Analysis of the budgets of the North-Central

There are 3.99 million households in the North-Central region based on the 2006 national census figures, which is 61 per cent of the number of households in the South-West but higher than the number of households in the South-South and South-East. The North-Central thus has slightly more than half the number of households in the South-West but three times the landmass of the South-West. This will have implications for the cost of doing business in the North-Central compared to the South-West as it will cost less to make sales per household in the South-West due to more households per km2 compared to the North-Central where there is less number of households per km2. This means that consumer companies are likely to be more profitable per km square in the South-West than in the North-Central if transportation is a key part of distribution cost.

Average household size at 5.9 in the North-Central region is also higher than the average of 4.9 in the South-West. This implies an average of one more person in the house than in the South-West. Firms will have to work out if the cost of reaching this one more person per household outweighs the cost of transportation to get to that person. However, average landmass varies widely in the North-Central, which means that firms will have to work on per state strategy. For example, Benue State has the highest number of households and population in the North-Central but third-highest landmass, which means cost of reaching each household will be relatively lower than Niger State with more than twice the landmass of Benue but less number of households and population.

The cumulative budget of the North-Central region comes to N46,166 per person and N235,723 per household. Budget per person is relatively lower than that of the South-West due to the household sizes in the North-Central, but budget per household is higher due to lower number of households. Thus, barring any inefficiency in spending, the budgets of the South-West and North-Central should be able to deliver similar wealth patterns for both regions.

The FCT Abuja has the biggest budget in the North-Central region. The state’s 2012 budget stands at N259.60 billion, which is 27.6 per cent of the total budget of the North-Central region. FCT is the only state in the region with lower budget in 2013 than in 2012. FCT’s budget is 15.27 per cent less than that of 2012. Fifty-nine per cent of the FCT’s budget is devoted to capital expenditure with the balance for recurrent expenditure. Plateau, Kogi and Benue States all have similar size budgets of N133 billion, N131 billion and N131 billion, respectively.

Abuja has the highest budget per head and household in the North-Central region. The FCT’s budget per head and household is well above the regional average showing that the capital territory has the strongest spending power in the North-Central region. This gives the FCT the greater capacity to improve infrastructure in the region and spend on social services than any other state in the region. This will result in better infrastructure provision and more social services per head in Abuja assuming an efficient budget implementation. Nassarawa ranks a distant second in budget per household and per person. Nassarawa is a neighbouring state to the FCT and also has the second-lowest population in the region. This shows a high spending power concentration in the two states in the region. Both states also have the lowest number of households and landmass in the region which makes them attractive for FCMGs. Budget per household in Abuja is about the highest in the country and higher than that of the South-South states.

It is significant to note that up to 70 per cent of the budget of the North-Central region is financed from allocations from the Federal Government. The implication is that the higher budget of any state does not translate to a higher tax burden on the citizens but rather cash injection into the state. It is also possible for Nigerian states to increase tax spend without necessarily increasing the tax burden at the state level, provided allocation from the federation account goes up.

This piece is an excerpt from BusinessDay Research and Intelligence Unit’s State of the States report.

Note: If you want analysis or data on any company or any particular sector of the Nigerian economy or industry or have any other queries that BusinessDay Research Unit can help you with, kindly send a mail to research@s19080.p615.sites.pressdns.com/en or call 08185193932. We can also help you with your confidential market surveys and competition analysis at a cost. 

Editor, BusinessDay Research Unit

anthony@s19080.p615.sites.pressdns.com/en 

Send reactions to:

comment@s19080.p615.sites.pressdns.com/en