Debt Burden Not an Impediment to Execution of N1.168tn Lagos Budget, Say LCCI, NECA

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Muda Yusuf

• Urge Sanwo-Olu to institutionalise fiscal disciple • Seek review of the state’s security architecture

Segun James

Lagos Chambers of Commerce and Industry (LCCI) and Nigeria Employers’ Consultative Association (NECA) yesterday said the debt stock of Lagos State currently standing at N992.38 billion should not be an impediment to the execution of its 2020 budget valued at N1.168 trillion.

With the budget deficit of N97.53 billion, the two bodies urged the state governor, Mr. Babajide Sanwo-Olu to institutionalise fiscal discipline in the public service so as not to mortgage the progress that would be made in the next financial year.

LCCI’s Director-General, Mr. Muda Yusuf and his NECA counterpart, Mr. Timothy Olawale canvassed these positions in separate responses to THISDAY inquiries on the capacity of the state to execute the 2020 budget effectively in the context of unstable national economy.

Sanwo-Olu had presented N1.168 trillion budget to the State House of Assembly, earmarking N723.75 billion (62 per cent) for capital expenditure and N444.81 billion (38 percent) for recurrent expenditure.
The governor had proposed that the budget would be funded from a projected Internally Generated Revenue (IGR) of N1.071 trillion. However, the budget deficit, put at N97.53billion, would be financed through internal and external loans.

Dissecting the fiscal plan yesterday, Yusuf, LCCI’s director-general acknowledged that the state’s debt profile, which the Debt Management Office (DMO) put at N992.38 billion, was the highest among the states in the federation.
However, he said the state “has the highest capacity to service debt even though it has the highest debt profile among the states in the federation.”

On his part, Olawale, NECA’s director-general, expressed concern not just at the current debt profile of the state, but also the anticipated deficit.

To effectively manage the state’s debt stock and its anticipated deficit of N97.53 billion, Olawale urged the state government “to maintain fiscal discipline so as not to mortgage the progress that would be made.”

Olawale emphasised the need to improve security of lives and property, which according to him, had been under duress due to the growing influx of people to the state from all states of the federation and neighbouring countries.

He, therefore, noted that it would be necessary for the state government “to review its security architecture and come up with more innovative ideas and strategies to combat crime and stop the insecurity that is threatening the pace of our national development.”

Specifically, the director-general pointed out that private capital and investments could only be guaranteed with assured security of lives and properties.

Yusuf equally made a case for improved security, noting that the rapid urbanisation challenges had undermined the security of lives and property in the state. He said the pressure on the state’s infrastructure “is huge. There is heavy pressure on the roads, health facilities, educational facilities, waste management systems etc. This is because of the growing population in Lagos state, currently estimated at over 22 million.

“This is coupled with the rapid urbanization challenges, which comes with the added challenge of ensuring the security of lives and property. Security expenditure to support the security agencies is also very significant.”

Yusuf, therefore, pointed out that the budget “will impact on the citizens of the state only to the extent that revenue expectations are met. Practically all levels of government are currently faced with challenge of revenue.
“The good thing about Lagos is its robust IGR. But even the IGR is dependent on the health of the economy and the prosperity of investment in the state. There is a clear correlation between business performance and government revenue.

“The extent of capital project implementation, particularly infrastructure projects, is also a key factor in the prospective impact of the budget on citizens and corporates. The reality is that in par capita terms, Lagos is not as rich as many people perceive it to be if we relate the resources to the population and the associated responsibilities.”
He, also, noted that the quality of the investment environment and the national economic performance “will no doubt impact on the revenue of the state. The state is highly dependent on IGR, which bears a strong correlation with the health of the economy and the prosperity of businesses in the state.

“Being the commercial and economic hub of the country, the economy of the state is quite sensitive to developments in the national economy. The state therefore has a big stake in ensuring that the national economy is well managed,” LCCI’s director-general explained.

But NECA’s director-general commended Sanwo-Olu for committing to infrastructure development, healthcare and education, noting that the two sectors “are foundation for economic development.

Contingent on the budget size, Olawale said the state would be a massive construction site; though canvassed strategic collaboration with the Organized Private Sector (OPS) would help attract private capital necessary for accelerated development.
He said: “We applaud the provision of N7.1 billion for industrial hubs, graduate internship programs and virtual markets for artisans in support for micro, small and medium enterprises. This will enable the private sector continue to serve as the engine for economic growth.”

He, however, expressed concern “at the growing debt profile of the State and the anticipated deficit. With the deficit of N97.53 billion and an increasing local and foreign debt profile, the state will do well to maintain fiscal discipline so as not to mortgage the progress that would be made.”

Olawale said the success of the budget “will be judged based on how it will impact the lives of generality of Lagosians. The Government should collaborate with the federal government with the view of granting Lagos the special status it deserves as the economic hub of the country.

“The OPS will be willing to partner and collaborate with the current administration in fostering a better development of the state and creating an enabling environment for rapid industrial and human capital development.

“In the face of dwindling revenue, it will be imperative for the state government to curb waste and leakages and also collaborate with the OPS to institutionalise a budget-performance review and feedback mechanism. This will assist the state in effective monitoring of the implementation of the budget.”