What Options Are Available for State Funding?, By ‘Tope Fasua
I believe that our youth and the not-so-young should be deliberately focused on by our leaders, in solving our myriads of problems and that as we solve those problems, we will unleash value and productivity and therefore government revenue will increase. To increase the chances of that happening, we need to organise and tidy up ourselves.
There’s a reason I have never contemplated becoming a state governor. But I won’t tell it straight away.
About a year ago, a friend who just contested for the APC ticket in Ekiti State asked me to put together an economic paper which he could use if he wins the ticket and becomes governor. I was a bit stumped I must confess. What do I tell his government to do? Increase taxes on already poor people? Dig up the ground and look for gems? Borrow huge amounts from the bank? Quarrel with the federal government. Rely on ‘foreign donors’ who also have price tags? Anyway, one thing that occurred to me then was that a new government in Ekiti should make it a point to encourage indigenes of the State to return home. I used the East of Nigeria as example, where their first real estate investments go back to the village, thereby causing a spurt of cash flow among those left back there. I believe this strategy is still valid.
My friend’s APC primary is done and dusted with, and I am somewhat involved in that foray, as the chairman of another party. It was a sorry sight to behold on Saturday May 12, 2018 as hundreds of ‘members’ of Action Democratic Party (ADP), supporting Segun Adewale for governor, scrambled for Gala/Biggy sausage in the premises of the hotel where our event took place. The level of food poverty in Ekiti is appalling. Something is amiss, beyond Fayose’s mismanagement, or the mismanagement of the guys before him. There is something fundamentally wrong with state funding in Nigeria. I believe this even goes beyond the restructuring question, by which states are angling for total control of all resources in their domains. If states will have control over all their resources, they will then have the kind of problems that our federal government has today: Same issues with slush funds, mismanagement, scarcity, and then debt. How well has the federal government performed with all the resources and powers in its kitty? Have governors not proven to be more wasteful? Can a state have a different economic philosophy from all other states around it and the country as a whole? Have we not seen that when a single state ‘does well’, it tends to attract the most desperate people from other states?
And so another friend, interested in the Imo governorship, asked me the same question casually the other day, as we rode in the car. That question made me think of fleshing out my thoughts on this subject.
The Big Question
Many people angle to be governor only to get famous and then spend four – or eight – years complaining about how their predecessors emptied the treasury. In the first place, what does anyone expect? That predecessors should not undertake any project and leave all the cash flow for their successors? This calls to question the ability for strategic planning on the part of most of our governments. Before aspiring to become governor, a serious person should have weighed all the possibilities and the reality on ground. Being a governor should not give anyone space to complain, while the people suffer.
So, if a governor happens on an empty treasury plus huge debts for projects that cannot be traced – like they usually do – what should they do to raise funds and run a reasonable government? Let’s explore some alternatives.
Usually the easiest way out for governors – and presidents – is to incur new debts wherever they can find such. The idea is to show some results. But as we may know in our own personal affairs, debts are usually easier to get into than to exit. That is not the only issue with debts though. The real issue is that it creates a illusion of progress, and that no matter the fact that some are labeled with humanitarian togas, they are still business decisions. Their rates may be low, but they are still business decisions. Indeed we often forget that rates like 3 per cent, 4 per cent, 5 per cent or 7 per cent are quite high if the loans are coming from European or American jurisdictions, where rates have almost flatlined. Still we have to pay back at some point. Longer term debts are worse, as they lull us to sleep entirely and all of us are likely not to be here when the creditor will show up. Sometimes I fear that the nation has already been sold by this present regime, as we have never binged on debts like we have done lately. The other day Nigeria was thinking of a debt of $46 billion for its rail sector alone! We have never taken such magnitude of loans for one sector and at a go. We certainly cannot manage such. All states are on the take as well. The wahala is that we are using dollar-denominated business loans to fund projects that have no cashflow, in the hope that somehow, remotely, they will cause economic activity and we will be able to what? Have tax unwilling people repay? All the governors know that they will not be there when the trouble comes. And the creditors are coming for the soul of the nation. Yes, the body, spirit and soul of Nigeria will be demanded in the next round of debt collection. We escaped one in 2006 and have unbelievably sunk into another, such that even the usual suspects, the International Monetary Fund (IMF) and the World Bank are having cause to complain and warn us. Truly, we have never been more insane.
