of VAT and Socialism

I took a look at the just released Nigerian Revenue allocation to all theirs of Govt for the Month of February 2009 and shared in March 2009.
Let’s pick two states Delta and Jigawa, Delta is one Nigeria richest states (Lagos is the richest), Jigawa is Nigeria poorest state[i]. Now what is being shared is statutory allocation (oil money) plus VAT, if we agree that oil money is for the whole of Nigeria, (which it is) then lets look at VAT. Delta got N366 as VAT which is internally generated income, while Jigawa which generates nothing got N374m in VAT. (Lagos got N2.6billion, but they generate 65% of VAT Collection and got 13% of allocation).

Now my concern is this, how do we justify that Jigawa gets more VAT than Delta? or are the CBN figures wrong? This is not about resource control ooh, VAT is revenue collected by states on value added by the merchants in that state on transactions. Hence if Delta puts street lights (which it did), a shop owner can work at night, charge more VAT which he remits to the VAT federal office, who is then supposed to give it back to Delta state, as reward for adding value to that transaction. If Lagos also build roads it attracts business men who stay in hotels, eat food and buy groceries in Lagos, thus Lagos generates VAT as reward for building roads.

Now this is not to accuse Jigawa of not building roads, nor of being lazy, Jigawa state did not write the VAT bill. But if we keep on rewarding states for doing nothing, then they will continue to do nothing.

Already if you create a state today, you are simply taking money away from viable states. Same as VAT. If you look at the papers you see all sort of pressure groups calling for state creation be it Apa, Ijebu, Anioma, Okija states etc. All this request will do is simply drain money away from Lagos, Delta, Kano and Rivers and send to the other 32 who cannot pay salaries to teachers. We have to reward good managers and at least discourage wastage.
We can have a formula which ties your VAT receipts as a function of your own Internally generated Revenue, Hence Jigawa will have a provisional allocation of N374 m, but can only get 100% of that amount if the state internally generates 25% of their expenditure budget. That way the governor cannot just get VAT and spend, but he has to make the state viable enough to generate revenue to qualify to receive a VAT grant from the centre.
Quite frankly if all a governor has to do is to spend then any idiot can do that, the governors are called Chief Executive of their states because they are supposed to manage the resources and people of their states in a manner reflective of the trust placed on them. If we go on like this then we will not only have a balkanization of the states, but a balkanization of the resources of the federation
There are some other data there that is quite interesting,
1. all state have foreign borrowing; Oyo in particular has a total foreign debt deduction of N142m ( wetin dem buy), Yobe has N4m
2. Rivers gets N12 billion a month extra as excess crude! N12billion! Why does PH look like Kabul?
3. Kano has 44 LGA, Lagos has 20 hmmmm
4. Imo state is paying N358m every month as interest to banks for loans collected! That’s more than they get from VAT (negative VAT)
5. Ekiti has the lowest Gross Statutory allocation in Nigeria; Education does not pay.
6. Richest Local government in Nigeria is Alimosho in Lagos state, they get N258m a month. Outside Lagos (and Abuja) the richest LGA is Bauchi LGA which gets 117m a month, more than PH LGA which gets 106m.
7. Poorest LGA is in Osun, called EGBEDORE just a paltry N46M a month! Sack your senator guys.

It’s our problem, we can fix it

Kalu