Bukola Ogunyemi: Nigeria’s Broke States And The Need For Economic Liberalism

Recently, we have had cause to focus on the developmental strategies of states in line with the politics of their governors, the impact of their strategies on the citizenry and the combined effect of these strategies and  national policies on the economic health of the country, measured in Gross Domestic Product (GDP) by the powers-that-be and interpreted as (un)employment rate by those most concerned.

These developmental strategies vary in degrees across states in the country with the highest risk-takers owing more with more visible development and debatable social impact than minimal risk-taking states. These debts accrued by said states are said to aid in sectional growth and development which should in turn produce jobs, provide security, higher standards of education and health, among other indices of upward economic movement. It must be said that active pursuance of revenue by states, beyond the monthly federal allocation as distributed by Revenue Mobilisation, Allocation and Fiscal Commission, is commendable.

A cursory look at the 2012 figures released by the Debt Management Commission (DMO) reveals to the average citizen, the true state of financial affairs in the debt stocks accumulated by their respective states. According to the DMO, a total of N1.86 trillion is owed by the nation’s states in form of contractors’ liabilities, commercial banks’ loans, bonds, pension and gratuity and government-to-government debt; with the lion share belonging to states with a penchant for industrialization, up from N1.42 trillion the previous year.

Lagos State as assumed by many and confirmed by data, is the highest borrower with a local and foreign debt of N157.536 billion and N80.726 billion respectively for a total of N238.262 billion (out of which public debt is N234.608 billion). It has the best Solvency Rate at 61%  on its domestic debt with respect to its Internally Generated Revenue (IGR) base of N257.419 billion and a Revenue base of N320.474 billion. This means that Lagos State has a higher ability to increase its asset base within one year to meet its debts, than other states.

Bayelsa State makes a not-too-close second with a debt stock of N162.82 billion, IGR base of N9.51 billion and a Solvency of 1712%. This means the home state of Mr President, cannot meet its needs despite the federal allocation recieved as an oil producing state. Cross River State has a debt stock of N90.75 billion, IGR of N16.553 billion and a Solvency of 548% while Zamfara holds N2.611 billion, N12.968 billion and 497% respectively. Ebonyi and Delta States came in fourth and fifth with debt stocks of N40.239 billion, N90.843 billion; IGR of N14.778 billion, N34.601 billion; and Solvency of 272% and 263% in that order.

Adamawa, Kogi, Rivers, Imo, Kaduna, Yobe and Borno States hold debt stocks, of : N25.954 billion, N34.122 billion, N112.229 billion, N59.979 billion, N53.808 billion, N 6.939 billion and N3 billion. It may seem to many that states experiencing a form of growth have stable coffers with plenty more to offer generations unborn, the many may be wrong. The debt piled by states in a bid to satisfy the desire(s) of the citizenry can and should be met by revenue-generating measures other than borrowing. Alas, the debt is being piled for Nigerians yet unborn.

This tangent revenue generation by certain states has long been debated in several quarters under the banner of Fiscal Federalism. It has been argued that a sugar-daddy reliance on federation account has hampered development achievable through state-level revenue generation and an internal government restructuring may well be in order. We should be aware that the federal allocation is dictated by the swaying price of oil, dwindling reliance of our biggest buyers on oil and the rising rate of theft. Isn’t it rational therefore, that we explore a different system of governance such as Fiscal Federalism, that reduces sole reliance on natural resources for national growth, increases powers of states and local governments to effectively administer their regions and adequately meet the need of every citizen?

As defined by Pierre-Henri Derycke in his ‘Theories of Fiscal Federalism: Yesterday and Today’ work published in the Regional Public Finance and Fiscal Federalism journal of 1991, page 19;  “Fiscal federalism, it is all in once: the territorial organisation of a country; the principle underlying repartition of powers, competencies, public revenues and expenditures between hierarchical levels of government; and the degree of territorial centralisation/decentralisation of territorial administration. It is thus a set of precepts underlying the conduct of public actions in more or less decentralised states.”

Taking the current high cost of government and the unenthusiastic attitude of those occupying seats of near-maximum power, elected and appointed, to drastically reduce this cost, divert the funds generated from such reduction to the necessary quarters; it can be deemed highly imperative that the authority be fragmented and responsibility diffused using fiscal policies encouraging fiscal federalism. Its should be understood that across board fiscal federalism cannot and should not be uniform, i.e fiscal fragmentation of authority will take on the characteristics of each state/region as determined by state and local governments.

For decentralisation to be effective and its woes minimised, all parties involved must clearly and carefully understand and engage in the processes that will ensure effective transitioning, highlighting increased responsibilities and accountability. States and local governments will be more involved in revenue generation through exploration of human, capital and natural resources existing in each area and debt financing of capital projects. This hands-on approach will ensure jobs created and public utilities constructed suit the particulars of each state and debts are accrued within limit. The federation account will be funded by specific percentages from each state, using the revenue to cater to federal projects such as national security.

Each of Nigeria’s geopolitical zones must wake up from this petroleum induced, dangerous dependence on federal allocation which has killed creativity in revenue generation and develop their human resources and non-oil sectors in preparation for what lies ahead. It is time for states to stop spending recklessly on frivolities and focus on projects that have direct meaningful impacts on the people.

As our rights to life, liberty and the pursuit of happiness are unalienable, so are our responsibilities to see to the proper functioning of governments instituted among us, for the sake of the security of these rights, inextricable. We must understand that the right to alter or abolish any form of government that becomes destructive of these ends is not given but claimed, by any means necessary, for the benefactors of a state of dismal depravity and dreary degeneracy would rather have the status quo maintained.