I deliberately used the word ‘taxes’, just to blindside us a little. Both government and the governed usually think only of ‘taxes’. But taxes don’t have to be called ‘taxes’. And they don’t have to be a huge burden on payers. Small rates of taxes are better for collection. And we know that the core issue for Nigeria is the way the taxes are spent. If Aba women could riot over oppressive taxes in 1929, it is only our ‘modernisation’ (our American dream illusion) that is preventing us today. Nigerians need to be on the streets protesting the current unimaginably blatant way our ‘taxes’ are spent on nonsense. Our ‘lucky’ government officials – politicians and top civil servants – are enjoying an unwarranted and unprecedented level of luxury based on the ‘taxes’ that we pay. It’s not like this anywhere else in the world. The other day, I was having a discussion with some guys on social media over whether presidential contestants should try and use the roads to at least know what our people are going through. It was surprising how many normal Nigerians believe that it was okay for government officials or top politicians to fly rather than use the roads, and that extends to government officials avoiding our public schools for their children, while patronising the best abroad, or hospitals abroad, while neglecting the ones here. Shocking indeed that many of those complaining of bad governance on social media would actually be part of the oppressors or already are. The golden rule in good governance is that public officials MUST use the services they provide, otherwise it will never get better. At least they need to get first-hand experience of what is happening. The situation right now is that the entire nation is a disaster zone. Drop a foreigner here from a country anywhere in Europe and s/he would marvel at our level of backwardness as reflected in our public facilities.
Many aspirants for governorship positions today would readily hinge their quest to transform states on the ability to mine solid minerals. It is a bright idea but as an accidental environmentalist, I do have some issues against digging up vast amounts of the land in search of these minerals. Here we don’t have good regulations around the environment.
However my qualification of the word ‘taxes’ needs to be explained. The fact is that government can hide little amounts in different avenues for collection and that would be part of its revenue. It is even smart for government to sometimes ignore the raw taxes that people avoid the most (PAYE or company taxes), and collect other revenues like rates, fines, fees, levies, duties, and charges for the use of facilities. Technology can be deployed to ensure collection, as we have seen lately with the Treasury Single Account (TSA) and other initiatives. The government is already doing something like this with our Value Addes Tax (VAT). It may be 5 per cent today but what people do elsewhere – even in Ghana where it is 17.5 per cent – is to net off every year i.e. you deduct what you paid from what you collected and remit the rest. Here they collect 5 per cent from all sides and on almost every transaction. So, the effective rate is at least 10 per cent – or more for those who don’t collect any VAT on behalf of government.
For the states, the trick is to organise society by enforcing fees, fines, rates, charges, duties. A state where people know their limits, where one-way driving attracts stern fines, or illegal dumping of waste, and where people know that they have to pay manageable fees for use of some government facilities would actually be an organised state and would attract tourism, be rid of crimes, and make progress. It’s as if many of our governors are too busy chasing bigger fish to be bothered about these lines of cash-flow.
Solid Minerals and the Exclusive List
Many aspirants for governorship positions today would readily hinge their quest to transform states on the ability to mine solid minerals. It is a bright idea but as an accidental environmentalist, I do have some issues against digging up vast amounts of the land in search of these minerals. Here we don’t have good regulations around the environment. What is more? We usually dig up those minerals just to sell abroad. We don’t care what they are used for there, and often promptly import the same minerals back in expensive finished products like phones, TVs, cars and so on, in a perpetual marriage to trade imbalance and deficit. Also, as it is in other sectors, technology has evolved in mining, and we cannot hope to compete in this area, using decades-old thinking. I believe mining of solid minerals should be a business-driven idea but regulations must be super-tight as this is often an area replete with disputes and sharp practices.
