Centrally collected revenue shared by the federal, state and local governments dropped by N2.8 trillion between 2014 and last year, a Federal Ministry of Finance report has shown.
The sharp drop in revenue has the greatest impact on the states' ability to deliver on development programmes in areas such as education, health and roads.
The states had found it even harder to pay workers' salaries until when they were bailed out by the new government of President MuhammaduBuhari.
Analysis of official documents from the Ministry of Finance shows that the three tiers of government shared N8.6 trillion in 2014 but the figure slumped to N5.8 trillion in 2015 due to the continuous global slide in crude oil prices.
A barrel of crude oil sold for $105.71 in the first quarter of 2014 but plunged to $37.28 in the last quarter of 2015, data obtained from the Central Bank of Nigeria (CBN) shows.
Daily Trust reported in July last year that the first half of the year had ended with the federal and the 36 state governments being unable to start the implementation of capital votes totalling N4.2 trillion made up of N3.47 trillion for states and N722 billion for the federal government.
BudgIT, a budget-tracking advocacy group, said in its new report: State of the states, that the three tiers of government were going insolvent for their failure to build adequate fiscal buffers in the past when the crude oil price stood at about $100 per barrel for 42 consecutive months.
In the first quarter of 2014, the Federal Accounts Allocation Committee (FAAC) document showed that N2.1trillion was shared to the federal, state and local governments as follows: N666.3 billion for January, N776.7 billion for February and N720.8 billion for March.
For the second quarter of the same year, N2.6 trillion was shared to the three tiers of government as follows: N685.1 billion (April), N1.1trillion (May) and N851.3 billion (June).
In the third quarter, N2 trillion was shared thus: N731.3 billion (July), N673.1billion (August) and N620.5 billion (September).
For the fourth quarter, N1.8trillion was shared as follows: N610.1 billion (October), N628.7 billion (November) and N580.3 billion (December).
In 2015, the distributable revenue was however reduced to N1.5 trillion in the first quarter: N500.1 billion for January, N567.8 billion for February and N435 billion for March.
For the second quarter, the figure marginally rose to N1.7 trillion - N388.3 billion for April, N418.4 billion (May) and N923.8 billion (June).
For the third quarter of 2015, the revenues further slumped to N1.3 trillion: N521.2 billion (July), N442.6 billion (August) and N389.9 billion (September).
The downturn continued as revenues slipped to N1.2 trillion in the last quarter of last year: N473.8 billion for October, N369.8 billion for November and N387.8 billion for December.
Apart from the monies shared to the federal, states, and local governments within the period, the FAAC disbursement included deductions for the cost of collections by the Federal Inland Revenue Service (FIRS), Nigerian Customs Service (NCS) and Department of Petroleum Resources (DPR) among others.
The federal government allocation dropped by N907.7 billion in 2015, slipping from N3.4 trillion in 2014 to N2.5 trillion in 2015.
The states' allocation dipped by N500 billion in 2015, changing from N2.0 trillion in 2014 to N1.5 trillion in 2015.
The 774 local government areas' total allocation dropped by N393 billion in 2015. They got N1.5 trillion in 2014 and N1.1trillion in 2015.
The 13 percent derivation fund shared to the eight oil producing states also dropped from N690.1billion in 2014 to N593.7 billion in 2015.
The oil producing states are; Abia, AkwaIbom, Bayelsa, Delta, Edo, Imo, Ondo and Rivers.
Debt Management Office (DMO) documents show that the 36 states are heavily indebted to foreign lenders and Nigerian banks borrowed against higher oil prices, with some collecting less than half of their monthly statutory allocations while the rest of it is held at source to settle debts.
Not all the governors adopted the holistic cut in expenditure, particularly in overheads and reducing workforce and other costs eating into the fiscal health of the states for obvious political reasons.
They equally failed to diversify their revenue sources to boost their internally generated revenue (IGR).
Daily Trust exclusively reported recently that only Lagos State generates enough money to pay workers' salaries without relying on federal funds.
The states are now weighed down by massive foreign and local debts. Only two states have one digit debt burden, with four having three digits, according to states debt profile released by the DMO as of December 31, 2014.
These figures have changed dramatically from January 2015 to date with many states doubling their debt profile.
Most state governors heavily borrowed ahead of the 2015 general elections and concealed the actual status of the public treasury under their watch.
