STATES AND THE PPP OPTION 

States must cut down on cost of governance

While the World Bank-assisted States Fiscal Transparency and Accountability Programme (SFTAS) was to nudge sub-national governments into imbibing fiscal transparency and tame their appetite for indiscriminate borrowing, the programme has not worked. Despite increased allocations from the federation account, state governments across the country have continued to ramp up their borrowing from both local and international lenders. To compound the problem, most of the debts already incurred for future generations of Nigerians are expended on projects that bring little or no returns on investment. It is therefore concerning that at a period these humongous debts hang precariously on the neck of these states, many of the governors are borrowing more. 

Apparently concerned by this development, the Director-General of Nigeria’s Debt Management Office, Ms. Patience Oniha, has called on governors to adopt the Public-Private Partnerships (PPP) model and prioritise tax revenue generation over borrowing to fund infrastructure projects. “This reduces the financial burden on government, accelerates project delivery, and often results in higher quality outcomes. PPPs can also create jobs, stimulate local businesses, and foster innovation,” said Oniha who admonishes governors to look inwards. We share Oniha’s admonition that the current challenge does not call for more borrowing, but rather creative resource management and potent revenue generation drive. 

The challenge, of course, is that while the federal government has the Infrastructure Concession Regulatory Commission (ICRC) to manage PPP projects from conception to execution, most of such bodies created in the states are weak. Therefore, while deploying PPP as a vehicle for infrastructure projects rather than the traditional approach of government borrowing has proved effective for subnational governments in many countries, legislative oversight problems in most of the 36 states in Nigeria makes implementing the idea to be fraught with problems. Since there are no reliable regulatory frameworks in many of these states, PPP arrangements could exacerbate their current financial indiscipline. In any case, it seems quite apparent that governors prefer securing loans.

Regrettably, while borrowing must be done with a well-thought-out investment initiative conceived to yield maximum benefits, that has not been the case in many of the states. Besides, most of the funds being sourced are not invested in much needed social infrastructure like power, schools, hospitals and reliable institutions. And with that, poverty is being reinforced across the country. Indeed, the rising debt profile raises serious concerns, as most of the states have feeble revenue base. Despite the humongous debts incurred, the unanswered question remains: How much development have the 36 states brought except the creation of a multiplicity of agencies that are neither accountable to the people nor serve their interests?

In most cases, there are no roads, no provision of clean water for the rural folks, no electricity, no medical facilities for the sick and no schools for their children.  What the current challenge calls for is not to borrow more money but rather to have a serious re-think of the fundamental assumption of the fiscal arrangements. States must begin to understand that federal bailouts and handouts from Abuja will not chase away the problem. 

 The feeding bottle mentality must begin to give way to a better public finance management system anchored on result-oriented revenue generation mechanism. The states must cut down on the enormous costs of governance and free resources for development and payment of salaries. They must create wealth to run their states as the template under which state governments exist as mere pay offices for redistributing the monthly proceeds of oil rent from Abuja is fast outliving its value.