Governors are complaining about the extent of the exclusive list. Some researches have revealed that this may not be a particularly big issue because states have got involved in sectors like rail and power, which are supposed to be exclusive to the federal government. Still the list should be reviewed and lessened. Also the 56 per cent of resource allocations to the central government must be reduced to no more than 20 per cent. The federal government has obviously lost grip of its construction and maintenance of infrastructure around the country. It should begin to hand off these. State governors too should begin to show vision and foresight, enough to be trusted with much more resources.
That said, pending when we can amend laws, smart governors should continue to chip away at the exclusive lists and stand up for their people. And they should start by inspiring confidence through the choices of lifestyle they adopt.
And so what we find are governors complaining about how the other guy spent all the money, and they themselves get into their lives of luxury and cannot be bothered about the people. Most governors are owing months of salaries or pensions, or both. It’s tough to justify why a sane person will want to be governor of a Nigerian state today given the problems, especially when they haven’t given the matter very deep thought. Again no governor should ordinarily keep money for his or her successor to spend. But they should also not entirely mortgage their states in the name of highfalutin, harebrained projects. In my State, Ondo, the new governor says he inherited N220 billion in loans from his friend and predecessor. It’s impossible to tell where such monies were spent in that State, where apart from the capital, all else seem to have fallen to pieces. Truly, we aren’t progressing at the pace that we should be maintaining.
So, what could be the way forward? Something sustainable and manageable. This puzzle should not be easy to solve but the first thing is to be truthful to ourselves. Governance is not meant to be a walk in the park, and certainly should not just be about photo ops or egotism.
The puzzle to solve is that if a government must borrow, the project it finances MUST generate at least a fair portion of the cashflow for its repayment. That is a tall order but a good place to start. Borrowing to build primary schools, or even roads, from abroad or the commercial bond market, is simply a stupid idea. Humanitarian projects (even essential ones like education and health) should be funded from self-generated cashflow, and grants. For commercial or foreign currency borrowing, there should be a ROI – Return on Investment – clearly stating projections and how the financials would be achieved. You could borrow therefore, to develop tourism in your state, as long as you generate enough money to ensure that people can find a way to your tourist attraction. Also, you can only tax people who are breathing and producing. You cannot tax dying people. The sight of hundreds of people scrambling and fighting over gala sausages in Ekiti comes to mind. The entire multitude of them are untaxable. This is where public sector jobs come into play. Many of them could be employed in low-paying jobs in our villages – tourist guides, environmental workers, low-level health workers, trained teachers.
…first and foremost, the revolutionary governors who will transform Nigeria, should first stand to scrutiny. They should be ready to lead spartan lives of example. What we have seen in the majority are wastrels, cocky fellows who soon give up trying and resign to grabbing their own from an unfortunate people.
We have ignored the fact that our public sector has been small and toxic for too long. There are thousands of job opportunities in every state in Nigeria. Those jobs must be created, especially to reintegrate our rural areas to some level of modernity. According to Jerry Rawlings in a 1990s interview he granted to an Italian journalist, our cities and villages have a toxic, parasitic relationship. The cities sucks the villages dry – of farm produce, which they buy for cheap and price down during harvest seasons, of human resources as boys rush off to cities for useless jobs like the riding of ‘okada’ bikes, etc. Our salvation seems to lie in the ability to reintegrate our villages with the path of progress. This is where we all missed the mark of development in black Africa. Our nationalists were too enthralled with the allure of developing cities, building skyscrapers – of course with technology from foreigners – at the expense of inclusive development that span our entire countries. But by now, those of us who took over from them should have corrected earlier mistakes… only that we are compounding the problems with even more egregious choices.
