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Edo’s Budget of Progress

18 May 2012

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Nasir El-rufai.  Email: nasir.elrufai@thisdaylive.com


From a hopeless budget in the Bauchi of the North-East, a sensible one in Lagos of the South-West and an opaque budget in Benue of the North-Central, our focus this week is on the South-South state of Edo with a view to assessing how self-reliant, fiscally prudent and accountable the state is. It is one of the states where a Fiscal Responsibility Bill has been presented to the state House of Assembly but has not yet been passed into law. While the state benefits from the 13% derivation fund as a marginal oil producing state, this fiscal advantage does not translate to any significant edge in financial transfers and key indices when compared to other states in the Niger Delta region.

The Mid-Western Region was created in 1963 from Benin and Delta provinces of the old Western Region, and its capital was Benin City. It was renamed a province in 1966, and in 1967 when the other provinces were split up into several states, it remained territorially intact, becoming a state. In 1976 it lost Ughelli to the new Rivers state and was renamed Bendel state. Edo State was formed on August 27, 1991 when Bendel State was split into Edo and Delta States. Geographically, Edo is bounded on the north and the east by Kogi State, on the west by Ondo State and on the south by Delta State. It had a population of 3,233,366; 1,633,946 males and 1,599,420 females according to the 2006 Population and Housing Census, making it more populous than Botswana and the Gambia.

As a marginal oil producing state, one of Edo’s principal mineral resources includes crude oil though in tiny quantities compared to other Niger-Delta states. Others resources are natural gas, clay chalk, marbles, granite, limestone (an estimated 10 million tones reserve),gypsum, feldspar (useful for glass production), kaolin(huge deposits which have not been exploited) and a reserve of about 90 million tonnes of bentonite. While bentonite has wide industrial usage, much of the required amount for local consumption is still imported. These minerals are potential revenue sources for the state. Agriculture is the predominant occupation of the Edo people. The major cash crops produced are rubber, cocoa and palm produce. In addition, the State produces crops like yams, cassava, rice, plantains, guinea-corn, and assorted types of fruits and vegetables.

Col John Yeri served as first Military Governor of Edo state till 1992. Others who governed the state include; John E.K Odigie-Oyegun (1992-1993), Chief Lucky N. Igbinedion (1999-2007), Prof. Oserheimen Osunbor (2007-2008) and most recently Comrade Adams A. Oshiomhole. Oshiomole was sworn into office November, 12 2008 after the appeal court declared him the winner of Edo state gubernatorial election of April 2007 under the political platform of AC. Prior to his election as Governor he was the president of Nigeria Labour Congress (NLC).

Oshiomole’s activism dates back to his days at the Arewa Textiles Company where he was union secretary. He became a full-time trade union organizer in 1975. In 1999, he became president of the Nigerian Labour Congress. He was publicly recognized as man of the people and openly challenged the government where policies were not in favor of the workers. The emergence of Adams Oshiomole as governor of Edo state came as a delight to many who were familiar with his activities and achievements as leader of the Nigeria Labor Congress and believed he would make a difference by actively being in government. Both Nuhu Ribadu and I broke ranks to attend his fundraising dinner and supported his candidature over the PDP candidate. Against this background, Oshiomole had the popular vote and naturally, the masses believed that his antecedents will enable him to use the resources of the state judiciously and in the best interest of the citizens.

Edo State Government’s budget totaled N150.9bn for the 2012 fiscal year; with N64.5bn (43%) recurrent expenditure and capital expenditure slightly higher at N86.4bn (57%). It falls short of the international standard requiring about 70% of expenditure for capital projects, but may be justified by Edo being an old sate with more maintenance burden that new build-outs of infrastructure and facilities. Edo’s personnel cost is 19% of the overall budget and is higher than the state’s IGR of N23.9bn by N4.8bn.This means that the state, if solely dependent on its IGR would not be able to sustain personnel costs much less invest in development projects. The state’s IGR of N23.9bn is only a third of its recurrent expenditure of N64.5bn and therefore insufficient to sustain those expenditures. The state government needs to be shrunk in size and cost.

The high recurrent expenditure cuts across the different sectors in the state, with health and education as understandable, but not in others. The Education sector has N14.1bn allocated for recurrent expenditure while capital expenditure for the sector is half that sum N7.7bn. About N4.3bn is expended on recurrent costs within the health sector in while the capital expenditure is slightly lower at N4bn. Works is the only sector with a allocation in favour of capital spending. It also got the lion’s share of the budget (N36.5bn) and of that amount, only N190m is for recurrent expenditure. Commendably, residents and visitors to the state applaud the current government’s effort at building roads in Benin City after a decade of neglect under PDP governments.

Edo leads all other states in the South-South zone in educational attainment in terms of numbers admitted to Nigerian Universities in 2007/2008 with a total of 3,569 while Bayelsa had only 434. The 2010 National Literacy survey statistics indicate youth literacy in Edo as 89.7%. Edo however has the lowest percentage of adults literate in English 73.5% in the south-south zone. Although the state was previously recognized as the “miracle centre state” because of the high incidence of exam malpractice prevalent there, the state was adjudged best overall in WAEC examinations in 2008 according to an advisor to the Governor. Hopefully the increase in capital expenditure to the sector from N5.6bn in 2011 to N7.7bn in 2012 would be a step in the right direction in support of education for the state.

