Following the recently released 2016 economic viability report by economic confidential, I beg to disagree that economic viability is a question of percentage of IGR to federal allocation. The picture below shows the index as published by economic confidential.
Economic Confidential’s 2016 Viability Index: An incomplete analysis. | By: Tope Bolarinwa
Viability is successful survival and economic viability is when a state is sustainable in terms of her use of her financial resources. That sure goes beyond the ratio of IGR to Federal allocation.
Federal allocation remains a credible funding source for every state in our federation and the mere fact that a state plans it’s expenditure around that alone is not enough to call the sat unviable, further to assume the absence of federal allocation for a state is to assume the absence of the federation which is a needless assumption; the federation would be there, the absence of the federation or inability of the federation to provide allocation would mean that many state’s IGR would also significantly dwindle. Nonetheless it is noble for states to take efforts to generate funds internally to being more development to her people.
Viability is about income vs expenditure. All states have deficit in that regard. But that does not tell the full story. We have to look at what percentage of expenditure is on recurrent and what percentage is on capital. This will tell us how the government is using the finances of the state to secure it’s sustainability over time.
Further we should look at income vs debt i.e. revenue to debt ratio.
While not exhaustive, these are all indicators that will further tell us about the viability of a state better than IGR percentage of Federal allocation. Please tell economic confidential to complete the work they have started so that we can understand more about the operations of our beloved states.
God bless Nigeria.
Temitope Bolarinwa blogs at whatsupng.blogspot.com.ng.