BusinessStates’ IGR: S’West Dwarfs S’East, N’East, N’Central, N’West in Tax Revenue

States’ IGR: S’West Dwarfs S’East, N’East, N’Central, N’West in Tax Revenue


Nigeria’s South-West region pooled the largest tax revenue of N516.6 billion in 2021 representing 46.7 percent of the aggregate N1,017 trillion by the entire six regions. The figure is also higher than those of the South-East, North-East, North-Central and North-West regions put together.

Data from the National Bureau of Statistics (NBS) revealed that the South-West region, made up of Ekiti, Lagos, Osun, Ondo, Ogun and Oyo states grew their tax revenue from N440.47 billion in 2020 to N 516.60 in 2021 representing a 17.3 percent increase.

South-East region comprising Abia, Anambra, Ebonyi, Enugu and Imo states grew their tax revenue from N49.24 billion in 2020 to N56.55 billion in 2021, or 14.9 percent. The North-East region consisting of Adamawa, Bauchi, Borno, Gombe, Taraba and Yobe states recorded a tax revenue of N58.41 billion from N47.45 billion in 2020 or 23 percent increase.


North-Central region consisting of Benue, Kogi, Kwara, Nawara, Niger and Plateau states recorded N81.33 billion from N58.97 billion in the previous year, or 38 percent growth. While the North-West region of Kaduna, Katsina, Kano, Kebbi, Sokoto, Jigawa and Zamfara states grew their tax revenue to N120.98 billion from N109.73 billion in the previous year.

Further analysis of the report titled, “Internally Generated Revenue at State Level: 2019-2021” showed that the internally generated revenue of the states, which tax revenue consists of the huge chunk of, showed a significant increase in 2021 after the lull in 2020.

“The Internally Generated Revenue at the State level for 2019 stood at N1.64 trillion with a 64.65% share of tax revenue. The revenue declined by 4.65% in 2020 when the IGR was N1.56trillion. However, the proportion of tax revenue in 2020 rose to 66.16%. The total IGR in 2021 stood at N1.90trillion, indicating a growth rate of 21.54% over 2020 revenue collections.

“On state profile analysis, Lagos State recorded the highest Internally Generated Revenue in 2019 with N646.61billion, followed by Rivers with N169.60 billion. Again, in 2020, Lagos revenue stood top with N659.99 billion, followed by Rivers with N117.19 billion. Furthermore, Lagos and FCT recorded the highest collections in 2021 with N753.46 billion and N131.92 billion respectively.”

A tax expert, Reginald Ibeh, said the drop in tax revenue in 2020 showed the impact of COVID-19 pandemic which resulted in business closure and restriction of movements. The 15 month border closure also affected revenue generation of the states. He also cited the increased awareness in tax generation among the states following the drop in oil revenue.

In recent times, the Federation Account Allocation Committee (FAAC) has been disbursing monthly allocations made up of non-oil revenue as the Nigerian National Petroleum Company (NNPC) Limited made zero remittance to federal purse.

The South-West region IGR is driven by Lagos State which recorded a tax revenue of N405.07 billion in 2021 from N342.85 billion in the previous year. Lagos tax revenue represents 78.5 percent of the entire South-West region with Ekiti recording the least, N7.54 billion during the period.

An investigation by THEWILL in August 2021 showed that over 60 percent of internally generated revenue (IGR) of the states and the Federal Capital Territory (FCT) constitutes deductions from employee emoluments under the PAYE (Pay-As-You-Earn) tax system.

PAYE tax also accounts for over 70 percent of total taxes realised by the states, according to data from the NBS. This is against the widely held thinking that the states (or sub-nationals) have grown their IGR through more creative efforts. The report further revealed that the exponential growth in the states’ IGR in recent years did not occur from the sub-nationals becoming ingenious in finding alternative revenue channels beside federal allocations. While there is a marginal increase in other revenue sub-sectors, the investigation revealed that the states’ IGR has grown exponentially on the back of PAYE tax deductions.

The study showed that in the previous five years, states’ IGR increased remarkably – from N823 billion in 2016 to N1.306 trillion in 2020, a jump of 58.7 percent. Further analysis of the reports showed that the states’ PAYE tax revenue increased in the same trend from N403.87 billion in 2016 to N851.73 billion in 2020, or 110.8 percent increase. This excludes 2017 without available PAYE information. Total PAYE tax realised in 2018 was N669.21 billion, hitting N809.3 billion in 2019. The tax deductions from workers’ income also boosted the states’ IGR in 2018 and 2019 from N1.168 to N1.334 trillion respectively.

Professor of Accounting & Finance at Nasarawa State University and immediate past president, Association of National Accountants of Nigeria (ANAN) Mohammed Mainoma, said that the drop in investment would have adverse effects on economic development beyond negative impact on tax revenue. He however stressed that it would not affect the machinery for accelerated tax drives that the government has put in place.

“The drop in foreign investment may not necessarily reduce the tax drive since there are genuine efforts through the Finance Act to expand the tax base and also to block leakage and ensure prompt collection of tax revenue.

“It is however not a thing of joy since it will affect employment and production. In the long run we shall still have issues in the aggregates since tax is not the only issue. Other matters of development particularly human development be it education or health might be seriously affected,” Mainoma said in a note to THEWILL.

Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PwC observed that virtually all tax heads are under-performing in Nigeria and that PAYE and other taxes would increase if the states embark on an aggressive tax drive. He said in a note to THEWILL that personal income tax (including PAYE tax) is the number one source of tax revenue in many countries and that it is not unusual if 60 percent of states’ tax revenue in Nigeria consists of employee income tax.

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