Lagos loosens the apron strings

By Segun Balogun

February 19, 2011 05:45AM

While other states of the federation and even the federal government dilly-dally about the 2011 fiscal Appropriation Law, the Lagos State government has commenced the implementation of its own, which the governor signed into law on January 31. The budget, totalling N450.775bn, is also far ahead of other states’ proposals and, indeed, it is only about N20 billion less than the federal government’s budget of year 2000. The state government had embarked upon a well-argued revenue generation drive, which started paying off almost immediately, as proven by the first budget of the state governor, Babatunde Fashola. The 2008 budget of N403.401 billion was about N128 billion higher than that of 2007. The leap in the approved budget within a year must also mean a leap in the Internally Generated Revenue of the state, through which about 60 percent of the budget is financed. Currently, the IGR oscillates between N15 billion and N18 billion monthly. The revenue generation drive is expected to bring N228.520 billion into government’s coffers this year and this will finance 51 percent of government’s spending for the year.

Stepping up the tax drive

Though the government itself described the revenue generation drive as “aggressive,” Mr. Fashola has always promised that the government will not increase the tax burden on the people; rather the “aggression” will be channelled at getting more people to pay taxes.

“We know we are just recovering from the global financial meltdown so we will not increase our rates. In fact, we are supposed to have increased the Land Use Charge rate but we will not. We will work hard to get more people to pay tax because the more taxpayers we have, the less the burden of tax becomes,” said Mr. Fashola, while explaining the misconception of multiple taxation in the state.

A financial analyst with IBFCAgusto Training Limited, Eloho Erihri, said the revenue generation drive of the government “should be maximised” because since government is the only organ saddled with societal development, it can only succeed with what is available to it.

“Without money, government cannot build infrastructure, and without infrastructure, we cannot generate employment. What matters most is to ensure the budget is having the desired impact,” he said.

According to the state Commissioner for Economic Planning and Budget, Ben Akabueze, the dependence of the state on federal allocations has been reduced to about 20 percent of the state’s need. “If it comes, fine. We don’t even cry before it comes,” he said.

“This financial independence,” according to a social critic, Bayo Ajayi, “is politically expedient and it will be good if other states can maximise their revenue generation and operate within the limit of what they can generate. It means governors will no longer be subservient to the president.”

Budget performance

According to statistics from the Ministry of Economic Planning and Budget, the percentage performance of 2007, 2008, 2009, and 2010 Budgets are 70, 71, 73, and 80, respectively. However, Mr. Akabueze noted that government does not measure performance by how much has been spent but by “how much of the set target is achieved”.

“We don’t just want to spend money, we want to ensure that budget has the desired impact,” he said, insisting that the government’s aim is to eliminate all bottlenecks and achieve 100 percent performance.

Remi Ayede, a public administration lecturer at the University of Ibadan said infrastructural deficit is the first indication of a government’s performance and scored the Lagos State government high in restoration of public order, environmental protection and private investment.

Although he said the Lagos State government has made a giant stride in budget implementation, he advised that the state ensure that, “determined by actual concrete targets of the budget and level of performance of the targets, such performance can be measured using budget targets and the level of performance of the expenditure”.

Mr. Ayede described the federal government as a “paralysed government because there is a lot of waste at the federal level.” He said the federal government “has much to learn from the Lagos State government.”

On what the federal government can learn about budget implementation in Lagos, Mr. Akabueze said “project monitoring is key.” He also recommended a central treasury as opposed to a system where each ministry operates its own budget.

“Lagos State does not run the silos kind of accounting system whereby funds are allocated to MDAs to prosecute their projects and retire whatever is unspent at the end of the fiscal year to the treasury office as it is done at the national level. The state’s MDAs are encouraged to go to the treasury for cash backing when they are ready to pay contractors for projects they want to implement and this ensured that payment is tied to performance,” he said.

Debt management

The 2011 Budget is a deficit budget, requiring N79.194 billion to finance. Critics have chided the state government for its “excessive” borrowings and the state’s debt profile also caused rancour between the executive and legislative arm of the state government in 2010. However, Mr. Erihri said, “Deficit is increasing but the government is also paying off debt principal and deficit as a percent of GDP remains below the 3 percent international benchmark. Given relatively lower levels of interest payments relative to IGR (5.3 percent in 2011 compared to 8.5 percent in 2010), the deficit borrowing does not seem to be a problem.”

According to statistics, the state government puts its deficit as a percentage of GDP at 1.91 percent. Though, Mr. Erihri said the government will have to disclose the state’s GDP for the ratio to be verifiable, the state in February 2009 put its 2008 GDP at N3.68 trillion. Mr. Erihri also said the 2011 budget shows the state government is “shifting its borrowings from loans to bonds evidenced by reduced loan debt expense and increased bond interest payments. It is also paying off principal on debt evidenced by the 32 percent decline in total debt expense (between 2010 and 2011).”

He also commended the N1.2 billion Pension Sinking Fund which shows that “the Lagos state government views its pension obligations as a debt and makes annual contributions meant to make sure pension obligations are met,” even before the need arises. However, he is worried whether N1.2 billion annual contribution is sufficient to meet government’s pension obligation.

Human vs infrastructural development

Another point harped on by critics is that the state government is developing the environment at the expense of the people. Mr. Akabueze, however, said: “Infrastructure improves quality of life. It creates jobs and enhances people’s buying power either directly or indirectly. So, by focusing on economic affairs, the government is actually improving peoples’ lives.”

He also said the state government will continue its free education and healthcare services, another means of developing human capacity in the state.

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Posted by Oladele on Feb 20 2011
Wow, The govt in Lagos always seems miles ahead of it's peers and even the Federal Govt. Truly the FG seems paralyzed and bereft of ideas judging by the state of affairs. In case some people don't notice, the state's commissioner of planning nag budget, is a Igbo man, the way forward for us as a nation is to abandon ethnic sentiments and use merit Well done to the Lagos team,


Posted by Tony Smart on Feb 20 2011
@ Oladele, You are spot on! Merit should be used as the basis of appointment not ethnicism, tribalism and religious sentiments. Lagos State has set a model of what state autonomy should be like. Lesson learnt? Nigeria should learn to depend less on Oil revenue. It makes our economy docile and unproductive!


Posted by GbemigaO on Feb 20 2011
When you bring in apolitical professionals to work for you, you get th best service.


Posted by Scarface on Feb 20 2011
Fashola's giant strides are simply a source of hope for me.

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