Despite the bailout funds, some states are still unable to settle salary arrears or pay workers as at when due.
To shore up their revenue shortfall, at least about two-thirds of the 36 state governors had demanded for bailout from the federal government.
A total of N662 billion was renegotiated for 27 states in July last year, with 19 states receiving N222 billion from the CBN as at September 2015.
The CBN approved N338 billion as loans to 27 states to pay outstanding salaries at nine percent interest rate over a 20-year period.
The DMO also converted N324 billion debts of 11 states to long term bonds at the rate of 14.83 percent payable over 20 years.
Governors not doing enough
It is almost impossible for governments to escape the devastating impact of the oil glut because the state governors are not doing enough to stand up to the challenges that the situation poses, Dr Dauda Garuba, Country Officer of the Natural Resource Governance Institute (NRGI), said.
"One possible way out of the present crisis is for governors to cut their spending on frivolity as a way of reducing the cost of governance," he said.
He said another way of generating revenue is for every governor to put in place a strong economic team that would be charged with the responsibility to explore opportunities for expanding internal revenue generation.
"This is because the crisis demands thinking out of the box. Positive results from such efforts would mean that they have converted the challenges of dwindling falling oil prices into opportunities. It will also mean we are redefining governance and growing sun-national economies," he said.
The states can overcome their revenue shortfall by broadening their tax base and blocking leakages, Razaq Ahmed, Executive Director of Sart Partners, a
-based investment management and financial advisory firm, said.
He said the states have to adopt creative and business-friendly solutions by focusing on resources in their control to boost their internally generated revenue.
"For example, most people want titles for their lands. The state governments can leverage on that by making the issuance of certificates of occupancy easier, more transparent and faster," he said.
He added: "Appreciable IGR can be generated by the land monetisation option while also unlocking the value of such land for business and banking."
Ahmed however said "most states don't look at that aspect but rely heavily on the FAAC revenue from
. Declining oil rent simply means drastic reduction in easy money."
States struggle for survival
State governments say they are doing their best to surmount the fiscal crunch. Kaduna State Commissioner for Finance, Suleiman Abdu Kwari, said regardless of the economic situation, the state would concentrate on service delivery in three key areas of education, health and provision of potable water to the citizenry.
He said in an emailed response to Daily Trust that the state's 2016 budget was passed with an oil price benchmark of $39.5 per barrel.
He said with the oil price at $35 per barrel below their projection, "it is within the sustainability level to maintain budget implementation ratios with overhead cost being reduced with corresponding figure of decline in revenue."
Kwari said: "In a situation where oil price goes below $35 per barrel, as it is now, priority is to be given to staff salaries and capital items with strict emphasis on the budgetary provision of 60 percent capital and 40 percent recurrent expenditures."
He said overheads which include office running cost and travel expenses would suffer a corresponding decrease in line with the revenue drop and predetermined by the price of oil.
Sokoto State has devised strategies to raise funds internally to meet its capital obligations, the spokesperson of Governor Aminu Tambuwal, Imam Imam, told Daily Trust.
"We plan to generate N33 billion in the 2016 fiscal year. We will intensify efforts at tax collection which is very low at the moment. The introduction of the TSA accounting system has so far led to the discovery of N1.5 billion lying idle in some accounts," he said in an emailed response.
"We believe with a proper accounting procedure and transparent management of revenue generation, our revenue targets will be met and our obligation to workers will not suffer," he said.
"As we speak, January salaries have been paid. We have also extended similar gesture to our pensioners. You may have read from the papers that recently, we paid the sum of N2.64 billion as gratuity to almost 2000 retired workers," Imam said.
In Bauchi, the Governor Mohammed Abubakar administration had to block all leakages and unnecessary expenditure to enable it save money, the governor's press secretary, Abubakar Al-Sadique, said.
"We have taken measures to eliminate unnecessary duplication of responsibilities and expenditures and at the same time re-structure the civil service in order to get value for the money being spent by the government," Al-Sadique said.
Governor Abubakar Badaru of Jigawa State said the state had adopted cost cutting measures to save funds for salaries and capital votes.
Badaru's spokesperson, Bello Zaki, said the state had saved enough to pay salaries for the next five months without federal subventions and even execute capital projects.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer