Previously a zone of admiration, a new glimpse into the financials of the South-West states reveals a troubling uncertainty. Apart from the general fiscal depression afflicting the country, the region is now reckoned as the most indebted among the six geopolitical zones. According to this newspaper, the states in the South-West region have more domestic debts than any other region, far in excess of N1 trillion. With no tangible result to show for their borrowing extravaganza, exiting the debt hole in the near future seems unlikely for these states.
Cumulatively, the six states in the region carry a burden of N1.04 trillion as of March 2019, data from the Debt Management Office aver. For the fact that their incomes from the Federation Account are not growing and their internally generated revenues – with the exception of Lagos State – are a mere pittance, this is an unusually high profile. As expected, Lagos, Nigeria’s commercial hub, is in the red for N542.2 billion. Its 51.92 per cent yoke is far ahead of Osun in second place with its debt burden of N147.7 billion or 14.2 per cent of combined total.
Between Lagos and Osun, there are, however, some indubitable underpinnings. Lagos is the largest sub-national economy in Nigeria. In 2017, it emerged as the continent’s fifth largest economy with a Gross Domestic Product of $136 billion, higher than that of Ivory Coast and Kenya. With an IGR of $1.3 billion in 2014 or 39 per cent of the total IGR by the 36 states – generated mainly through tax – its capacity to offset borrowings is sustainable. To boot, it is producing a small quantity of oil with the promise of the derivation fund that goes with this status as another source of good funding.
Conversely, Osun and the other states in the South-West are mainly agrarian. Despite recession, the IGR in Lagos increased from N333 billion in 2017 to N382 billion in 2018, the National Bureau of Statistics stated. Osun, with few manufacturing concerns and its array of public servants, recorded a paltry N11.7 billion in 2017. Instead of going up, its IGR dropped to N10.3 billion a year later. Much of this is from the federal institutions located in the state, and its own civil servants. With the state owing months of salaries, reduced income from taxation was prevalent.
Ekiti, categorised as another largely agrarian state like Osun, accounts for N118.01 billion (11.35 per cent) of the borrowing. Ogun, which shares proximity with Lagos, has on its books a debt profile of N97.09 billion or 9.34 per cent of the aggregate. Oyo too is not far off: it is indebted to the tune of N94.14 billion (9.03 per cent) on the domestic front. Ondo, which is an oil-producing state, is a little better, with the lowest rate of N56.96 billion (5.48 per cent).
Comparatively, the five South-East states have a combined debt of just N303 billion. This appears manageable. On their part, the states in the South-South have an indebtedness of N949.4 billion, which though relatively high, is manageable as they rake in income from the 13 per cent derivation fund. The North-Central’s N648.63 billion is higher than the North-West’s N485 billion and the North-East’s N441 billion.
Economic experts argue that debt acquisition is not totally a bad route to ply, but the underlying essence is that borrowings be channelled to promoting production and job creation. At the same time, the ability to repay is fundamental before embarking on contracting debts. The onset of the recession in 2016 saw some of these states engaging in borrowing for recurrent expenditure. Despite that, they owed salaries, pensions and failed to remit deductions to workers’ retirement savings accounts. Borrowing to pay salaries is thus uneconomical. A demand by the Federal Government to the 35 states for a refund of N614 billion given to them as bailout credit is disconcerting them.
That folly is compounded by the low intake from the Federation Account, where the Federal Government disburses money to the three tiers of government on a monthly basis. Lagos grosses the highest in the region, with the other states collecting barely enough to sustain themselves. The reality of near-empty treasuries in the South-West was depicted boldly when Ogun State’s Dapo Abiodun, who had assumed duty as governor on May 29, had to borrow N7 billion to pay that month’s public workers’ salaries.
With more encumbrances from soaring joblessness, the outlook for the South-West states seems dire, indicating a prolonged entanglement with the debt hole. In all this, some of the states have embarked on white elephants, including airport projects. Some operate an array of tertiary institutions that they find difficult to fund. As this newspaper has advocated on several occasions, getting out of the rut is predicated on these states seeing themselves as unique economic units, where productive activities and wealth creation are the fulcrum of activities. The model in Lagos is worthy of note in this respect. In the Fourth Republic, it has made giant strides in IGR and it is just one of the two states – along with Rivers – that can run its operations were federal allocations to stop suddenly. It is exploiting its comparative edge in commercial activities, working on its security arrangements and rebuilding the previously decrepit infrastructure that litters its domain.
In essence, the other South-West states should concentrate firmly on their strengths, especially agriculture. They should exit from business, but provide the enabling environment for private entrepreneurship to thrive and drive exports with processed agricultural products like cocoa, cashew, cassava and yam to earn foreign exchange. Infrastructure renewal – rural roads, health centres and schools – should be accorded high priority to drive wealth creation and boost job opportunities. They should reduce the size and cost of the bureaucracy.
The South-West states can grow out of the mire. The Development Agenda for Western Nigeria launched in July 2013 should be pursued with more vigour. The geopolitical zone should focus on its strengths – agriculture, industry, technology, tourism and the motion picture industry. To fulfil their rich potential, the South-West states have to stop their damaging dependence on the sharing from the centre that has done them more harm than good and implement modern, pragmatic economic planning in their domains.
