12th March, 2012
One feature that has become synonymous with budget presentation in Lagos State, especially since 2007, is the clarity of purpose that manifests itself from the beginning to the end of Estimate presentation. It has been so from the first full budget of this administration in 2008 tagged “Great Leap Budget”, through the 2009 Budget tagged “Budget of Accelerated Growth”, to the 2010 Budget christened “Budget of Consolidation”.
While the 2008 Budget declared the intention of Government to take a giant leap into addressing the more than 30 years infrastructural deficit in the State, the 2009 budget declared its continued determination to accelerate economic growth through infrastructural renewal and the 2010 Budget sort to consolidate the gains of the two previous ones. Though the 2011 Budget was not christened, its purpose and objectives were clearly stated in the opening paragraphs of the presentation when the Governor, Mr. Babatunde Fashola (SAN) said, like the previous ones, the budget was prepared in line with Ten Point Agenda evolved by the previous administration in the state.
Another feature common to all the budgets is the ratio of Capital to Recurrent Expenditure which has always been in favour of the former. This is consistent with the administration’s policy of shrinking overhead costs to free more resources for fixed intensive investments. In the 2008 budget which stood at N403.401 billion, for example, Capital Expenditure took the lion share of N243.954 beating Recurrent (N159.447) by 84. 507 billion. This feature was repeated in 2009 (N405 Billion) where Capital Expenditure (245.504 billion) overtook Recurrent (159.284) by N86.220 billion. In 2010, N250.778 billion of the total Budget Estimate of N429.596 billion went to Capital Expenditure leaving Recurrent with N178.818 billion. In 2011, out of the N445.180 billion estimate, N248.471 billion went to Capital Expenditure while Recurrent Expenditure got N196.709. In line with this policy, the 2012 Budget of N485.292 billion earmarks N257.821 billion for Capital leaving N227.47 billion for Recurrent Expenditure.
Noticeably, the ratio of Capital to Recurrent Expenditure in 2012, when compared with those of the previous years, is slim (53:47 for Y2012 as against 56:44 in 2011). Governor Fashola while presenting the Budget, explained that the ratios were “dictated by recent wage increases and also partly informed by the emerging recurrent costs of maintaining and staffing the various infrastructure projects we have embarked upon over the years that are now being put to use, such as new schools, new hospitals, new water works, skill centres, and so on”.
Central to all these budgets, including the 2012 budget, is infrastructural renewal as a means of alleviating poverty. In the last four years, the Babatunde Fashola administration has more than demonstrated that this is, perhaps, the fastest and most viable means of achieving economic growth in any economy, be it community, state or country. Aside the job opportunities which the massive construction work undertaken by this administration has yielded, it has opened other windows for economic growth such as investment opportunities for both local and international investors, Foreign Direct Investment (FDI) and the boost in public private partnership.
The result is seen today in the vast improvement in diverse sectors of the State’s economy such as Education where, aside the free education policy of the Government, infrastructure and learning aids have been given tremendous boost in both primary, secondary and tertiary institutions resulting in the improvement in standard of education in the State, teachers’ welfare has greatly improved while many incentives have been introduced in the system to encourage enrolment of pupils in school. It can also be seen in the Health Sector, the Environment, Security and in the living standard of the people which has taken a turn for the better.
The 2012 Budget, however, has some unique features, perhaps, conferred on it by its privileged position as the first full budget in the second tenure of this administration. As the first full estimate, the budget is expected to fulfil new electoral promises made to the Lagos electorates by the ruling Action Congress of Nigeria (ACN) during the 2011 electoral campaigns. Secondly, the budget is coming at a time when many economic indices that determine the successful or unsuccessful implementation of budgets, have taken a turn for the worse. Such indices include exchange rate, bank lending rate, cost of building and construction materials as well as cost of fuel, among others. Between 2007 and 2011, exchange rate has increased from N125 to $1 US Dollar to N152 to $1 US Dollar, local bank lending rate from 17 percent to 19 percent while cost of cement which hovered around N1.450 per bag in 2007, has since taken a giant leap hovering between N1.800 and N2.100 and bitumen for road construction from N75,000 per tonne to N158,000 per tonne today while cost of diesel has risen from N129.00 per litre to N150.00 per litre.
These realities, of course, mean that more funds will be needed to implement this particular budget. In fact, the Governor alluded to this when he told the House of Assembly, “The truth therefore is that if we are to keep people at work, secure our State, build the houses we promised, implement the programme for construction of inner roads and keep the Lagos economy on the path of sustained growth, we need to find more money”. Given that this State has led the way, especially in the last four years, in the area of self sustenance through tax compliance, the implication of this is that the administration will be more aggressive in Internally Generated Revenue (IGR) drive if it must meet the target it has set for itself.