Regarding health in the state, in 2011, Women Health and Action Research Centre stated that out of 100,000 women that enter labor rooms, 50 of them do not come out alive. Studies including data from Edo state indicate maternal mortality reflects the national average. It seems that maternal health is currently not given the priority it deserves by the state government. Of the N8.2bn allocated to health, about half the amount (N4.3bn) would be expended on overhead and personnel costs.

Despite Edo being a predominantly agrarian state, a paltry N1.5bn (about 1%) is allocated to the sector. Only 0.9% (N812.4m) of the capital budget is allocated to the sector. How this is supposed to aid development in the sector is an open question.This sector deserves to be given more attention if the state is to boost its IGR, employment and rural incomes.

Most of the state’s IGR is from taxes. The state increased its IGR projections from N18.5bn in 2011 to N23.9bn for the 2012 fiscal year but only made about 58% (N10.7bn) of its projections in actual revenues. For 2012, approved tax estimates are N16.9bn (71%) of the total IGR figure. The amount has increased from N13.9bn estimated in 2011. However, the state fell short by about N5.4bn (39%) of its projection in 2011. In 2011, the state projected its statutory allocation to be N45.7bn but received N22.4bn. In spite of all the above, it still estimated receipts of N56bn for 2012.

It is evident, even to a layman that continuous over-estimation of income that constantly falls short will surely lead to a deficit budget. In fact, the Edo state budget has a deficit of about 14% (N20.5bn). Its total receipts amount to about N130bn, made up of N115.4bn recurrent revenue and N15bn capital receipts while total expenditure is about N151bn. The budget makes no mention of how this deficit is funded. In 2011, the Edo state government was only able to balance out its revenue deficit by virtue of income which was not included in the estimates but was paid by the Federal Government, namely; excess crude oil reserve fund (N9.4bn), multilateral debt refund (N3bn) and refund of 0.75 commission charged on Paris club debt refunds (N436.2m). Perhaps that is what it expects to do in 2012.

The Edo State Government has attempted to correctly prioritize its spending by allocating the bulk of the funds to the major sectors of the economy as thus; Works (N36.5bn), Education (N21.8bn), Health (N8.2bn), Transport (N642m), Energy and Water Resources (N2.0bn), Environment (N18.9bn) and Agric (N1.5bn). Interestingly it categorically lists the state security vote as N4.5bn which is highly commendable compared to Bauchi’s allocation of a massive N17.6bn.

Edo ranks 21 in the ease of doing business rankings in Nigeria. It ranks 16 of the 37 states in ease of starting a business.  On average, it takes 45 day and 60.5% of one’s income to start a business in the state. Unemployment in the state is 17%, below the national average of 21.1% but considering that the state is home to two large Universities which churn out graduates yearly, it is imperative for the government to create a thriving environment for SMEs which would not only reduce unemployment and saturation of the state civil service but will also boost the economy of the state.

In Edo state, 39.4% of the population is food-poor and cannot afford proper meals daily, 47% are absolutely poor, 57.9% relatively poor and a little below half the population (47%) survive on less than a dollar a day. Overall, Edo’s poverty ratings lie in the middle among the south-south states with Akwa-Ibom, Rivers and Bayelsa slightly better while Delta and Cross-Rivers are much worse off.
The spending priorities in Edo indicate a high cost of governance which is unsustainable given the state’s earnings.

The government is spending so much to maintain its staff at the expense of developmental investment. The situation is further worsened by falling revenues and repeated “over-estimation” of its revenues. The government incurs expenses without commensurate revenue flows in the university it owns and several state owned companies. A typical example would be education which receives about N21.8bn but generates less than 2% (N355.3m) in revenues through fines and fees. Virtually all its SOEs return nothing to the government coffers and should be privatized. The state should also aspire to be like Lagos which makes every MDA a significant revenue centre.

The present government of Adams Oshiomhole must be commended for its efforts at improving the state compared to the work done by its predecessors. But as with everything in life, there is room for improvement if continuity is sustained.The state is blessed with abundant resources which have barely been tapped and converted to cash-cows and apart from tax earnings which cannot even sustain its recurrent expenditure, the states’ major financing source is the Federation Account.

Without handouts from the Federal Government, will the state exist in the form it does now? The answer is no. Has the state provided a thriving environment for SMEs to play an active role in its economy? It is trying but needs to do more. Is the government investing in physical infrastructure and human capital or is it just maintaining what it has inherited? The state's performance in education and spending on roads answer this question affirmatively.

As Edo citizens go to the polls in July to elect a governor, it is my belief that the Oshiomhole administration has done well enough to be re-elected compared to the previous ten years of lethargic and violent PDP governance in the state. We hope the voters will make the right choice and the elections will be free, fair and credible. It is not too much to ask after the needless murder of Olaitan Oyerinde, may his soul rest in peace.

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