Fortunes and Foresight: Ogun’s Journey with Trillion Naira Budget

Kunle Somorin writes that much as news of Ogun joining Lagos and Rivers in the league of states with Trillion Naira budget is a welcome development, there is need for the State House of Assembly to oversight proper implementation of the budget for the good of the citizens of the Gateway state.

when Nigeria’s national budget first reached the trillion-naira mark in 2011, there was little surprise, as even that year’s estimates of N4.697 trillion incurred a deficit of N1.285 trillion (approximately $8.3 billion), accounting for about 0.43% of the country’s GDP. Nevertheless, it was a significant milestone in the country’s fiscal planning and economic development.

A decade later, Lagos became the first Nigerian state to achieve a trillion-naira budget. In that year, Governor Babajide Sanwo-Olu signed into law the N1.168 trillion Appropriation Bill.

Following this, on New Year’s Eve, Ogun State joined the ranks of Lagos and Rivers with a budget estimate of N1.054 trillion, marking its entry into the exclusive club of Nigerian states with trillion-naira budgets.

The “Budget of Hope and Prosperity” is designed to consolidate the administration’s achievements over the past five years and drive further development across various sectors. This ambitious budget reflects the state government’s commitment to addressing infrastructural deficits, enhancing social welfare, and promoting economic growth.

The 2025 budget, notable for its substantial increase from previous years, indicating the state’s ambitions to accelerate development and improve residents’ quality of life. Significant allocations will go to key sectors such as education, health, housing, community development, and agriculture/industry, which are crucial for stimulating economic growth, creating job opportunities, and ensuring the populace’s overall well-being.

Investments in infrastructure, including roads and healthcare facilities, are expected to enhance connectivity and access to essential services. Specifically, education receives N177.835 billion, health N134.538 billion, infrastructure N284.4 billion, and housing/community development N66.382 billion.

Other key sectors got far more than was allocated to each of them last year. In addition to the over 600 kilometre of roads done in his first term, the governor is reconstructing the Lagos-Ota-Sango-Abeokuta road, the Akute-Ijoko road and he is also focusing on the Gateway Agro-Cargo International Airport. This world-class airport, located in Ilishan-Remo, is nearing completion and will significantly boost the state’s economy by providing job opportunities and enhancing agricultural exports.

Furthermore, the 250-bed specialist hospital in Abeokuta, previously abandoned, is being completed and managed under a concession agreement with private sector partners.

This partnership aims to provide world-class healthcare services, reduce medical tourism, and improve healthcare infrastructure. That underscores the good faith of Prince Dapo Abiodun and his team to address deficits, enhance welfare, and drive economic growth.

However, Ogun State’s trillion-naira budget requires careful management to avoid the pitfalls of increased debt and economic instability. According to the Debt Management Office (DMO), as of June 30, 2024, Ogun was on of the Nigerian states with the highest debt profiles. Others  are Rivers, Cross River, Bauchi, and Kano, having accumulated substantial external debt primarily for extensive infrastructure projects and essential public services.

The DMO regularly conducts Debt Sustainability Analyses (DSA) to evaluate the states’ capacity to manage their debt levels effectively. Recent findings indicate that while some states, like Rivers and Lagos, maintain relatively sustainable debt profiles due to robust internally generated revenues, others, such as Cross River, Imo, Osun, and Plateau, encounter significant challenges in sustaining their debt.

Ogun is at a critical juncture. With its increased IGR profile of N240.24 billion in 2024, this could be a crucial factor enabling its ambitious budget. Ogun State has boosted its revenue profile through strategic efforts to attract investors, enhance the ease of doing business, and foster industrialisation, reducing dependency on federal allocations and providing a more stable financial foundation for its developmental projects.

The state government has also implemented robust strategies for efficient revenue collection, broadening the tax base, and improving compliance. This financial prudence is essential for sustaining the momentum of growth and development envisioned in the budget.

Expectations from the newly implemented tax reform laws are also high. These reforms aim to enhance revenue generation by simplifying tax procedures, reducing evasion, and ensuring that all eligible entities contribute their fair share.

