Governor Akinwunmi Ambode recently signed the 2016 Appropriation Bill into law. The budget aims to solve key problems militating against rapid economic growth in the state. Experts are, however, worried about the budget implementation, its heavy reliance on personal income tax and the increasing debt profile of the State. WOLE OYEBADE reports. 

THE fanfare of the first working day of the Year 2016 at the Lagos House in Ikeja could easily have been mistaken for the New Year’s Day celebration itself. One after the other, exotic automobiles of all kinds cruised into the premises. Politicians, State Executive Council members and civil servants were stepping out from chauffeur- driven cars and walked straight into the State Banquet Hall, the venue of the event. They were welcomed into the hall by traditional troupe that entertained arrivals with local musical instruments. The occasion turned out to be the signing of the year 2016 Appropriation bill into law.

It calls for a celebration,” a state official whispered to a colleague in the hall. At a time when states such as Ekiti, Nassarawa, Enugu, Edo, Adamawa, Oyo and Ogun were presenting a sum of N67b, N77b, N96b, N115b, N120b, N160 and N200b, in that order, for the fiscal year, Lagos showcases a budget of plenty and the largest ever in the history of the state.  From N489.69b in 2015, the budget rose by 26 per cent in 2016 to N662.588b.

Ambode, who has since the run-up to the 2015 elections earned the “consolidator” moniker, indeed leads a government that promptly pays salary of over 12000 workforces. He had told the Lagos State House of Assembly on December 17 that the 2016 budget would go a step further to meet the needs of the Lagos masses.

The budget tagged, “the peoples’ budget 2016”, aims to address infrastructure deficits in the area of security, traffic gridlocks and job creation among others, the government stated.

Shortly after signing a copy of the budget, Ambode reiterated that the new Appropriation Law was an article of faith with Lagosians and has been tailored towards the realisation of the mission of delivering on his promise of a Lagos that works for all irrespective age, gender, tribe or status.

The budget comprises of N386, 933b Capital Expenditure, percent and N275, 655b Recurrent Expenditure, representing 58 and 42 per cent respectively.

The project lineup in the “peoples’ budget” includes construction, rehabilitation and maintenance of roads, including the 10-Lane Lagos-Badagry expressway and three flyover bridges in Ajah, Pen Cinema and Abule-Egba. The 27.5km Blue Rail Line project from Okokomaiko to Marina is to be completed; food security. In health, the state will commence Medical Health Insurance Scheme, e-Health programme and Omo-Eko Project at Massey Children Hospital among others.

Education ministry, headed by the deputy governor, Dr. Idiat Adebule, proposes flagship programmes such as a-meal-a-day (to be partly sponsored by Federal Government); ‘Ibile’ tablets for secondary schools pupils, coupled with the rehabilitation/upgrading of public school buildings/facilities, provision of books to libraries and free textbooks for public schools.

A renowned economist, Dr. Austin Nweze, who has been following the fiscal developments in the State, described the Lagos budget as quite ambitious, realistic but not without some reservations.

Nweze said that the budget outlook is good both for the State and Nigeria as a whole. Lagos economy is about number six largest economies on the continent and its economy is over 60 percent of the country’s GDP. “You also find that any growth in Nigeria’s economy starts in Lagos. So, we can see how important the budget is to us all.”

Dr. Femi Saibu, a senior lecturer at the Department of Economics, University of Lagos, is in agreement with Nweze. He said Lagos has a good standing in relation to the fundamental conditions that determine a successful budget, namely sustainable revenue source; social viability of its projects and programmes; strong and efficient institutional framework to implement and enforce compliance and economic realities of key parameters.

The two speakers, however, expressed concern about the source of revenue.
The State’s total revenue estimated for 2016 fiscal year is N542.873b, which shows that the balance of N119.714b will be funded through deficit financing – a combination of internal and external loans including World Bank DPO 3 loan which could not be accessed in 2015.