And so, whether at national, state or local levels, we are in dire needs of philosopher-kings. We are in dire need of leaders who will redefine the way we think, who will think deeply and bring out the best in their people. We need leaders who will understand the need to develop our most important resource – our human base – because it is only by doing so that we can achieve sustainable development. This will happen by sustaining intense, relevant public education, which will explain civic responsibility to our developing generations and make them productive. We need leaders who understand the urgency of now. We need leaders today, who will rethink the public sector and disperse them to every corner of the nation, to provide much-needed services and to show government presence. We need leaders who understand that this is the only way to harness our disparate and stranded human resources. We need leaders who understand that a trained responsible citizen means great cashflow for the government. We need leaders who understand that you can only tax the productive; the taxable. We need leaders who understand that the ‘majority’ which should ‘carry the day’, in any democracy, is actually our unborn, because they are ultimately the largest in numbers, except we intend to become extinct as a specie or race sometime soon. And so our decisions today should always ask the question: What will our unborn think about this? This should be the golden rule.
But first and foremost, the revolutionary governors who will transform Nigeria, should first stand to scrutiny. They should be ready to lead spartan lives of example. What we have seen in the majority are wastrels, cocky fellows who soon give up trying and resign to grabbing their own from an unfortunate people. And then the people clam up and look for ways to avoid whatever their obligations are. And a vicious cycle ensues. We need communicators for leaders; governors who will explain very succinctly to their residents at each step of the way how their money is being spent. There is nothing wrong if a governor briefs his people daily through a live TV programme; or these days maybe via Facebook Live and so on. This way, such a governor can achieve voluntary compliance with laws and tax obligations. It is the loss of trust that is at the bottom of our issues as a people.
The debate still continues. I propose a systemic and sustainable approach to funding state development. I posit that a single youth, living in a conducive environment, with guidance from his/her leaders, and a mindset of patriotism to this nation, can create something that will bring all the money a state and the world need. I believe that our youth and the not-so-young should be deliberately focused on by our leaders, in solving our myriads of problems and that as we solve those problems, we will unleash value and productivity and therefore government revenue will increase. To increase the chances of that happening, we need to organise and tidy up ourselves. It is not everything that is about money. An authentic leader can show the way and others will follow. Little incentives can work magic. Our higher institutions could be put to work to solve real problems and our academia should stop thumbing their noses at society. A governor can unleash the power of intellectualism in his state university and polytechnics in a way that shifts focus onto them and brings the world and their chequebooks. I believe that there is no problem too tough to solve if only we try.
But back to where I started – Ekiti. Over 30 big boys – and a couple of big girls – vied for the governorship seat in a single political party, of recent. You’d wonder what they see in the State. I haven’t seen any of them – with the exception of Tunde Afe of Abundant Nigeria Renewal Party (ANRP) – bring out some out-of-the-box ideas that show he is ready to rethink the challenge. I may be wrong though, but all I hear is still how salaries will be paid, and how hospitals or schools will be built everywhere.
The State still has a lot to learn from South-East Nigeria. Ditto most South-West states have lessons to learn. States like Ekiti, Ondo, Oyo, Edo, Osun, Ogun have large populations of people in the U.S.A, U.K. and Europe in general. It is still standard practice for us in that region to push our children out there. But there is no way our society will develop if all we do is use hard-won money to send our children abroad – sometimes for the bragging rights. When those children become successful, they should come back home and build the home-front. No one will do it for them. And those lovely countries where they run to were built by the citizens of those countries – even when it may not have made business sense to do so. Our people first buy houses abroad and in commercial centres before thinking of home. Where then will economic activities come from? A massive homecoming with focus on real estate to promote urban and rural regeneration will work magic for states like Ekiti. Aside from this, Ekiti should transform itself from being a Fountain of Knowledge, to a Fountain of Innovation. Knowledge is nothing if it doesn’t lead to innovation and a better life for the people. Ekiti’s knowledge seems to be increasing the poverty among its inhabitants.
This is certainly not acceptable.