There is serious concern about sustainability of states in Nigeria owing to high dependence on centrally collected and shared federation account. This is partly because the federation account is funded mainly from revenue from oil—an exhaustible resource with fluctuating international price and demand. Interestingly, basic operations in many states in Nigeria cannot go on without the monthly allocations. This has partly helped government officials to pay little attention to growing the economic base that would help them to become independent. Many states rely almost exclusively on this handout from the federation account. Realizing the lack of sustainability of this situation, this paper sets out to evaluate the state of Internally Generated Revenue (IGR) in states in Nigeria. The paper is based on a survey of the five states of the South-East region. It evaluates sources of revenue, methods of revenue collection, remittance of such revenue to government coffers and points out some of the loopholes and strengths of the system. It notes that modern technology is yet to be incorporated in IGR planning and collection approaches, with officials relying mainly on physical visitation, memos and letters to notify tax payers. Remittances of collected funds are mainly by cash, creating opportunities for embezzlement. These inefficiencies filter to taxpayers by way of multiple payments of the same tax and harassments. The paper also examines the issue of untapped sectors, their implications and options for tapping into them, particularly essential for the government to woo the private sector, improve its image and trust, and then enter into partnership with the private sector to grow critical sectors of the economy.

Nigeria has been in an unending bid to get its fiscal federalism right. And that is not for nothing; experience seems to suggest that getting its fiscal federalism right could help in resolving a myriad of its internal socioeconomic problems. There is, for example, sharp revenue-expenditure assignment mismatch among tiers of government, which makes it difficult to appropriately assign responsibilities for specific poor services and public infrastructure provision. The manner of state creation, funding and responsibility assignment also affects the country's growth and is in fact a factor deterring adequate integration among its diverse people.

For a long time though, the issue of concern has been the determination of proportion of accruals that should go to each tier of government and the justification for such appropriations (Ekpo, 1999). Such discussions can at best be considered elemental given the fact that times are changing fast and situating the country's economic fortunes solely on hopes of favorable international oil prices is problematic. There have been signs in recent years that governance can easily become grounded if hopes of stable (or increasing) oil prices are not met. For example, between 2008 and 2010 alone, over 50% decline in oil prices (from about $147 to only $70 per barrel) has combined with biting global financial crisis to stretch resources in all tiers of government to breaking points. To subsist, the country has drastically whittled down its foreign reserves, gulping a whopping $27 bn in barely 15 months. It has become imperative that if the states must exist, considerations be given to options for improving their capacity for independent funding through internally generated revenue.

Public Finance journal, Fragile States, Subnational Governments, Global Financial Crisis, International Market, Nigerian Federalism Project, Local Governments, Monetary Policies, Fiscal Federalism, Economic Development, Manufacturing Sectors, Eeconomic Crisis, Government Operations.