Challenges Preventing Southeast States from Achieving Good Revenue and Infrastructure Development.
The disparity between the economic potential and actual revenue generation in the Southeast states of Nigeria is stark. Despite having a significant number of wealthy individuals, such as those in Anambra State, the region lags behind states like Ogun in revenue generation. This gap is attributed to several key challenges:
Insecurity
Widespread insecurity, including violence and kidnapping, has severely impacted economic and traditional activity in the Southeast. Many businesses have relocated to safer areas, leading to reduced economic activity and tax revenue. High-profile relocations include notable businessmen such as Cubana Chief Priest and Obi Cubana, who moved their operations to Lagos. This trend highlights the severe impact of insecurity on local economies. Additionally, some governors of Southeast states spend significant time outside the region, further exacerbating the instability.
Economic Migration
Entrepreneurs and businesses are increasingly moving to more stable regions such as Asaba, Akwa Ibom, Rivers State, Cross River State, Lagos, Ogun State, and the Federal Capital Territory (FCT). This migration diminishes the tax base in the Southeast and hinders economic growth.
Disruption of Traditional Economic Activities
Traditional economic activities, including marriage ceremonies, are being relocated to safer regions. This shift reduces local spending and associated tax revenues, further weakening the local economy.
Low Formalization of the Informal Sector
A significant portion of the Southeast's economy operates informally, resulting in lower tax compliance and collections. Efforts to formalize this sector are crucial but challenging, impacting overall revenue generation.
Administrative and Governance Issues
Inefficiencies in revenue collection systems and lack of enforcement of tax regulations contribute to lower revenue in the Southeast. Additionally, administrative corruption undermines effective revenue collection. These governance issues need immediate attention to improve the economic outlook.
Impact of Political Activities
Electioneering activities often disrupt economic activities and divert government resources away from economic development and revenue collection efforts. For commercial cities like Onitsha and Aba, the state government should focus on creating industrial hubs and recreational facilities to boost local economies.
Several states in Nigeria exemplify revenue collection mechanisms, effective governance, and favorable business environments, contributing to their high internal revenue generation (IGR). Recent data highlights the following top performers:
Lagos State
- Consistently the highest performer, generating N651 billion in IGR in 2022 and N267.2 billion in the first half of 2021 and even in 2023.
Federal Capital Territory (FCT)
- The second highest in many reports, with N69.1 billion in the first half of 2021 and over N203.1 billion in 2023.
Rivers State
- Third highest in several rankings, generating N57.3 billion in the first half of 2021.
Ogun State
- Noted for having higher revenue than all Southeast states combined, with significant increases in internal revenue collection.
Delta State
- Achieved over 40% of its projected IGR for 2023 by the end of the first quarter, indicating strong performance.
Cross River State
- Demonstrated significant progress with a 21.6% increase between May and June 2023 and a 50% increase from June 2022 to June 2023.
These states' success in revenue generation explains the importance of stable governance, effective revenue collection mechanisms, and a favorable business environment. Addressing the challenges faced by the Southeast states requires a professional approach to improve security, formalize the informal sector, enhance governance, and foster economic development. Written by Daniel Okonkwo for Profile International Human Rights Advocate.
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