by Oke Godwin Olaoluwa
The Lagos state is in the news again. The state has set a new record, for the highest amount of budget proposal ever prepared by a single Nigerian state. The budget is estimated to be about 11% of the total budget of the federal government of Nigeria. The budget tagged “The Golden Jubilee Budget” has a proposal of =N=813 billion, the recurrent expenditure is expected to gulp =N=300.535 billion while capital expenditure is set for =N=512.464 billion about 63% of the entire budget.
There is no doubt that the budget if fully implemented will transform the state to its desired mega city status. The budget is set to open up the hinterland as a result of the massive investment in road construction, rehabilitation and maintenance. The budget is also geared towards sports development by building new stadia, a targeted youth empowerment schemes and other promising social development program. The challenge towards funding the budget to achieve 100% or even close performance level is a herculean task. The budget seems not to mirror the current economic situation of the country and even projected economic outlook for the year 2017. The budget is premised on a conservative oil benchmark of $41 to a barrel, an expected 13% oil derivation fund and a projected internally generated revenue of =N=350 billion. The financing gap is expected to be bridge via deficit financing by adding to the already existing and quite burdened loan stock.
According to data released, the 2016 budget evaluation shows about 71% performance while internally generated revenue is around 73% of projected revenue. The state highest internally generated revenue was about =N=268.77 billion naira generated in the year 2015 and there is growing tendency that 2016 IGR may not achieve that feat. This shouldn’t be far-fetched as the nation has lost about =N=4 million jobs in the past one year with the highest number from Lagos, companies are closing down and a drastic fall in property value.
The projection of revenue in the state’s budget is not based on a realistic benchmark, giving the fact that we are expected to continue the economic recession until the year 2017. For instance, the state is expected to increase his Internally generated revenue when the highest generated IGR during the economic boom was in the range of =N=268 billion. The governor also hinted that the expected increase in revenue will be through several initiatives like automation and efficient revenue administration. Some of these initiatives especially the automation is yet to be implemented, this will help to understand the hitches and challenges therein, such initiative is not expected to increase revenue at take off stage. It is also a known fact, that federal allocations have fallen far below capacity level including the 13% derivation fund.
The state government seems to be playing to the gallery by presenting to us an impressive budget and making the impression that funds for the budget will suddenly show out of the blues. The government is not explaining how a state with about =N=145 Billion personnel cost and dedicate expenditure annually, =N=95 billion overhead cost and around =N=72 billion loan repayment annually, is expected to undertake so much capital expenditure despite a projected extension of economic recession to the year 2017.
The state government is mincing words on how they intend to finance Infrastructure development through a public-private partnership arrangement, despite understanding that the federal government has the same arrangement, meaning they will be competing in the same market and for same potential investors. Also noting that funds attracted to the country through PPP arrangement forms part of the nation’s foreign direct investment which is currently challenged due to the lack of stable and clear-cut economic policy of the federal government. The state government is not talking about the amount of loan the state is allowed by law, to add to the existing burdened debt portfolio.
Though the budget proposal of Lagos state government looks impressive on paper, but unfortunately the state is still part of the federal government of Nigeria and as a result not immune from the self-inflict vagary in our economic situation. The fundamentals which the budget is formed seems to devoid any realistic framework but the government is not telling us.
Op–ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija