How diverse is Nigeria's economy across state lines?
November 6, 2014
Tolu Ogunlesi in Lagos* A breakdown of Africa’s largest economy into its 36 states shows striking differences. Poorer states need to expand their revenue bases to catch up. Having become Africa’s largest economy with a gross domestic product (GDP) of more than $500bn this year, Nigeria has been living up to its claims to represent the continent’s diversity – economically, politically and culturally. That diversity becomes clear in any research on conditions in Nigeria’s 36 states. “While Nigeria’s rise is well documented, little is known about the composition of its state economies,” noted Renaissance Capital in a detailed report last year. The report found big differences in incomes and social conditions across states. Primary school completion rates vary widely between north and south, as does life expectancy. Lagos – the state with the largest share of GDP – has expanded its tax base and set up lucrative but controversial public-private infrastructure partnerships that other states have copied. The impact of oil revenue Monthly oil revenue allocations from the central government account for only about a third of revenue for Lagos State. That is far lower than most other states. The National Bureau of Statistics reported in 2012 that Lagos generated more than double the tax revenue of the 19 northern Nigerian states combined. Without the monthly allocations from the federal oil revenue, most states would be insolvent. Eight states are classified as oil producers, which earns them an extra share of revenue from the derivation fund. These relatively high oil revenue allocations have meant that productive sectors such as manufacturing and agriculture have largely been neglected until now. In Benue State, known as the country’s food basket, copious amounts of fruit go to waste every year because of the lack of processing facilities. A weak industrial base holds back job creation and deprives Benue State of potential tax revenue. According to state governor Gabriel Suswam, as much as 90% of government revenue goes to paying salaries. To balance budgets, many states take bank loans and issue bonds, which are serviced from their monthly allocations. “These debt overhangs weigh heavily on the monthly allocations due to the states, preventing them from meeting their minimum basic obligations to the citizens,” Elias Mbam, chair of Nigeria’s federal revenue allocation body, said in 2012. This unleashes a vicious cycle of debt and dependency on the centre. One way out would be for the states to expand their revenue bases by attracting new investment. Simplified land policies and infrastructure upgrades could go a long way towards bringing in investors. A survey of 29 African cities published by the UK’s Economist Intelligence Unit last year argued that paying attention to the demographic profile of African cities could reveal “interesting market opportunities”. Lagos, Abuja, Port Harcourt and Ibadan made the list. Port Harcourt is home to what is claimed to be the largest gated, luxury real estate development in Nigeria. This collaboration between the state government and private developers is due for completion in 2015. Abuja had a per capita income more than double the national average, according to Renaissance Capital, before the government announced the results of this year’s GDP rebasing. Private equity firm Actis is investing in a 27,000m2 riverside mall in Abuja, also due for completion in 2015. Regional groupings For state governments, there could be strength in numbers. States have joined together to form regional economic groupings. Under the Development Agenda for Western Nigeria’s (DAWN) strategy, the goal is for “closer integration of neighbouring south-west states as the first step in creating a larger regional market for development, trade and investment.” Similar groupings have emerged, including the BRACED Commission – an acronym derived from the names of the six member states in the oil-rich Niger Delta – and the South East Nigeria Economic Commission. The six north- eastern states – three under a state of emergency due to the onslaught of Boko Haram – came together last December to host a joint economic summit, a possible prelude to a formal grouping. *Source theafricareport]]>
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