The international financial institution, World Bank has asked Nigerian states to prepare for massive revenue loss in oil and gas this year.
Naija News understands that the world lending financial institution raised the alert in its Nigeria Development Update report released in the public domain this week.
The report warned that many states would find it difficult to meet up with their expenditures this year, saying there was an increase in debt servicing expenditures of States.
The World Bank said the Nigerian states will likely lose no fewer than N18.8bn in oil and gas revenues in 2022, as worsening revenue collection at the federation level increases budgetary pressures for the states.
The report titled ‘The Continuing Urgency of Business Unusual’ revealed that the declining revenue from the federation level had put many states in a precarious fiscal position.
The report read in part, “With net oil and gas revenues stagnating, most states will not be able to achieve their intended levels of expenditures in 2022.
“In addition, debt servicing expenditures at the state level are also mounting due to a decline in gross statutory account revenue transfers from the federation account allocation committee, which comprises oil and non-value added tax, non-oil revenues.”
World Bank observed also that the expected higher VAT collection or improvements in independently generated revenues would not compensate for the lower transfers from the Federation Accounts Allocation Committee in 2022.
The financial institution also warned that there would be a 2.7 per cent decline in FAAC transfers in 2022 when compared to 2021, adding that this decline would push states to borrow more and slash discretionary expenditure.
It added: “Stagnating net oil revenues will significantly affect the fiscal situation at the state level. State governments are projected to collectively receive 2.7 per cent fewer revenues than in 2021, as federal transfers are estimated to decline by 10 per cent against 2020 levels.
“Lower transfers will cause state governments to incur debt or drastically slash discretionary expenditure. Although states receive the majority of VAT revenues, VAT increases would not make up for the loss of net oil revenues.
“As a result, in 2022, the average state in Nigeria will lose N18.8bn in oil and gas revenues, while optimistic projections place average gains from VAT and the electronic money transfer Levy at N7.1bn per state, and average increases in each state’s independent revenues at N6.7bn. As a result, the average state can expect to lose N5bn in revenue in 2022.”