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Economy | State and Local Govts

Stakeholders Urge Sub-Nationals To Rethink Strategies for Fiscal Sustainability

Sep 25, 2020   •   by   •   Source: Proshare   •   eye-icon 1022 views

Friday, September 25, 2020 / 3:59 PM /Ottoabasi Abasiekong for WebTV / Header Image Credit: Twitter; @BudgITng

 

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As the global crude oil price volatilityensues and Nigeria like other nations grapple with the disruptive impact ofCOVID-19, states have been tasked with the responsibility of rethinkinggovernance and strategies for attaining fiscal sustainability. This was a majortakeaway from the official unveiling of the BudgIT  "State of States 2020" report which focused on the theme "Fiscal Sustainability and EpidemicPreparedness Financing at the State Level".

 

The event which was a hybrid of a physicalpresentation (at Radisson Blu Hotel, GRA, Ikeja, Lagos) and a virtualparticipation by stakeholders. The event brought together policy makers,analysts, business leaders, and advocacy groups.

 

Giving the opening remarks at the eventthe Principal Lead of BudgIT Mr Gabriel Okeowo described the "State of theStates report" as  a flagship event for the organization.

 

According to him since 2015 the "State ofthe States" report has provided data-driven research that looks at thesustainability of states.

 

For the 2020 edition the BudgIT'sPrincipal Lead said it took 9 months of detailed research to produce thereport, which covered the 36 states of the federation.

 

Mr. Okeowo said the methodology of thereport was validated by other key stakeholders in the nation, before its finalpublishing.

 

"The StateofStates report providesactionable intelligence that serves state governments, citizens and advocacygroups, and is designed to inspire healthy competition amongst states".

 

This according to him was the first timethe report launch was being hosted in Lagos, outside the Federal CapitalTerritory Abuja and is the part of the plan of BudgIT to extend the launch toother states in the country.

 

In his address at the event as the SpecialGuest the Governor of Lagos State Mr Babajide Sanwoolu commended BudgIT for itsdedication to driving advocacy at the level of governance and public finance,covering the various tiers of government.

 

Citing some of the key points captured bythe report, Governor Sanwoolu was happy to note that Lagos state had 22 or 23%of its revenue from FAAC allocation in 2019, which has reduced to about 21% asat August, 2020 revealing the state remains a sustainable  withoutreliance on FAAC allocation.

 

He also stated that the Debt Service toRevenue of the State was 23%(within the 30% global best practice threshold)even as Lagos seeks to De-Risk the Debt Portfolio it inherited.

 

Speaking further Governor Sanwoolu saidLagos state will be relying more on naira borrowing to reduce the risks tocurrency measures.

 

To reflect the COVID 19 economic realitiesthe Governor mentioned that the state reviewed its budget by 20%.

 

Looking at the budget composition,Governor Sanwoolu asserted that over time Lagos has maintained a recurrent tocapital expenditure distribution of 51%-49% and also 55%-45. Recently it wentup to the range of 60% to 40% due to the COVID 19 pandemic which requiredexpenditure on medicals and consumables for stabilization of the economy.

 

He informed stakeholders that Lagosremained the Sub-National with the highest health expenditure at the statelevel.

 

Going forward he said Lagos was exploringthe 3Rs which include;

  • Responding appropriately to the COVID 19 Pandemic
  • Restarting the economy seamlessly
  • Reimagining the transformation of the Lagos economy Post COVID 19

 

The Governor stressed that the key areasof focus for the state will be food security, MSME support, ICT, Arts &Tourism and Transportation through which Lagos is targeting 29% GDP growth in2021.

 

In terms of investments the Governor saidLagos has attracted about $600m into the Lekki Deep Sea Port, while it isdetermined to complete a 6,000km fiber infrastructure to drive the digitaleconomy.

 

Looking at Agriculture the Governor saidthe Rice Mill in Imota when completed will provide 2.4m bags of 50kg Riceannually to citizens and will produce 250,000 jobs.

 

Presenting the Keynote address at theevent Mr Teslim Shitta-Bey the Chief Economist/Managing Editor of Proshare whorepresented the Founder/Chairman Mr Olufemi Awoyemi, FCA lauded BudgIT for thelaunch of the #StateofStates2020 describing it as an intellectual art, that iseasy to relate with and understand.

 

He described the annual report as aneffective way to measure policy impact for states ,who have a wider influenceover grassroot socioeconomic development than the Federal Government.

 

From the presentation he called on Lagosand the other 35 states to rethink, re-strategize and re-imagine governance andeconomic strategy.

 

Shitta-Bey highlighted the fact thatfive(5) states classified as sustainable by the BudgIT report namely Rivers,Anambra, Ogun, Lagos and Kano were economic hubs and had characteritics thatdrove growth in GDP and debt in a marriage of self reinforcing complexity.

 

On areas that states must address and takeseriously based on the report, he listed the following;

  • Addressing the rising tide of debts
  • Addressing the high state overhead costs
  • Taking steps to reduce recurrent expenditure relative to capital outlays
  • Leveraging technology to boost agriculture rather than overdependance on labour
  • Explore partnerships and peer review mechanisms to enhance the quality og governance oversight, planning and direction

 

He advised states like Lagos to take stepsin the area of articulating and implementing easily triggered "DisasterRecovery Plans (DRPs)" would that would position the states to respond to issueslikes pandemics and  ecological disruptions in a programmed and strategicmanner rather than random actions taken aimed at dodging silver bullets. Heemphasized the need for states to be prepared for both dark swan and greyswan occurences.

 

The Research Methodology of the#StateofStates2020 report covered the focus on four indexes which were;

Index A - Ability of States to meet their recurrent expenditure obligation with their internally generated revenue and Value Added Tax. (45%)

  • Index B- Reviews the States ability to cover all recurrent expenditure obligations with their total revenue, without sorting to borrowing. (35%)
  • Index C- States ability to manage their debts sustainably. (10%)
  • Index D- Evaluates the degree to which each state is prioritizing capital expenditure. (10%)

 

The formal launching of the report wasperformed by Mr Sam Egube who also joined in commending BudgIT in its role inadvocacy and citizen engagement, especially in its interventions in ensuringgovernance transperancy.

 

The launch also featured a paneldiscussion that focused on the theme "Exploring Fiscal Dimensions for EpidemicPreparedness and Social Protection" with Mrs Toyosi-Akerele-Ogunsiji(Chairperson, Victim Support Fund;COVID 19 Task Force, Dr David OkelueUgwunta(Commissioner for Budget and Planning, Enugu State), Ms Amina Ado (ChiefExecutive, Sana'a da limi Foundation) and Mr Sam Egube (Commissioner forEconomic Planning, Lagos State).


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Proshare Nigeria Pvt. Ltd.

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