For many states in Nigeria, agriculture is not just a way of life; it’s their economic backbone—a source of food, identity, and employment for millions.
Yet, a curious paradox emerges: these states, blessed with fertile soil and a hardworking farming population, often rank low in internally generated revenue (IGR). The disconnect is striking and worth looking into.
Why do regions celebrated for feeding the nation struggle to feed their coffers?
The 2023 IGR report by the National Bureau of Statistics (NBS) provides a critical lens to examine this question. The answer might lie in how these states have (or have not) been able to transform their agricultural strengths into sustainable economic gains.
Nigeria’s agricultural prowess is undeniable. States like Benue, Niger, Kaduna, and Kano lead the pack, with a significant percentage of their households engaged in farming. For example, Benue State, known as the “Food Basket of the Nation,” is a top producer of yams, cassava, and grains. Similarly, Niger and Kaduna dominate in rice and maize production, while Kano leads in groundnut and tomato cultivation. Despite these strengths, these states show stark contrasts in their revenue profiles.
Revenue profiles: disparities amidst agricultural abundance
The latest IGR report reveals significant disparities among states with high agricultural activity. For instance, Kaduna, home to nearly 2 million agricultural households, generated an impressive ₦62.49 billion in IGR—the highest among the agriculturally dominant states. This success is partly due to the state’s diverse economic activities, which include a growing industrial base and investments in agro-processing.
On the other hand, Benue, with its reputation as the “Food Basket of the Nation” and over 1.8 million agricultural households, recorded an IGR of just ₦19.12 billion. While agriculture contributes significantly to the livelihoods of its people, the state’s limited industrialisation and infrastructure for value addition have stymied its revenue potential.
In the northwestern region, Kano stands out for its blend of agricultural productivity and bustling trade. Despite having over 2.3 million agrarian households—the highest in the country—Kano’s ₦37.38 billion in IGR is dwarfed by Kaduna’s revenue. This raises questions about how much of Kano’s agricultural output is integrated into formal economic channels that can be taxed.
Meanwhile, Niger State, with 1.45 million farming households, recorded ₦21.68 billion in IGR and faces one of the highest poverty rates in the country at 66.11%. This juxtaposition highlights the complex interplay between agricultural activity, revenue generation, and socio-economic challenges.
These figures beg a deeper question: Why does agriculture often fail to translate into robust financial outcomes for these states despite its potential to be a revenue powerhouse? To understand this paradox, exploring the broader economic context is crucial—how agricultural dominance interacts with poverty, unemployment, and the absence of economic diversification.
Agricultural dominance and economic complexities of Nigerian States
Agriculture is the lifeblood of many Nigerian states, yet it is not enough to lift them out of economic stagnation. The interplay between agricultural dominance, poverty, and employment (or the lack of it) reveals the intricate challenges these states face in converting agricultural productivity into meaningful economic gains.
Consider Niger State, with more than 1.4 million agricultural households and vast farmlands, has a poverty rate of 66.11%. Despite its agricultural abundance, the state generated just ₦21.68 billion in IGR in 2023. This reflects a troubling disconnect: while agriculture sustains livelihoods, it often fails to drive prosperity, especially when dominated by subsistence farming.
Sokoto, similarly, paints a grim picture. With 87.73% of its population living below the poverty line—the highest in Nigeria—the state recorded an IGR of only ₦17.96 billion. The reliance on low-value agricultural activities and the lack of value addition are significant barriers, underscoring how raw agricultural activity (or primary production) often doesn’t translate into robust state finances.
In contrast, Kaduna offers a glimmer of hope. With nearly 2 million agricultural households, the state has leveraged its agricultural base to diversify its economy. Its ₦62.49 billion IGR is one of the highest among agriculturally dominant states, demonstrating the value of agro-industrial development and strategic investment in infrastructure. Kaduna’s example shows that with the right policies and investments, states can unlock the potential of their agricultural sector to fuel broader economic growth.
Infrastructure deficits and their impact
Agricultural households face well-documented challenges, particularly with poor infrastructure and post-harvest losses. Inadequate storage facilities and inefficient transportation networks significantly exacerbate these issues, hindering the transformation of raw produce into high-value goods. These infrastructural deficiencies lead to substantial post-harvest losses, diminishing the economic potential of agricultural output and limiting its contribution to local revenue.
