‘States would generate more income if empowered to control resources’

EXPERTS at Cowry Asset Management Limited have explained that the states would be able to generate more income if they are empowered to control their resources.

The firm made the statement while commenting on the recent report from the Bureau of Statistics that revealed a plunge in internal revenues generation.

The National Bureau of Statistics (NBS) reported that total value of the 36 states’ internally generated revenues and that of the Federal Capital Territory (FCT) Abuja moderated to N612.87 billion in H1 2020 from N693.91 billion it printed in H1 2019.

Analysts attributed the drop in the states’ revenues to Covid-19 which nearly brought global economic activities to a halt, especially in the second quarter of the year.

Major sources of revenues for the 36 States include Pay As You Go (PAYE); Direct Assessment; Road Taxes; Other taxes; and income from Ministries Departments and Agencies (MDAs).

Of the multiple income streams, analysts said PAYE contributed most to the pool, accounted for 68.24% or N418.21 billion.

Revenue from MDAs constituted 13.72% (N84.11 billion), followed by Other taxes, direct assessment and road taxes contributing 13.37% (N81.95 billion), 2.67% (N16.39 billion) and 1.99% (N12.21 billion) respectively.

Revenues from Sokoto, Niger and Benue States recorded the sharpest declines of 61.9%, 56.0% and 55.9% respectively.

However, Gombe, Yobe and Ebonyi States printed the largest increase of 81.5%, 77.8% and 61.7% respectively.

Perusing the data on quarterly basis, total states’ revenues also contracted by 26.5% to N259.73 billion in Q2 2020, from a high of N353.14 billion in Q1 2020.

In another development, data from the Central Bank of Nigeria (CBN) depository corporations’ survey showed a 1.62% month-on-month (m-o-m) rise in Broad Money Supply (M3 money) to N37.19 trillion in August 2020.

This resulted from a 13.38% increase in Net Foreign Assets (NFA) to N8.66 trillion; however Net Domestic Asset (NDA) decreased m-o-m by 2.46% to N42.17 trillion.

The decrease in NDA was chiefly driven by a 2.27% m-o-m moderation in Net Domestic Credit (NDC) to N38.67 trillion, accompanied by a 4.51% m-o-m decline in other assets net to N3.48 trillion in August 2020.

Further breakdown of the NDC showed a 10.21% m-o-m decline in Credit to the Government to N8.55 trillion; however, Credit to the Private sector rose marginally by 0.24% to N30.13 trillion.

On the liabilities side, the 1.62% m-o-m increase in M3 Money was driven by the 3.33% m-o-m increase in M2 Money to N34.22 trillion, but was partly offset by a 14.70% fall in treasury bills held by money holding sector to N2.97 trillion.

The increase in M2 was propelled by a 4.62% rise in Narrow Money (M1) to N13.14 trillion (of which Demand Deposits increased by 6.02% to N11.64 trillion, however currency outside banks fell by 2.66% to N1.97 trillion), and a 2.54% increase in Quasi Money (near maturing short term financial instruments) to N21.08 trillion. Reserve Money (Base Money) further rose m-o-m by 2.02% to N13.69 trillion as Bank reserves increased m-o-m by 2.68% to N11.32 trillion.

However, currency in circulation moderated by 1.04% to N2.37 trillion.

“We feel that the decline in States IGRs was chiefly due to the negative impact of COVID-19 pandemic on the social and economic activities in the country.

“However, we believe that more income would be generated if states are empowered to control their resources, rather than the current system of awaiting allocations from the FG”, experts at Cowry Asset noted.

Source: DMarketForces