Commissioner for Economic Planning and Budget, Akinyemi Ashade, disclosed that the Lagos Internal Revenue Service (LIRS) is expected to generate N300b, equivalent to 78 percent of the total IGR.

At N300b IGR a year, the argument in some quarters suggests that the State is either underutilising its potential to generate revenue internally or has not fully disclosed its monthly IGR pegged at about N21b a month.
On the other hand, the state collected N58.273b from Federal Allocation over 12 months. As at August 2015, federal monthly allocation to Lagos stood at N12.5b, which had subsequently dropped.

Ashade hinted that the government has no plans to introduce new taxes, however, he said efforts would be made towards bringing in more citizens into the tax net especially the informal sector as well as through the adoption of an automated process to block leakages.

The Chairman of the Lagos Inland Revenue Service (LIRS), Olufolarin Ogunsanwo confirmed that no fewer than 5 million people are currently in the tax net, with a projection to increase it to 8.5 million taxpayers soon.

Ogunsanwo said that the 3.5 million gap was due to the 70 per cent of the informal sector that were not yet complying with the income tax regulations, adding that all efforts would be made to bring them in.

…Efforts would be made towards bringing in more citizens into the tax net especially the informal sector as well as through the adoption of an automated process to block leakages

Nweze, who lectures at the Pan-Atlantic University, Lagos, said that because of the pressure to be self-sufficient and to generate more revenue, the burden would obviously shift to the residents.
“It means you cannot do anything in Lagos without having to present your tax certificate. To face traffic offence, pay student school fees or anything else, you have to present your tax certificate,” he forecasts.

While more revenue might be made, Nweze is also concerned about the unintended consequence of such policy, which according to him, may create an unfriendly business environment capable of scaring away the investors.

Dr. Saibu added that the Lagos state government has the potentials to generate sufficient income from non-oil revenue especially tax and they can also secure some corporate partnership to execute the projects.

He said depending less on federation allocation had made Lagos State the most viable state in Nigeria without oil. But Government should avoid excessive fiscal exorbitant in tax revenue drive.

Another cause for concern is the debt implication of the budget. Experts though argued that there is nothing literally wrong with incurring some debt to build infrastructure for the people, but it is quite unhealthy to amass more debt on behalf of a generation yet unborn, they reasoned.

The Y2016 has deficit financing of N119.714 out of which N43b will be from the bond in the capital market later this year, bringing the total debt burden of Lagos to about N550b.

It would be recalled that the current administration inherited a debt burden of N430b from the immediate past administration, payable over the next 25 – 40 years.  Lagos debt to GDP ratio stands at three per cent, according to the state government.

Nweze, who felt sorry for the next generation that would have to pay some of this debt, said the state is better off exploiting huge revenue opportunities in tourism than widening the debt burden.

Another school of thought suggest that government should consider levying tax on religious organisations. The proponents argued that if the religious organisations are rich enough to acquire sites in choice place such as Oregun, Ogba and Ikeja (once owned by defunct manufacturing companies), able to build domes worth billions of naira and set up fee-paying facilities like schools, why not have them give to Caesar what is Caesar’s?

Executive Secretary/Chief Executive Officer, Financial Reporting Council (FRC) of Nigeria, Jim Obazee, recently at a forum in Lagos said that most of the religious organisations are entangled with non-charity ventures that are taxable under the law.
“If you set up fee-paying schools, hospitals and the likes under a church, there is a high likelihood that you are engaging in non-charitable activities within charity. If you are doing that, then what stops Dangote from setting up a mosque and having all his bags of cement, rice and sugar under it?,” Obazee said.

Analysts are unanimous that the foregoing concerns might be easily dispelled should the budget be well implemented and its promises fulfilled.
Saibu is of the opinion that the institutional framework of budget implementation in Lagos State is still bedeviled with a lot of inefficiencies and the current government must strengthen all agencies so that there could be improvement in budget delivery.