10% percent of Nigerians spends 90 percent of Nigeria’s revenue – Consultant
By John Olusegun
Chief Revenue Consultant to CSDC Consulting Enterprise Solutions and Tree Four Consult, Prof. Muritala Awodun, has said that 10% percent of Nigerians spends 90 percent of Nigeria’s revenue.
He stated that such a development was unsavoury and inimical to national development and the overall wellbeing of the citizens.
Awodun, who is Professor of Business and Entrepreneurship, and Director, Centre for Enterprise and Human Capital Development, Crown-Hill University, Eiyenkorin, Kwara State, Nigeria, in an interview alleged that the federal, state, and local governments in Nigeria are consumption friendly generally and not investment-friendly.
He called for a reversal of the alleged negative trend.
Awodun said, “Government generally, not peculiar to the Buhari administration or the Federal Government. If you look at the various states and local governments and their budgets, their expenditure patterns are the same, what differs is the range. While some are as high as ninety percent recurrent expenditure in their actuals, the majority are between fifty and seventy percent recurrent expenditure as against capital expenditure. Even the 2022 Budgets of the 36 states, for instance, shows that recurrent expenditure of the sub-nationals is an average of fifty-five percent against forty-five percent capital expenditure. However, at the end of every year, they hardly implement the proposed allocation to the capital up to fifty percent of what is budgeted, while the recurrent is almost one hundred percent expended. What this implies is that the capital expenditure that will benefit more than ninety percent of the people is always sacrificed once there is revenue shortage while the recurrent that is for less than ten percent of the people are almost fully expended.
“So, our governments are consumption friendly generally and not investment-friendly. This is also a reflection of society generally. At the individual (household) level, we know how to spend money on consumption activities that bring little or no returns than on investment or capital-related activities. Even our children, if you give them money, they want to spend it because of wrong values rather than thinking of how to apply it meaningfully to make it work and multiply. So, we remain perpetually poor as a people and as a nation. We are a consuming nation and not a producing nation, and until that narrative is changed, we will not develop. Our environment and culture had promoted lousiness, luxury living that has increased our expenditure beyond what our income can even carry.
“If you look at the people that are in government and the quantum of funds that are expended on them. If you look at people that are in one form of power or the other and the quantum of money that is expended on them, then everybody wants to aspire to be there because of the huge expenditure pattern. So, everybody aspires to behave like them because they are the mirror the younger ones can see. Therefore, there is this tendency generally, once money comes you just want to do what other people you see around you are doing. This has developed into a high hunger to consume that has beclouded our capacity to think of how to save, invest and grow wealth as a people.”
The tax consultant said none of the 36 states in Nigeria and the Federal Capital Territory, (FCT)Abuja, has reached their full potential in internally generated revenue collection.
The Professor of Business and Entrepreneurship, stated that all the states of the federation and FCT can be self-sustaining if they develop and maximise their resources and IGR collection.
According to him, it is sad and dangerous that out of the 36 states, one can hardly count up to six states that can survive without federal allocation going by the figures of the internally generated revenue of the 36 states of the federation.
He said it is dangerous because not that these other states cannot actually generate sufficient IGR but because they are solely dependent on the money that comes from the Federal sources which come with little or no effort and because it is barely adequate for them to pay salaries and do some other things, they tend to be contented with that status, adding that what if that federal allocations stop today, how are those other states going to survive?
Awodun, who is a former Chief Executive Officer of Kwara State Internal Revenue Services, urged the 36 states of the federation and FCT to develop the resources in their domains and optimise their IGR collection for sustainability rather than depend on federal allocations.
He said, “All the 36 states of the Federation including the FCT have not reached their full potential. The six states that are said to be doing well can still do far better based on the revenue potentials of those states. They are being appraised as having done well only compared to where they are coming from. The Federal Government, in terms of revenue generation, can do a lot better than what they are doing now, so can all the 36 states. Those that are doing well now should be encouraged in that direction so that they will do better. The states that are not doing well at all should begin to wake up because without them going in the direction of trying to make the business environment in their states conducive enough to generate economic activities, they cannot significantly drive IGR, and this may not augur well for them in the years ahead.
“There is no state in Nigeria that cannot survive if left alone. What will happen is that each state will begin to look inward and develop its hidden potential, and before you know it, there will be an increase in its IGR. The bottom line is, when the chips are down, there is no state that cannot survive on its own, and I stand to be corrected. It is just that they will have to begin to look at things that will make them self-sustaining. There is no state that does not have one form of mineral resource or the other, aside from the massive landmass. Rather than take the money they are collecting from the federal to go and develop those mineral resources and build industries around them so that there can propel good economic activities in the various states, everybody is just collecting the federal allocation money and spending on recurrent expenditure, which practically is consumption-oriented.
“If each state decides that for every administration that comes onboard, one particular form of mineral resource of their state will be concentrated upon such that industries will be built around them, or concentrate on one form of their agriculture potential and magnified them on a large scale, such states will not be the same again after that particular administration. The situation is that most states are not making any significant effort to develop in Nigeria, as they always find a ready excuse every now and then to pass the buck.
“Every state in Nigeria has one form of resource or the other that can actually make that state to survive, but we are not looking at such a direction because we have a source of revenue that is like free money. My take is that we should not wait until the situation becomes too late, as the present state of affairs is not sustainable for too long and the warning signals are already out there.”
He added, “Imagine Lagos State remaining at the level of its IGR some 20 years ago, if nothing had been done to revolutionize the IGR, the potential will still remain there as potential but without anybody driving it to reality. Look at River State some eight years ago, look at their IGR and look at what it has turned out to be now. The states in the top ten bracket of IGR in Nigeria, including Lagos, have not even started, based on the potential internal revenue in these states, talk less of reaching their full potential, but the fact that they have endeavored to do something, even including Kwara State, means they have realized that the revamping of their internally generated revenue is the viable route to sustainability.
“Before we embarked on the reform of the revenue process in Kwara State, some six years ago, it was like a mission impossible. Kwara was condemned to less than N700 million IGR monthly for so long and nobody thought that making an average of N2bn or more could be possible on a monthly basis. The study conducted then in 2014, in Kwara shows that conservatively, without increasing the tax rates but harnessing the existing potentials through process improvements, the monthly IGR of the state can climb to N5 billion monthly over a 10-year period (i.e. by 2024/2025). All these other states have to begin to look inward to develop their IGR collection process. The Federal Allocation the states collect, if adequately applied towards developing infrastructure and providing a conducive business environment that will make the state conducive for productive activities, is capable of translating into IGR in one form or the other subsequently.
“Unfortunately, almost all the managers of our states’ resources are not looking in the direction of development because they all prefer easy sources of money than what is considered as sources of revenue that are difficult to harness. IGR is one source of revenue not easy to harness when compared to federal allocation sources and borrowing. Everybody comes to Abuja at the end of the month, share money, and go back to their states to expend these funds on recurrent expenditure while the capital expenditure that could impact the majority of their people is neglected and this is not sustainable.”