States’ rising budgets – The Sun

The 2018 budget estimates presented by most states are much higher than those of previous years, with most of the budgets already passed by the state legislatures and signed into law by the governors. If, however, the size of budgets is an indicator of what citizens can expect from their governments in a given year, it will be safe to say that many Nigerians are in for a better time this year as many of the governors have proposed to do much more to boost their welfare and address the infrastructural deficits in their states.

For the first time in many years, the combined total budgets of the 36 states of the country witnessed a quantum leap, surpassing the entire budget of the Federal Government. While the Federal Government proposed an expenditure of N8.6 trillion in 2018, the total budget figures of the 36 states stand at N9.15trn.

On paper, this is good news.  The development will, however, only be relevant to the people if it helps to achieve the developmental goals of the states by stimulating economic growth and transforming the lives of the people. Highlights of statistics from the states show that the highest budget presented   for 2018 is from Cross River where the governor, Ben Ayade, proposed a whopping expenditure of N1.3trn. It is followed by Lagos State with a proposed expenditure of N1.04trn. That of Akwa Ibom is N651bn, Rivers State, N510bn, Ogun, N345bn, Oyo, N267bn, Kaduna, N216bn, and Imo, N190.9bn. Yobe State has the lowest figure with a budget proposal of N92.2bn.

Ordinarily, the increase in the states’ budgets for 2018 should not elicit any concerns if the funds are available. But, apart from borrowing and federal allocations, some of the governors gave no details of how they would raise the funds budgeted. For many of the states, their total projected federal allocations and Internally Generated Revenue (IGR) for 2018 are nowhere near the total expenditures they proposed. In other words, their projections are not proportionate to their revenue profiles. Only a few states have the financial muscle to implement half of what they have proposed in their budgets.   This has raised fears of massive budget deficits of the states and rising debt profiles. The debt profile of the states, according to the Debt Management Office (DMO), had risen to over N3.9trn as at the third quarter of 2017. Lagos State accounts for 24 percent of the total debt stock of all the states. Therefore, the general concern is the uncertainty on how the states will fund their 2018 budgets without putting their respective states in harm’s way.

These concerns are genuine and supported by hard facts. For instance, revenues from Federation Account allocations, plus the states’ IGR, represent only 40 percent of their projected total revenue. This means they have to look elsewhere for the remaining 60 percent, perhaps through borrowing. The snag here is that it makes budget deficit inevitable with its untoward economic consequences.

Also, as at October 2017, the combined total federal allocations to the 36 states    amounted to N1.4trn. It was N1.3trn in 2016. The average allocation received by each state in 2017 was N38bn. In 2016, it was N36bn. The IGR from all the states at the end of third quarter 2017 was N546bn, with Lagos State realising more than 23 states’ revenues combined. More worrisome is the fact that the total projected revenues for all the states in 2018 is N3trn, less than 40 percent of the N9.15trn total budget.

While Lagos State may fully realise its expenditure estimates, it remains to be seen how some other states will perform the feat. For instance, Cross River State’s N1.3trn “Budget of Kinetic Crystallisation” is about 400 percent over that of 2017 which was N301bn. The state’s IGR for 2017 was N10bn. The state has projected to receive from the Federation Account about N50bn this year. In ten years (2007-2017), Cross River received N411bn from federal allocation, according to Finance Ministry statistics.

Beyond Cross River, many states are in the same dilemma, making most of the parameters on which their budgets are based shaky, even when you factor in allocations to the 774 local government areas in the country, which was N1trn in 2017, or an average of N1.3bn per local council.

Altogether, we urge the states to vigorously diversify their economies and boost their IGR to make their budgets realisable, and not just mere paperwork. Many states have untapped resources and the Federal Government says it is disposed towards allowing the states have jurisdiction over certain solid mineral deposits in their domains. Sadly, many states seem to lack the rigour and foresight to explore and exploit them. They are used to depending on monthly ‘handouts’ from the Federal Government. That parasitic attitude must change.

Beyond that, every borrowing to fund budgets should be linked to sustainable projects which can pay back the loans and also improve the overall income profile of the state, including expanding their IGR. States should also cut down wastes and white elephants. They should learn how to invest within, and on projects that can create wealth. Budgets are meaningless if they do not make significant positive impact on the lives of the people. We urge the citizens to hold their governors responsible for the implementation of their budgets. This is necessary for accountability and transparency.

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