Ogun State and lopsided revenue sharing formula

OGUN State has always been alive to the need for an enabling and investor-friendly environment that is able to attract capital and foster economic growth. It has recorded many achievements over the past six years of the Senator Ibikunle Amosun’s administration. Ogun is one of the five states that attracted fresh investments into their states between January and June this year, an analysis of a capital importation report obtained from the National Bureau of Statistics (NBS) has shown. The report revealed that only five states within the first six months of this year recorded any form of fresh investment inflow in key sectors of the economy. According to the report, Ogun State attracted fresh investment inflow of $5.31 million. In its report for the first quarter of 2017, the NBS listed Lagos, Akwa Ibom, Ogun, Oyo, Rivers states and the Federal Capital Territory, Abuja as the most investors-friendly destinations in the country.

It listed Ogun as an investment-friendly state with a capital importation of $5.351 million in the first three months of the year, while Oyo and Rivers came next with $3.419 million and $550,000 respectively. According to the report, the largest chunk of the imported capital, $302.47 million, representing 33.5 per cent, came in from the United Kingdom, while the second largest, $215.66 million, came in from the United States of America. The Bureau noted that this year’s record showed a 27.75 per cent improvement over the country’s achievement last year. Another data provided by the NBS shows that Ogun has recorded the highest amount of mining activity in the country in the last three years.  The statistics indicates that it accounts for about 40 per cent of the mining resources in the country, which makes it the leading state in the mining sector in Nigeria.

Vice President Yemi Osinbajo recently noted that two of the 914 people who paid between N10 million and N20 million tax annually are domiciled in Ogun State. Regrettably, while Ogun is among the few states that produce the wealth that sustains the country, it is among the states that receive lower allocations from the Federal Government. Ogun is next to Lagos State in terms of non-oil revenue generation such as VAT, among others, for the Federal Government. Unfortunately, it is still placed 25th in terms of revenue sharing in the country based on indices generated several years ago and not on present contribution to the Federation Account.

Last year, the Internally Generated Revenue (IGR) of all the states in Nigeria for 2015 was released by the NBS. The statistics showed a decrease in the total IGR of all the states of the federation by comparing the IGR of 2014 and 2015. The IGR of 2014 was N707.8 billion while that of 2015 stood at N683.6 billion. Even in the face of this decline, Ogun State still recorded one of the highest increases in IGR (49.42%). In 2016, the 36 states and the 774 local government councils in Nigeria shared a total sum of N2.6 trillion from the Federation Account in spite of the prevailing economic recession. The total figure was payment made to the two tiers of government between January and December 2016 at the monthly meeting of the Federation Account Allocation Committee (FAAC). The total gross federal allocation to Ogun state in 2016 was N57 billion.

The statutory revenue received by the Ogun State government for the months of January, February and March 2017 from the federation account has been put at N4.98 billion. The N4.98 billion revenue was paid to the state, after deduction of N3.64 billion from the total allocation for debts and other financial obligations entered into by the previous administrations. Ondo State during the three months period, received N10.2 billion, after deduction of N3.19 billion; Oyo State (N8.9 billion, after deduction of N2.2 billion); Osun State (N1.1 billion after deduction of N7.22 billion); Lagos State (N19.03 billion, after deduction of N8.5 billion) and Ekiti State got N4.97 billion after N3.08 billion deduction. The top 10 recipients of Federation Account allocation in Nigeria are Akwa Ibom, Rivers, Delta, Bayelsa and Lagos States. Others in the top 10 bracket include Kano, Katsina, Oyo, Kaduna and Borno States. One of the perennial problems which has not only defied all past attempts at permanent solution, but also has a tendency for evoking high emotions on the part of all concerned is the issue of equitable revenue allocation in Nigeria.

It is an issue which has been politicised by successive administrations in Nigeria, both military and civilian. The imperative of competition over sharing of the commonwealth in the context of a plural society like Nigeria has resulted in a lot of contradictions. An acceptable formula that would foster a more balanced development and harmonious fiscal federalism among the component groups in the country is very fundamental. Governor Amosun has, on several occasions, advocated an overhaul of the existing revenue allocation formula in the country to make it fairer and equitable. At a time most states in the country are groaning over dwindling resources and are unable to pick their wage bills, Ogun State, under Governor Amosun, has recorded an increase in internally generated revenue to the tune of N6 billion per month.

Although the governor is not in support of the restructuring of the country, he welcomes anything that will allow for the equal distribution of projects and dividends of democracy. Amosun’s request for a special status in the federal revenue allocation is borne out of the fact that Ogun State has been officially acknowledged as the industrial hub of the country, adequately remitting excise duties to the coffers of the Federal Government. Due to prudent husbandry of the scarce resources of the State and his less reliance on the monthly Federal Allocation, Governor Amosun has not defaulted in the payment of salaries. Amosun has realised the importance of partnering with the organised private sector towards boosting the potentials of the state. There are about 423 companies in Ogun State with a minimum of over $2 billion investment capital base. In view of the new business investments trooping into Ogun State, the government has continued to complement their investments by maintaining and expanding on the existing infrastructure with the little revenue allocation it receives, just as new ones are being constructed.

• Durojaiye is the Special Adviser (Information & Strategy) to Governor Ibikunle Amosun.