One of the major recommendations from agricultural experts is the development of community-level aggregation centres and subsidised storage solutions to mitigate these losses. Such interventions could address both infrastructural gaps and the broader systemic inefficiencies that limit agricultural productivity.
Electricity is another critical issue. Lack of reliable electricity limits the use of modern equipment critical for processing, milling, and packaging agricultural goods. For example, agro-processing businesses often resort to alternative, less sustainable power sources like diesel generators due to insufficient energy access. This constraint affects their capacity to create value-added products, perpetuating reliance on raw exports, which are less profitable than processed goods, and it increases the cost of production.
The role of policy and investment
Government policies and investments have been critical in shaping agricultural outcomes, but their uneven implementation often undermines their potential. Initiatives like the Anchor Borrowers’ Programme (ABP) have channelled significant funds into agricultural production, particularly for cash crops like rice and maize. As of 2023, ABP reportedly disbursed over ₦1 trillion across multiple states, yet states like Benue and Sokoto have seen limited impact. Poor access to infrastructure and weak monitoring mechanisms mean these states often struggle to capitalise on such programs fully.
Infrastructure investment remains a pressing need. Post-harvest losses in Nigeria amount to nearly ₦3.5 trillion annually, with poorly connected agricultural states bearing the brunt of these losses. For instance, Benue’s lack of processing plants and storage facilities has limited its ability to move beyond raw produce, locking its economy in low-value agriculture.
The role of governance cannot be overlooked. States with more transparent and efficient administrations, like Ogun, have been able to leverage federal programs and private investments to boost both agricultural productivity and revenue. Conversely, states with governance challenges often miss out on critical opportunities to integrate agriculture into broader economic frameworks.
Additionally, the tax policy reform bill by the President Tinubu-led administration could see a change in earnings by agriculturally-rich states. Part of the plan is to remodel the state remittance. Originally, Value-Added Tax (VAT) was attributed to the state where the company’s headquarters or tax remittance office is located. What this meant was that large corporations with headquarters in major cities like Lagos, Abuja, or Port Harcourt remit VAT collected across the country to these locations. However, the adjustment will see VAT attributed to the state where the taxable goods or services are supplied and consumed. Companies will report VAT by detailing the derivation of taxable supplies based on their location, as mandated in Section 22(12) of the bill.
Beyond agriculture: economic diversification as a necessity
Agriculture alone cannot sustain a state’s economy, especially primary production. Diversification into non-agricultural sectors such as manufacturing, technology, or tourism is critical for long-term growth. For instance, Rivers State, despite having fewer agricultural households (1.3 million), generated ₦195.41 billion in IGR in 2023. Its success lies in its robust oil and gas industry, which complements its agricultural base.
For states like Benue and Sokoto, adopting a similar approach—focusing on value addition in agriculture while exploring other revenue streams—could significantly boost their economic profiles. Investments in education, technology, and infrastructure will be key to achieving this transformation.
Conclusion
The disparity between the agricultural potential of Nigerian states and their internally generated revenue is a paradox that demands attention. States like Kano and Benue, with millions of agricultural households, showcase the immense possibilities of a thriving agrarian economy but struggle to translate these opportunities into fiscal strength. This disconnect underscores the need for deliberate efforts to bridge the gap between agricultural output and economic returns.
For states to maximise the revenue potential of their agricultural sector, the focus must shift from subsistence to sustainability. Policies must prioritise investment in agro-processing, storage, and transportation infrastructure, enabling farmers to capture more value from their produce. Likewise, governance reforms, transparent fiscal strategies, and public-private partnerships are essential in transforming agriculture from a subsistence-based livelihood into a revenue-generating powerhouse.
The recently released IGR report is more than just a reflection of fiscal performance; it is a call to action. For states to thrive, agriculture must evolve from being the backbone of rural livelihoods to a robust pillar of economic growth. Will Nigeria’s agricultural states rise to the challenge and harness their immense potential? The next steps will determine not only their financial future but also the nation’s path toward sustainable development.
