With 80% Budget Performance in 2017, Lagos Makes Bolder Economic Projections

From its 2018 fiscal plan, Lagos State economic outlook signals more prospects than it recorded in the past. Gboyega Akinsanmi writes

On December 18 last year, the national budget performance came under scrutiny at the Senate. Contrary to a report from the Budget Office of the Federation that put the performance of the national budget at 40 per cent, the Senate discovered that the federal government had only implemented between 12 and 15 per cent of the budgeted capital expenditure. 

That, indeed, was an abysmal narrative for Nigeria’s crawling economy, which, according to the National Bureau of Statistics, managed to record a 0.55 per cent growth in the second quarter of 2017. Even though it sustained growth by 1.40 per cent in the third quarter, national economic indicators still depicted “an economy in a whirl of winds” with unemployment rate rising to 18.8 per cent. 

 

Uncertainty 

 Apparently, this trend spelt uncertainties for almost all sub-national economies. For instance, oil-producing states were not spared from this spell of economic woes, which the President Muhammadu Buhari administration is struggling to resolve. Already, federal allocation to the state governments has declined drastically. Given their reliance on federal allocation, the trend altered the fiscal directions of most states in the federation, culminating in their failure to meet core constitutional obligations.

 

 Standing Out  

But the Lagos economy has stood out, even though it is not totally immune from the economic turbulence. This is evident in the performance of its 2017 capital expenditure; the growth its internally generated revenue recorded and the number of jobs the state created through its infrastructure development projects, urban renewal programmes and different initiatives under its economic trust fund.

From all indications, 2017 did not present much hope for Lagos. At inception, Nigeria was still reeling in the swirl and whirl of economic recession. As indicated in the NBS report, the national economy shrank by 2.06 per cent in the 2016 second quarter. Likewise, it recorded a wider decline of 2.24 per cent in the third quarter. However, the rate of negative growth shrank to 1.3 per cent in the fourth quarter with exchange rate crisis and inflation going out of control. 

In the first quarter of 2017, the national economy was at the verge of recovery with a negative growth of 0.52 per cent. Yet, it did not present desired national economic indicators, which analysts said, could beam some rays of hope for Nigerians. Amid these national economic uncertainties, the state governor, Mr. Akinwunmi Ambode, reeled out an ambitious fiscal plan at a time Nigeria was neck-deep into recession, the worst of its kind in the last three decades. 

The issue was not the volume of the state’s budget valued at N812.998 billion, but the level of performance the Ambode administration recorded in the era of turbulence. The budget witnessed an increase of 18.47 per cent compared to what the state proposed the year before. 

Despite the harsh economic realities, the state’s budget recorded 82 per cent performance. Ambode attributed this to God’s hands in the management of the Lagos economy. 

At the tenth town hall meeting, penultimate week, Ambode said the total recurrent expenditure was N281.33 billion, which represented a performance of 92 per cent. He equally put total capital expenditure at N387.60 billion, accounting for 76 per cent. 

Under the 2017 fiscal regime, the state proposed a total revenue of N642.848 billion and deficit financing of N170.151 billion. Aside what it received from the Federation Account, total revenue generated in 2017 was N503.7 billion, which represented a performance of 78 per cent. By implication, the state generated 75.30 per cent of what it spent in 2017.

In the last two decades, no administration has recorded this feat. However, all analysts acknowledged the fact that the administration of Asiwaju Bola Tinubu reformed the state’s tax system in 1999. From N600 million, the state proposed to generate N50 billion internally under the 2018 fiscal regime, which the Commissioner for Finance, Mr. Akinyemi Ashade, said was achievable through the revenue expansion strategies the state had already mapped out for this fiscal year. However, he said that did not suggest that the state will increase the tax commitment of its residents, but rather it will expand its tax net to the over five million residents not paying taxes.

 

New Era 

The budget performance offered a window into the new fiscal year. That might be the main reason Ambode recently said the year “holds great promises for Lagos and its residents.” 

Obviously, 2018 appears more auspicious for Lagos than previous years for three different reasons. First, the national economy has recovered from recession, coupled with rising price of crude oil at the international market. Second, the state proposed to spend N1. 046 trillion, which the governor said, accounted for an increase of 28.67 per cent compared with what he presented in 2017.    

Third, under the 2018 fiscal regime, the state equally planned a total revenue of N897.423 billion, which showed a gap of N148.699 billion. But the state revenue projection showed that the state would bridge the gap through deficit financing – bond issuance programme and external loans, to be specific. Of the estimated total revenue, the state plans to generate N720. 123 billion, representing 80 per cent, while expecting N177.30 billion from federal transfers and 13 per cent derivations

In every economy, the level of budget performance often determines whether people’s aspirations are realised or whether reasonable measure of real growth is recorded under a specific fiscal regime. For Lagos, its annual budget analysis revealed an antecedent that signals more prospect than gloom. 

