The states should cut down on costs of governance



At a period the debt profile of the 36 states, according to BudgIT, has increased from N3.03 trillion in 2015 to N3.89 trillion in 2017, the governors are considering floating bonds in the capital market. This proposal, according to the chairman of the Nigeria Governors’ Forum, Abdulaziz Yari of Zamfara State, was as a result of the serious financial crisis facing several of the states. While sourcing funds through the capital market is the cheapest way for states to raise the needed finances to augment what they get from the federation account in order to be able to carry out infrastructural projects, we are nonetheless worried about the repayment of such loans.

We need to state from the outset that we have nothing against states borrowing through the capital market as this is the standard practice world over. If the aim is to help the states bridge the gap between what they receive from the federation account and their developmental needs in the areas of infrastructure, health, education, power and transportation, it is a laudable idea. But it is one thing to raise these funds and quite another to ensure accountability and its judicious application. That precisely is where the problem lies.

Without the requisite oversight by their respective state legislature, there are fears that some states’ chief executives may simply pocket a large chunk of these funds. There is also a possibility that some governors who are approaching the end of their tenure could incur and leave behind heavy debts for their successors. In fact, many of the current governors on assumption of office complained of inheriting heavily indebted states on account of funds taken from the capital market by their predecessors.

To compound the problem, each of the state government has scores of agencies and commissions which add no value to governance. Public funds are diverted to political activities while the burial and wedding ceremonies of family members of top public officers are turned into state events at huge expense to the public. Today, billions of naira is wasted on meaningless projects while religious festivals are celebrated with hundreds of millions of naira to purchase rice, ram, vegetable oil, etc. Dozens of officials accompany governors to inspect projects including boreholes and markets. Huge sums of money are also expended on officials and legislators who embark on frivolous trips.

What the current challenge therefore calls for is not to borrow more money but rather to have a serious re-think of the fundamental assumption of our fiscal arrangements. One, cutting down on the enormous costs of governance will free resources for development and payment of salaries. And there is need to reorder priorities. Two, as we have said several times on this page, 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. As oil prices plummet and many countries plot a future without hydrocarbon, there may soon be little or no money in Abuja to distribute.

The foregoing are some of the challenges that must be tackled but that would require a critical review of the socio-economic system operated in the country. While borrowing from the capital market to finance infrastructure is good, there should be consideration for repayment beyond the expected revenue from the federation account.

We therefore call on the state houses of assembly and all relevant authorities to put in place the necessary mechanism which will ensure that the states do not mortgage their future on the pretext of borrowing from the capital market. The states must become not liabilities but centres of productive activities.