In the just concluded week, the European Central Bank (ECB) reconfirmed its accomodative stance as the interest rates on the main refinancing operations, the marginal lending facility and the deposit facility were left unchanged at 0.00%, 0.25% and -0.50% respectively during its April 2021 meeting.
Notably, the Governing Council appeared to strongly have it eyes on inflation rate, as it hinted that the key interest rates would remain at their current low levels until inflation outlook converged to a level close to its
projection of 2%.
According to the ECB President, Christine Lagarde, the marginal rise in inflation rate recently experienced was due to temporary factors as underlying price pressures remain subdued amid significant economic slack and weak demand.
The ECB also kept the Pandemic Emergency Bond Purchasing Programme (PEPP) quota at EUR1.85 trillion with the buys to run at least to March 2022.
On the local scene, the National Bureau of Statistics (NBS) stated that Nigerian States’ internally generated revenue (IGR) for the FY 2020 moderated year on year (y-o-y) by 1.93% to N1.31 trillion from N1.33 trillion in FY 2019.
A breakdown of the 2020 IGR into the various income sources (as contained in a recently published report by the NBS titled, “Internally Generated Revenue At State Level”) showed that income from Other taxes and Direct Assessment, which were N170.49 billion (lower than N225.41 billion in FY 2019) and N37.06 billion (less than N47.67 billion in FY 2019) respectively, chiefly accounted for the decline.
Also, there were marginal declines in income sources from Ministry, Departments and Agencies (MDAs) and Road Tax as their respective amounts stood at N28.39 billion (fell from N30.27 billion in FY 2019) and N218.39 billion (fell from N221.55 billion in FY 2019). However, Pay As You Earn (PAYE) which amounted to N851.73 billion (rose from N809.32 billion).
Of the thirty-six states and the Federal Capital Territory (FCT), nineteen states grew their IGRs; with five states growing theirs by more than 30% in the period under review.
Specifically, Kebbi State grew its IGR by 87.02%, Ebonyi (82.30%), Oyo (42.23%), Borno (41.63%) and Katsina (34.16%) to N13.78 billion, N13.59 billion, N38.04 billion, N41.63 billion and N11.39 billion respectively.
The increase in their IGRs was chiefly driven by higher revenue from PAYE.
On the flip side, four states which recorded decline in IGR include: Benue, Sokoto, Kwara and Jigawa. Their IGRs moderated by 41.38% to N10.46 billion, 37.93% to N11.79 billion, 36.03% to N19.60 billion and 32.95% to N8.67 trillion respectively in FY 2020.
Further analysis of the report showed that 7 states (lower than 9 states in FY 2019) generated IGR above N30 billion: Lagos state generated the highest IGR of N418.99 billion, while Rivers, Delta, Kaduna, Ogun, Oyo and Akwa Ibom states generated N117.19 billion, N59.73 billion, N50.77 billion, N50.75 billion, N38.04 billion and N30.69 billion respectively.
However, Yobe, Taraba, Adamawa, Gombe, Jigawa and Ekiti states generated the least IGRs of N7.78 billion, N8.11 billion, N8.32 billion, N8.54 billion, N8.67 billion and N8.72 billion respectively.
We note that the decline in states’ total IGR was largely due to depressed economic activities which was exacerbated by COVID-19 pandemic. Nevertheless, we saw a surprise increase in PAYE despite the recent rise in unemployment rate.
It appears that staff in the health, information technology and financial sectors got pay raises as corporates operating in those sectors printed better performance despite the Coronavirus outbreak in the year under review.
Going forward, we expect states’ IGR to further moderate, especially for the states in the northern part of the country, given the worsening insecurity – this is more so, as the death of Chadian President, Idriss Deby, elevates fears of arms influx into Nigeria amid too many Militia groups operating in that country.