And the target is quite daunting. It includes plans to build more houses under the soon-to-be-launched Lagos State Home Ownership Scheme or Lagos HOMS to provide affordable accommodation for the teeming population. It includes the rehabilitation of Ikorodu Road, the building of Odolya/Alaro Waste Water Treatment Plant, the Adiyan Phase 11 Water Works and several kilometres of inner city roads in Aguda, Ijeshatedo, Mushin, Agege, Ikorodu Town, Eti-Osa, Shomolu, Orile-Iganmu, Alimosho, Victoria Island, Ikoyi, Apapa and many other parts of the city and building more drains as well as expanding new ones across the State such as in Lekki where Government is building 11 concrete storm channels and expanding existing ones in Ikoyi. It also includes servicing and maintenance of existing infrastructure and logistics in such sectors as Security, Education, Transportation, Health and the Environment, among others in order to keep them in perfect working condition.
Take security for example, aside the payment of security personnel to maintain 24 hour vigilance over the city, there are streets lit 24 hours from generators powered by diesel. This has provided additional security and revived the long dead night life and night economy within the city. It has also enhanced safe transportation across the metropolis at nights. With the focus on inner city roads this time, there will be need for more generators and, of course, diesel to power them. In the area of Health, the engagement of additional staff to man the new departments created through expansion must be paid the new minimum wage in addition to the existing public servants. Again, the building of houses for the State’s Home Ownership Scheme will require the purchase of cement and other building materials at their new prices.
Ever conscious to balance the existing realities with the need to keep the people at their jobs and maintain a vibrant economy, the Governor has taken some cost cutting measures in areas where it will not affect Lagosians too adversely. For example, while not tinkering with personnel costs such as wages and allowances or pension contributions and gratuity in the face of the new minimum wage which has raised the its monthly wage bill by N2 billion, the Government has reduced overhead costs by trimming the number of trainings, travel costs, managing the procurement of generators and vehicles to reduce diesel and petrol costs. The Governor has also embarked on other cost cutting measures such as stoppage of new television sets and DSTV subscription in offices, putting a stop to granting waivers to those who seek to acquire land and an upward review by 0.05 percent of the State’s Land Use Charge which has remained stagnant for nine years in spite of the spiral increase in property cost as a result of the massive infrastructural renewal, especially in the last four years.
However, in order to cushion the effect of these measures, Government has, among others, offered some palliatives in some sectors such as Housing where in order to meet the genuine aspiration of the people to own their houses and transact business with their properties, it has reduced by 2 percent the rate of Governor’s Consent, reduced from 15 to 13 percent the cost of perfecting title deed on properties, pegged the total cost of mortgages for residential purposes only to a gross sum of 1 percent of the value of the property and reduced the costs of regularization of title to government lands acquired by some citizens without prior approval, although, according to the Governor, this policy which includes removal of E-Transaction fee and reduction of the penal fee by 50 percent, will only be effective for 2012.
Taken together, therefore, the 2012 Budget is a well-structured package aimed at balancing the need to maintain a vibrant economy by keeping the tempo of development on the upbeat against the prevailing global economic realities. It is a package which, if well implemented, will see the State maintaining its lead as a model of governance in this country.
But as the Governor said, the Budget will be “a most challenging budget to implement” most probably given its cost implication. There is no doubt that Government will be more aggressive in the pursuit of its fund generation drive. However, Government has promised that it will not increase taxes. The Governor himself gave that assurance when he said at the presentation, “This is not about increasing taxes but about ensuring that any eligible tax payer contributes; because benefits from the public service will increasingly be dependent on our tax compliance status”. It is also about tax administrators, collectors and operators demonstrating the highest level of civility and courtesy in the administration of the State’s tax laws and policies.
Given that Lagosians have, in the last four years, experienced the highest level of transparency and accountability in governance; given the fact that they have enjoyed the full dividends from their taxes; given the reality that Lagos has become a model of governance and a reference point in self-sustenance through its Internally Generated Revenue, there is no doubt that Lagosians will support this Budget by paying their taxes as they did willingly in the last administration. The truth remains that the prosperity of this State depends, as the Governor said, “On getting more employed people to pay their taxes and contribute to our commonwealth”. Voluntary compliance will, of course, be of great assistance to the Government as it will cut cost of tax administration.
•Durugbo is the Personal Assistant on Print Media to the Governor of Lagos State.