States’ Budgets: Wrong Priorities, Pathetic Outcomes (1),

Nasir Ahmad El-Rufai,   Email: nasir.elrufai@thisdaylive.com

Our aim today is to draw some stylised conclusions from our analysis of the budgets of 10 state governments. The states covered are representative of the six geo-political zones; Bauchi and Gombe in the North-east, Lagos (South-west), Benue and Nasarawa (North-central), Edo and Akwa-Ibom (South-south), Kaduna and Zamfara (North-west) and Anambra (South-east). 

These states are governed by five political parties, Peoples Democratic Party (PDP) (Akwa-Ibom, Bauchi, Benue, Gombe, and Kaduna), All Nigeria Peoples Party (ANPP) (Zamfara), Action Congress of Nigeria (ACN) (Edo and Lagos), All Progressives Grand Alliance (APGA) (Anambra) and Congress for Progressive Change (CPC) (Nasarawa). Thus to a degree, not only are the 10 states representative of the six geo-political zones but also their budgets present the ideological outlook of the leading political parties in the country.  Our analysis therefore provides a basis to make some generalisations about the budgets of the 36 states of the federation. 

The objective of analyzing the states’ budgets is because a considerable proportion of our national revenue is allocated to the states and the local governments they control. Based on the existing revenue allocation formula, nearly half of the federation revenues go to 36 states and the FCT, and the 774 local governments and area councils. When the derivation, other federal transfers and related revenues are added, this proportion is well in excess of 65 per cent of total revenues that accrue to the federation, being spent directly or indirectly by the state governors. It is therefore important to focus on this tier of government which controls and spends nearly two-thirds of the nation’s resources to assess their performance.

The 1999 Constitution assigns important roles to the state governments in promoting social and economic development of the country and in improving the welfare of our people.  It is important not only to focus on how the states are spending their accrued revenues, but also to ask to what extent, through their respective budgets, they are fulfilling their constitutional obligations. We hope that the analyses will not only generate national debate on quality of spending and accountability but will lead to better state budgets in the future.

Consequently, rather than offer opinions, we adopted a facts-based approach to the analysis of the 10 states budgets. We relied on publicly available and official data. For ease of Doing Business in Nigeria, we relied on the most recent World Bank survey, the National Bureau of Statistics (NBS) for the Poverty Profiles and Unemployment, and Universal Basic Education Commission (UBEC) for school enrolment and JAMB for tertiary admission.

A major challenge that we faced in the exercise was the difficulty in accessing the budgets. Most of the states do not have websites with uploaded budgets. Even states that have functional websites have very little information on their annual budgets. Only Lagos and Gombe have detailed budgets online. 

Nasarawa has nicely-printed copies of the budget distributed widely and easily accessible in the state. This unusual scarcity and secrecy around state budgets create conditions of poor accountability and lack of transparency in governance. Invariably, our governance is weakened by the refusal and inability of state governors and assemblies to make their budget readily available to ordinary Nigerians. How can citizens hold governors accountable if they do not know what is planned, budgeted and implemented?

One noticeable trend in the budgets is the inability of state governments to collect taxes and thereby generate internal revenue. Only Lagos was the exception with IGR constituting73 per cent of total revenue in 2012. Only Kaduna State raises enough IGR to pay the salaries of its three arms of government without monthly FAAC handouts. Most states have high personnel costs, attributable to the appointment of unreasonably large numbers of political appointees. As an example, until recently, the governor of Bauchi State had over 900 assistants.

This is in contrast to Gauteng Province in South Africa which includes in its boundaries the cities of Johannesburg and Pretoria, with a GDP that is more than 20 times that of Bauchi State, whose premier has a maximum of five special assistants. What makes the case tragic in our context is that most of the ‘assistants’ make no meaningful contribution to the development of the states.

We can illustrate the above point further by the fact that the civil servants and political appointees do not generate enough revenue to even cover their salaries. Of the state budgets analysed, only Lagos and Kaduna have IGRs that could cover their personnel cost.  The others like most states in the federation have been unable to device strategies to raise enough for their personnel costs.  Edo’s IGR will fund 83 per cent of its personnel cost, Anambra’s would fund 74 per cent, Akwa Ibom 65 per cent, Nasarawa 53 per cent, Gombe 30 per cent, Bauchi 26 per cent and the worst case scenario is Zamfara whose IGR would fund only 19 per cent of its personnel costs – less than one out of its five employees.

Virtually all the 36 states of the federation are dependent on federal allocation for their overhead and capital project requirements. In 2012, even the best state Lagos has a recurrent budget which is 80 per cent of its IGR.  The IGR of the nine other states, like most other states in the federation, will not even cover their recurrent budget. Akwa Ibom’s IGR covers only 6.3 per cent of its recurrent budget; Zamfara’s can only cover 7 per cent, Bauchi’s 11 per cent, Gombe’s 11.9 per cent, and Anambra’s 18 per cent. The better performing states are Benue whose IGR will pay 26 per cent of its recurrent budget, Nasarawa’s which cover 31 per cent, Edo’s 37 per cent and Kaduna that internally generates 52 per cent of its recurrent expenditure.

One other trend emerging from the foregoing is that most of the states are also spending more on running their governments than on improving the welfare of their people and investments that will enhance their productive capacity. These are governments of the people but not for the people – but to serve the political elite.

With the exception of Akwa Ibom State that earmarked 83 per cent of its 2012 budget for capital expenditure, which is more than the 70 per cent required for developing countries to ensure sustainable development, most state governments’ spend nearly half of their revenues on recurrent expenditure, with Nasarawa (60% on capital) and Zamfara (63%) being the notable exceptions.. The states are therefore not allocating sufficient amounts to the development of both social and economic infrastructure, nor are they saving for future generations.

Given the infrastructural deficits in the country, one expected that states’ governments would expend bulk of their resources not only building physical infrastructure but improving the living standards of citizens through provision of better schools, hospitals and security of life and property. Sadly, not enough of this is being done. If this pattern continues, it will perpetuate not only the underdevelopment of the federating units in particular but the country in general.

States develop and prosper when those in charge of governance recognise both the challenges they face and the endowments available take advantage of. Generally speaking, the endowments in most states range from agricultural resources, to minerals, tourism and human capital. Lagos has no minerals or agricultural land but has leveraged on its ‘locational’ and commercial advantages. For many of the other states, it is either these natural resources or human capital.

•To be continued