By Nchetachi Chukwuajah
Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has highlighted the paradox of the economic reforms of President Bola Tinubu which has increased federal allocations to states.
Oyedele noted that with the reforms, transfers to states from the Federation Account Allocation Committee (FAAC) have more than doubled from N5.4 trillion in 2023 to N11.4 trillion in 2024.
He, however, decried a situation whereby states are receiving more money than ever before, but ordinary Nigerians have less disposable income in their pockets, urging state leaders to channel the extra revenues into projects that tangibly improve citizens’ lives.
Oyedele made this disclosure in a keynote address at the launch of the BudgIT State of States 2025 Report in Abuja on Tuesday, October 28, which also marked the 10th anniversary of the initiative.
He said: “States are receiving more money than ever before. But there is a paradox: while governments have more naira, ordinary Nigerians have less disposable income in their pockets.”
The fiscal policy expert projected that states could earn more than N4 trillion annually, a staggering 55 per cent increase, from 2026 when new Value Added Tax (VAT) reforms take effect.
He said: “With VAT reforms kicking in from 2026, states’ share will rise to 55 per cent. That could amount to over N4 trillion in 2026. The question is: will this money be spent, or will it be invested?”
Oyedele referenced the BudgIT report, which showed that 21 states still rely on federal allocations for over 70 per cent of their revenues, describing it as worrying and urged states to diversify their revenue sources.
He further explained that the new tax laws, which transfer the full proceeds of electronic money transfer levies to states and exempt state government bonds from tax, would help reduce borrowing costs and create fiscal space.
“This is a unique opportunity for states to build resilience, close existing tax gaps and invest in infrastructure,” he stressed.
In his speech, Oyedele highlighted the mismatch between spending and outcomes and acknowledged that for the first time in many years, capital expenditure had overtaken recurrent expenditure.
He, however, warned that implementation in critical areas remained poor.
“States implemented only two-thirds of their education budgets, spending less than N7,000 per citizen. In health, implementation was even lower, at just N3,500 per citizen,” he observed.
In his comments on debts, the fiscal policy expert noted a N2 trillion reduction in domestic debts and a $200 million slash in foreign loans, with 31 states lowering their domestic debt stock.
He added that states still owe over N1.2 trillion in arrears to pensioners, contractors and workers, noting that “borrowing is not the problem; unproductive application of debt is.”
