States’ IGR Rises 34% to N2.43tn Despite Economic Hardship

The internally generated revenue of states across Nigeria rose by 34 per cent to N2.43 trillion, despite the economic difficulties confronting households and businesses across the country.

The increase represents a significant improvement in the ability of state governments to generate revenue from sources within their jurisdictions, including taxes, levies, fees and other internally generated income.

The growth in IGR comes at a time when Nigerians continue to deal with rising living costs, inflation, high operating expenses and declining purchasing power. Businesses and individuals have faced increased financial pressure, making the rise in revenue collection particularly notable.

States have increasingly turned their attention to improving their internally generated revenue as governments seek to reduce dependence on allocations from the Federation Account.

For many states, internally generated revenue has become an important component of their ability to finance infrastructure, public services, salaries and other government programmes.

The increase also reflects efforts by several state governments to strengthen their tax collection systems, expand their revenue base and improve compliance among individuals and businesses.

Digitalisation of tax administration has played an important role in some states, with governments adopting electronic payment systems, taxpayer databases and other technology-driven measures to reduce leakages and make revenue collection more efficient.

Some states have also intensified efforts to identify previously untapped sources of revenue and bring more individuals and businesses into the formal tax system.

However, the increase in revenue has also raised questions about the pressure placed on residents and businesses as governments attempt to expand their tax base.

Economic hardship has made it increasingly difficult for many households to meet their financial obligations, while businesses have complained about multiple taxes, levies and other charges imposed by different levels of government.

Analysts have therefore stressed the importance of ensuring that higher revenue does not come primarily from imposing additional burdens on already struggling citizens and businesses.

Instead, states are expected to focus on broadening the tax base, improving compliance, reducing leakages and creating an environment that allows businesses to grow.

A stronger business environment could ultimately increase government revenue by encouraging more companies to operate formally, creating employment and expanding economic activity.

The rise in IGR is also significant because states remain heavily dependent on federal allocations to finance their budgets. Improved internally generated revenue can provide governments with greater financial flexibility and reduce vulnerability to fluctuations in federal revenue.

States with stronger internally generated revenue systems are generally better positioned to fund development projects and maintain public services, particularly during periods when federal revenues come under pressure.

The latest figures therefore highlight the growing importance of fiscal responsibility and revenue diversification among state governments.

Governments are expected to balance the need to raise revenue with the responsibility to protect citizens from excessive taxation and ensure that public funds are used efficiently.

The increase to N2.43 trillion suggests that states have made progress in improving revenue mobilisation, but the sustainability of the growth will depend on the strength of the economy and the ability of governments to maintain compliance without discouraging investment.

As economic conditions continue to evolve, states will likely face increasing pressure to generate more revenue internally while also providing relief to residents affected by rising prices and reduced purchasing power.

The challenge for state governments will therefore be to transform higher revenue into tangible improvements in infrastructure, healthcare, education, security and other essential services.