How many of Nigeria's states are viable?

Nigeria's state governments are facing a severe budget deficit crisis, with many struggling to pay salaries, meet contractual obligations, and service overhanging debts accumulated during more prosperous times when oil prices were favorable. Seun Onigbinde, co-founder of the social advocacy and accountability firm BudgIT, shared insights on the challenges facing Nigeria's sub-national entities in a recent interview on CNBC Africa. Onigbinde highlighted that only three out of Nigeria's states have shown commendable financial results recently, with Lagos, Rivers, and Akwa Ibom leading the pack in revenue generation. Lagos, for example, generates a significant portion of its revenue from Internally Generated Revenue (IGR), while Rivers has diversified its economy beyond oil and gas. However, the issue of high recurrent expenditure remains a significant challenge for many states, particularly those heavily reliant on federal allocations. One of the key concerns raised during the interview was the mounting debt levels in several states, with some struggling to manage their debt burdens effectively. While states like Lagos have the capacity to service their debts due to sustainable revenue streams, others like Katsina and Gombe face more significant challenges. Onigbinde emphasized the need for greater transparency and accountability in how state governments manage their finances, urging proactive measures to address recurrent expenditure and debt accumulation. The interview also touched upon the lack of robust planning and accountability mechanisms at the state level, with Onigbinde criticizing the absence of clear fiscal targets in the Medium-Term Expenditure Framework (MTEF) for the current year. This deficiency in planning contributes to states making arbitrary financial decisions without a solid economic foundation, leading to reliance on bailouts and emergency funding sources to meet financial obligations. In response to the growing financial crisis facing many states, Onigbinde called for a more punitive approach to accountability, stating that states must demonstrate responsible financial management practices before receiving additional funds. He also underscored the need to realign incentives for state governments to promote fiscal sustainability and reduce dependency on federal allocations. The interview highlighted the historical context of state finances in Nigeria, noting that states like the Southwest region, which once thrived on agriculture, have now become heavily reliant on oil and VAT revenues. This overreliance on federal allocations poses a significant risk to the financial stability of these states, as seen in cases where high recurrent expenditure and debt accumulation threaten long-term financial viability. As the discussion concluded, Onigbinde emphasized the role of citizens in demanding greater accountability and transparency from their state governments. By advocating for responsible financial management and pushing for fiscal reforms, citizens can play a crucial role in shaping the future financial landscape of Nigeria's sub-national entities. Overall, the conversation shed light on the complex challenges facing Nigeria's state governments and the urgent need for comprehensive reforms to ensure their long-term financial sustainability and viability.