Fall in Oil Prices: What alternatives for state governments?
on January 21, 2015 / in Features 9:28 am / Comments
THE fall in the revenue accruable to state governments in Nigeria, occasioned by the falling crude oil price, has raised questions about the capacity of state governments at handling the multiplier effects of the fall. CHARLES KUMOLU reports
WHEN the Delta State government under Governor Emmanuel Uduaghan, conceived the Delta Beyond Oil,DBO, initiative, it meant so many things to different people across the country. To some, particularly those outside government, it was a conduit pipe to be used for the exploitation of the state’s resources, while others saw it as an initiative designed to bring about economic development with a framework of multi dimensional investment strategies.
Those, who were not so much informed about DBO, thought it was a physical structure, but the DBO is far from that. As gathered by Vanguard Features,VF, the DBO which is the brainchild of Uduaghan, is a vision to prepare the state for the inevitable, drying up of hydro-carbon deposits.
It primarily seeks to diversify the economy from total dependence on oil revenue, so as to ensure that the state is not caught napping when the era of oil boom ends.
The DBO essentially is to ensure that in the absence of oil, the state would remain self-sufficient and be able to cater for the needs of its people.
Three key enablers
To achieve the vision, VF gathered that three key enablers were identified. They are; adequate infrastructure; good governance and adequate security of lives and properties.
Interestingly, the initiator of this programme has not failed to tell all that the initiative is a template for Nigeria’s mono-product economy.
‘’The ultimate goal of Delta Beyond Oil is to provide employment for our teeming population. Specifically, we are concentrating on agriculture, culture, tourism, solid minerals to achieve our Delta Beyond Oil. We have pursued these agenda with great zeal and determination to make Delta State a peaceful place, conducive for investment. Our human capital and infrastructure development agenda have also produced measurable results,” Uduaghan stated at an award ceremony in recognition of the DBO initiative.
Further checks by VF also showed that the vision has already set in motion systematic and deliberate economic policies that will galvanise reasonable and substantial turnover for government and private investors so as to facilitate the eradication of poverty and at the same time bring about rapid and consistent economic prosperity for the state.
Little wonder, the state had earned so many awards from mainstream newspapers in Nigeria and abroad.
Considering that the DBO has within a short time, become the state’s bridge to and self-sufficiency, it is expected that other states would follow suit.
Bridge to self-sufficiency: The fact that all the states except Lagos, depend solely on oil revenue for its sustenance, justifies this yearning.
cartoon-budgetBut just like the Federal Government that has made little or no effort to diversify the economy, moving from total reliance on oil, many states equally have not made commitments at developing alternative sources of revenue.
They are so comfortable with the oil revenue allocations from the central pool, at the expense of untapped opportunities in other sectors of the economy.
Given this failure to heed to earlier calls for diversification, VF, investigation showed that many states have already been caught pants down by the impact of falling crude oil prices.
‘’We have a very terrible situation at hand. Although these governors are pretending that all is well, I can tell you that they don’t have enough money to run the states now.
Where would the money come from? Do they do other businesses apart from dependence on federal allocation? Even their internally generated revenue, IGR, will not be enough to fund the business of governance. Except the money coming in for the Federal government increases, the multiplier effects of the paucity of funds, would become so profound by the end of the first quarter of the year,’’ Chairman, Dobi Securities and Loans, Mr. Deji Obiniyi told VF.
Unpaid salaries: The result of checks by VF in this regard revealed that the effects are now visible. For example, most workers celebrated Christmas without their salaries despite promises by state governments. A few state government workers have had their salaries paid up to date, others have not been so fortunate.
In the light of this, the Nigeria Labour Congress, NLC, less than a month ago, expressed dissatisfaction over non payment of December salaries to workers by 11 state governments.
The NLC, President, Mr. Abdulwahed Omar, said in an End of Year Message, that three of the states, Benue, Plateau and Osun, owe between three to eight months workers’ salary arrears.
‘’Collated reports from our state councils indicate that a number of state governments and some Federal MDAs have not paid their workers for December as the year comes to an end.
Of the 30 states reporting as of the 30th of December, 11 subjected their workers to a Christmas/New Year celebration without the December salary,’’ he stated.
Omar further said: “Three of these, Benue, Plateau and Osun, owed their workers arrears of salaries ranging from three to eight months! Some federal government employees in the Ministries of Education, Labour and Productivity, among others, are owed arrears of salaries ranging from one to three months”.
States caught napping
Like the union leader, Managing Director of Klinx Asset Management Company, Mr. Jonhbull Tamuno, told VF that the current state of the economy requires more than lip service from the state governors, noting that if the states were viable, they would not have been taken unaware.
‘’The chickens have come home to roost. We all made case for a holistic approach to development but everyone was carried away by oil money. That indifference to the fact that oil deposits will dry up someday, is a surprise to me. The stark reality of what the situation portends now stare at us. It is not a situation that will consume the nation but the state governors must do things differently this time. Other opportunities should be tapped and harnessed,’’Tamuno counselled.