In 2016, for instance, it was an account of boom, despite harsh economic conditions. Yet, the state recorded 78 per cent budget performance at the height of economic slump that almost shut sub-national economies. In 2017, too, the state attained an aggregate budget performance of 83 per cent, which was the highest it ever recorded since Ambode assumed office in 2015. 

Across the federation, however, other states are reeling under the burden of debt and unpaid salaries. Of course, Lagos is not on the list of sovereign debtors, though its net debt stock is N874.38 billion, which according to the governor, represents only three per cent of its GDP currently valued at $131 billion and rated the fifth largest economy in Africa. For Ambode, it is not an indication of fiscal viability, but of the state’s commitment to fiscal sustainability. Contrary to reports, his administration had not contracted any new external loan “to fund our projects since assumption of office.” Rather, he had completed transactions, which the governor acknowledged were already in place before he came into office. 

By implication, Ambode’s administration inherited external loans from various past administrations, which according to him, constituted at least 60 per cent of the state’s total debt stock. The governor pointed out that the debt stock “is made up of some loans that have been running since 1989, about 30 years ago; and were contracted at an average of N80 to $1. Today, the loans are being repaid at an average rate of N305 to $1, translating to 205 per cent increase in the loan repayment rate.” 

 

Agenda 

At a lecture he delivered at Harvard University in October last year, Ambode unveiled a plan to create at least 250,000 jobs per annum. Aside, under the same fiscal regime, the state has set aside $13.5 million to empower small-and-medium enterprises under the different initiatives of the ETF. 

Already, the state has earmarked N135.815 billion to fund infrastructure projects. It has started construction of Pen-Cinema flyover, a 1.4-kilometre bridge designed to undo gridlocks in Agege. Aside this flyover, it equally planned to construct Opebi-Mende Link Bridge; dualise Lekki-Epe expressway; reconstruct 181 inner-city roads across the local councils and complete Oshodi-Airport road, among others.

In a 2017 budget report he presented last month, Ashade disclosed the government’s plan to take advantage of the Public-Private Partnerships to deliver three critical projects. Under the current fiscal regime, the state would implement 3,000-megawatt embedded power programme, Ikorodu-Agbowa-Itoikin-Ijebu Ode road and Okokomaiko -Seme section of Lagos-Badagry road. Likewise, the state set aside N101.358 billion to execute different transport infrastructure projects. As indicated in the report, the allocation would benefit Light Rail (Blue Line) project and 10-lane Lagos-Badagry expressway. 

From the allocation, the state plans to complete Oshodi-Abule Egba BRT corridor, jetties and terminals at Marina in Epe and Badagry with shoreline protection, among others.   

Under the fiscal regime, the state had budgeted N54.582 billion to address different environmental challenges. It placed premium on the execution of Cleaner Lagos Initiative, which according to the governor, replaced the old regime of waste management in the state. Besides the CLI, the fund would be used to improve drainage channels; landscape Gbagada-Oshodi expressway and modernise the recreation park/botanical garden along Gbagada-Anthony road.

Like the year before, the state allocated N59.904 billion for housing and community amenities. With a housing deficit of over five million, however, Ambode acknowledged that the state government “cannot provide shelter for all residents.” But he believed the allocation would allow his regime deliver affordable housing units to interested residents under the “rent-to-own” schemes in Gbagada, Igbogbo, Iponri, Igando, Omole Phase I, and Sangotedo.   

Ambode’s plan to use information technology to drive governance and solve diverse challenges associated to Lagos metropolis gets much attention. At least N23.508 billion was allocated to complete the state’s strategic information management system; build information technology infrastructure state-wide and fund the Smart City project targeted at deploying technology to enhance security and revenue generation in the state. 

 Alongside other associated projects, the state allocated N64.485 billion to continue the development of Lekki Free Trade Zone (LFTZ); N15.2 billion to execute the Heritage Centre for Leadership (Lugard House); N10.574 billion to accelerate its food expansion programmes; N9.059 billion to construct four new stadia in Igbogbo, Epe, Badagry and Ajeromi-Ifelodun and N37.708 billion to maintain law and order across the state with a clear vision to drive its economy.

Ambode said 2017 witnessed a massive leap in terms of infrastructure development in the state. In 2018, he said, some of the reforms in key sectors of the economy will take full flight. By implication, the governor is saying there is good reason to be optimistic about what 2018 has in stock.