Fragile States! Why Subnational Governments in Nigeria Cannot Subsist on Internally Generated Revenue?

Chukwuma Agu

The IUP Journal of Public Finance, 2011, vol. IX, issue 1, 25-53

Abstract: There is serious concern about sustainability of states in Nigeria owing to high dependence on centrally collected and shared federation account. This is partly because the federation account is funded mainly from revenue from oil—an exhaustible resource with fluctuating international price and demand. Interestingly, basic operations in many states in Nigeria cannot go on without the monthly allocations. This has partly helped government officials to pay little attention to growing the economic base that would help them to become independent. Many states rely almost exclusively on this handout from the federation account. Realizing the lack of sustainability of this situation, this paper sets out to evaluate the state of Internally Generated Revenue (IGR) in states in Nigeria. The paper is based on a survey of the five states of the South-East region. It evaluates sources of revenue, methods of revenue collection, remittance of such revenue to government coffers and points out some of the loopholes and strengths of the system. It notes that modern technology is yet to be incorporated in IGR planning and collection approaches, with officials relying mainly on physical visitation, memos and letters to notify tax payers. Remittances of collected funds are mainly by cash, creating opportunities for embezzlement. These inefficiencies filter to taxpayers by way of multiple payments of the same tax and harassments. The paper also examines the issue of untapped sectors, their implications and options for tapping into them, particularly essential for the government to woo the private sector, improve its image and trust, and then enter into partnership with the private sector to grow critical sectors of the economy.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjpf:v:09:y:2011:i:1:p:25-53

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