Faced with these realities, the governors have continued to allay fears that they may not be able to pay monthly salaries and provide other social services. A cursory look at the proposed budgets of 31 states by VF showed that some of the governors are prioritizing projects to meet basic needs.
Apart from proposing frugal or austere budgets for 2015, a number of them said they would pursue aggressive Internally Generated Revenue IGR to augment whatever they would get from the centre. They also allayed fears that boosting their IGR would entail a heavy tax-burden on their people and businesses.
Oyo’s budget of repositioning: While presenting his N141.778 billion 2015 budget proposal tagged ‘Budget of Repositioning’ in Oyo State, Governor Abiola Ajimobi, who is seeking for re-election, pledged that no new taxes would be imposed on the people, notwithstanding the poor financial situation of the state occasioned by sharp drop in oil revenue. The state spent about N190 billion last year. He said rather than impose new taxes, a strategy had been put in place to enhance the level of cost effectiveness of revenue collection, especially with respect to existing fees and levies.
However, the governor said priority would be given to expanding the state’s taxable base through accelerated gainful employment generation by private investors in the state. Of the N141.8 billion budgeted, a sum of N86.72 billion (61.17 per cent) is allocated to recurrent expenditure while a miserly N55.05 billion (38.83 per cent) will be for capital expenditure.
Imo: Okorocha goes for total rescue, allocates 57% to capital projects
The Imo State Governor, Owelle Rochas Okorocha proposed a budget of N141,219,133,849, termed “budget of total rescue and sustainability,” for the 2015 fiscal year. Presenting the budget to members of the state legislature, Okorocha said the budget represented an improvement from the last fiscal year’s N137,684,678,119. He stressed that recurrent expenditure for the 2015 fiscal year would be 43 per cent, while outstanding 57 per cent would be channelled to capital projects.
The governor explained that the higher allocation for capital expenditure, which he said, was “the thrust of the budget since 2012, is a policy meant to sustain the basic structure upon which other structures will stand to guarantee balanced development, industrialisation, private investments with high multiplier effects for wealth creation, employment generation, conducive business environment and improved welfare of the citizens.”
Ekiti’s ‘realistic budget’: The Ekiti state’s N80.78 billion “budget of reality”, represents 77.7 per cent of the 2014 budget of N103.8billion. Governor Ayodele Fayose allocated N48,717 billion to recurrent expenditure and N31. 956 billion to capital expenditure.
He said the size of the budget was informed by his government’s desire to live within its means and go with an achievable estimate rather than “decorate the budget with unrealistic figures.”
It’s unlimited opportunities in Niger: In Niger State, Governor Mu’azu Babangida Aliyu forwarded to the House of Assembly a “Budget of Shared Vision and Unlimited Opportunities,” estimated at N80.815 billion.
In a statement, his Chief Press Secretary, Israel A. Ebije, said the capital expenditure is N38.5 billion (47.83 percent) while recurrent expenditure is N42.6 (52.17 per cent). The governor said the budget is more realistic and in response to the dwindling crude oil prices.
Ebije disclosed that the budget is N18 billion less than the 2014 appropriation bill as the state drives for a realistic budget, adding that a 50 percent increase is projected from IGR as the state moves to diversify its revenue sources.
Delta: Economic sector gets lion share
In Delta State, Governor, Emmanuel Uduaghan proposed N327.68 billion for the 2015 comprising of N161.6 billion recurrent and N166.07 billion capital estimates, representing 49.32 and 50.68 percent respectively. Uduaghan disclosed that the 2015 estimates was lower than the 2014 fiscal estimates by N123.05 billion due to the fall in the price of crude oil.
Sectoral breakdown of the capital estimates revealed that a lion share of N50.32 billion, representing 30.3 per cent went to the economic sector, followed by the social, general administration and environmental sectors while the sum of N34 billion was voted for the Delta State Oil Producing Areas Development Commission (DESOPADEC).
According to him, “The 2015 budget is driven by the successes recorded in various sectors of the state’s economy in the past seven years up to the 2014 budget of Consolidation, Sustainable Economic Growth and Development as the 2015 budget is aimed at consolidating the achievements of 2014 budget as well as completing all ongoing projects and programmes that will facilitate the fulfilment of the administration’s goal of making Delta State one of the most industrialised and developed states in the country by 2020.
Taraba: Making communities accessible
In Taraba, the Acting Governor, Alhaji Sanni Abubakar Danladi allocated over N22 billion of the N97.3 billion proposed budget to the Ministry of Works to ensure there are more access roads in the rural areas. “There is need to provide more communities with access roads. That is why the Ministry of Works has the highest allocation of N22,063,221,363.00,” he said. He also allocated N53.3 billion of the budget to capital projects while recurrent expenditure got N42.7 billion.
Bauchi: We will pay salaries promptly –Yuguda
While presenting the Bauchi State N127.89 billion budget, Governor Isa Yuguda said that a huge percentage of the budget would go for the payment of salaries, wages, pension and gratuity.
He said that the budget would give priority to health, agriculture, water resources, poverty eradication, women and youth empowerments as well as ongoing projects.
- See more at: http://www.vanguardngr.com/2015/01/f....ueFPieWB.dpuf