The projected Value Added Tax (VAT) revenue for 2025 is estimated at N2.5 trillion, representing a significant increase from previous years. Enhanced tax compliance and efficient administration are expected to provide the necessary financial backing to meet the ambitious targets set by the state government.

Public-private partnerships (PPPs) are highlighted as a means to drive development. Collaborating with the private sector can attract investments, leverage expertise, and ensure efficient project delivery.

Such partnerships can enhance the state’s capacity to implement large-scale projects and achieve sustainable development goals. Additionally, focusing on economic diversification aligns with the state’s goal of creating a more resilient economy. By investing in agriculture, industry, and technology, Ogun State can reduce its dependence on volatile federal allocations and build a stable economic base.

Despite the optimism surrounding the budget, several challenges must be addressed to ensure its successful implementation.

The fluid nature of Nigeria’s political economy poses a significant threat to the budget’s projections. Fluctuations in oil prices, exchange rates, and inflation can impact the state’s revenue and expenditure plans, creating uncertainty that could hinder the achievement of the budget’s goals.

The reliance on federal allocations, subject to these economic variables, adds another layer of complexity. Therefore, maintaining financial stability through prudent management and diversified revenue streams is essential. Moreover, debt sustainability is a concern. With a substantial portion of the budget allocated to debt servicing, high debt levels could limit the state’s ability to invest in critical sectors and lead to increased financial burdens in the future. Effective financial management and prudent borrowing practices are necessary to avoid compromising the state’s fiscal health.

Granted that big budgets offer several advantages: they can stimulate economic growth through increased government spending, creating jobs and boosting consumer spending. They enable investment in infrastructure, enhancing public services such as healthcare, education, and security. When effectively deployed, with holes plugged and corruption eschewed, big budgets can support technology and innovation, driving productivity and competitiveness, while allowing for social welfare programmes and poverty alleviation efforts, improving the quality of life for vulnerable populations. Additionally, substantial budgets support environmental sustainability initiatives and long-term planning, ensuring sustainable growth. However, effective management and accountability are crucial to maximize these benefits and avoid potential risks of misallocation and increased debt burdens.

Given the known metrics of multidimensional poverty, the budget’s priorities appear well-aligned with the needs of the population. According to the National Bureau of Statistics, 63% of Nigerians are multidimensionally poor.

Ogun state does not rank too well in the South West indexes, with high deprivations in sanitation, healthcare, food security, and housing. Addressing these issues requires more than big figures; it calls for a high sense of responsibility, decency, inclusiveness, and openness. Otherwise, it will breed an increased debt burden, one primary consequence of running budget deficits.

As the government continues to accrue deficits, the debt piles up, straining the state’s finances and diverting resources from developmental projects to debt servicing. Another critical implication is inflation, often leading to higher prices for goods and services, affecting the overall cost of living. Persistent budget deficits also lead to higher interest rates, making borrowing more expensive and stifling economic growth by deterring investment and consumption. Continuous deficits can create economic instability, challenging sustainable growth, and that’s why caution is required in Ogun State’s new status as a trillion-naira state.

On his part, Governor Dapo Abiodun has often reiterated his administration’s commitment to a tripartite agreement with God and the people of Ogun State to ensure that there is “a focused and qualitative governance and to create the enabling environment for a public-private sector partnership, which is fundamental to the creation of an enduring economic development and individual prosperity of the people of Ogun.”

This agreement underscores the governor’s willingness to submit to public scrutiny on his stewardship. By invoking this tripartite agreement, and under divine guidance, the trust of the citizens, should not be taken for granted. This is where the State House of Assembly that screened and passed the Appropriations Bill becomes critical.

The trillion naira budget will have more meaning and successful if the House of Assembly should diligently oversee its implementation, and ensure transparency and accountability. These should not only be done but seen to be done. Civil Society Organisations (CSOs) must engage in active advocacy, monitoring, and evaluation, promoting citizen participation and holding the government accountable through periodic sensitization and briefings.

The people should stay informed, participate in budgetary spending, and follow where their money goes. Collaborative efforts between these entities can foster effective implementation, curb mismanagement, and ensure the budget addresses the needs of the populace, leading to sustainable development and improved quality of life for all.

-Somorin writes from Abeokuta.

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