 per cent y/y to N170.49 billion), Direct Assessment (-22.3 per cent y/y to N37.06 billion), and Road Taxes (-6.2 per cent y/y to N30.27 billion) which offset the 5.2 per cent y/y growth recorded in revenue from PAYE (N851.73 billion).
Meanwhile, the total revenue available to all the sub-nationals (aside grants) in 2020 printed at N3.6 trillion, translating to a mark-up of 63.7 per cent (or N2.3 trillion) on their IGR figure. This mark-up which equates to about two-third of the total revenue available to the sub-nationals represents the annual aggregate of the monthly Federation Accounts Allocation Committee (FAAC) allocation in 2020.
Commenting on the development, analysts at Cordros Research noted that on a quarter-on-quarter basis, the IGR increased by 1.0 per cent q/q in the fourth quarter of 2020, reflecting the impact of increased economic activities compared to Q3 2020.
“Although we expect the gloomy outlook on the labour market to weigh on PAYE, we still see scope for increased IGR in 2021 FY compared to 2020, given the continued normalisation of activities in the informal sector supported by the full reopening of the economy.
For their part, analysts at Afrinvest said “Given the expectation that Nigeria’s earnings from crude oil will remain low over the medium term due to the innovation in cleaner energy sources and COVID-19 impact on the global oil market, we expect sub-national’s financial vulnerability to heighten in the near term”.
Lagos State recorded the highest internally generated revenue in 2020, having made N418.99 billion, accounting for 32.08 per cent of the total states’ IGR recorded in the period under review. It is therefore not surprising that Lagos State makes this much revenue being the commercial hub of Nigeria.