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Infrastructure deficit: How taxation can help

By Sola Gbadebo
19 January 2018   |   3:45 am
Over the past two years, the bulk of the Lagos State government revenue has been spent on capital projects, specifically physical and social infrastructural development.

Over the past two years, the bulk of the Lagos State government revenue has been spent on capital projects, specifically physical and social infrastructural development. In 2017, 54 per cent of the state’s income was voted to infrastructure; in 2016, it was 58 per cent and for 2018, a massive 67 per cent capital expenditure is proposed.

Such substantial deployment of revenue to infrastructure is indeed justified if real progress must be achieved. And this is particularly so for Lagos State, which has an estimated population of 24 million people, projected by the African Development Bank to double by 2025. The latest United Nations’ report on population, World Population Prospects: The 2017 Revision, projected that Nigeria will unseat the United States as the third largest population in the world by 2050. The impact of such population growth will be very profound on Lagos State, being the commercial hub of the country and the most attractive destination for Nigerians and immigrants. A population figure of 24 million or 48 million in 2025 creates a huge infrastructure challenge, no doubt. The state government’s spending on housing, education, healthcare, roads, utility and others must be large and progressively increase yearly in line with the population growth rate otherwise a huge infrastructural deficit and its attendant challenges will wipe out any progress made.

Lagos today is a huge construction site, with infrastructural renewal and redevelopment taking place in virtually every corner of the state in priority sectors. The interchange at Julius Berger, the point of entry into Lagos via road, has been transformed and is emblematic of the very visible progress that Lagos State has achieved over the past two years, in infrastructure terms. The road stretching from Old Tollgate all the way to Oworonshoki leading to the third Mainland Bridge has been redesigned and the bus stops clearly set back and widened to help ease traffic flow and check the perennial intractable tailbacks on that axis. A regular visitor to Lagos State who has been away for three, four years will be pleasantly surprised to see the physical transformation all around.

Many of the roads within the state have undergone or are undergoing rehabilitation, upgrades or maintenance such as the Oshodi-International Airport Road, the Agric-Ikorodu to Lagos-Ibadan Expressway link road, Ajah Jubilee Bridge, the 8-lane Mile 2-Badagry Road, the Ikorodu Road, the Okota-Ago Palace Way Road, the Agege Abattoir Road, Lekki-Epe Expressway expansion, the Ogba-College Road, Freedom Road and Admiralty Way, Lekki, the Iju-Ishaga Road, the Abule-Egba and the Pen Cinema flyovers, and construction of modern interchanges like the ones at Berger and Oshodi, pedestrian bridges and lay-bys. The government is investing in a modern and efficient transportation system: rail (Okokomaiko-Marina; Iddo terminal-Alagbado); Automated Guideway Transit (Ikoyi-VI-Ajah line); Bus Rapid Transit (BRT) plying routes across the state; channelization of the waterways (construction of jetties and provision of ferry services).

Other renewals and rehabilitations of facilities are equally ongoing in education, healthcare services, where schools and medical facilities are being upgraded and reequipped to modern standards, and in the utility, housing, and environmental sectors. The Cleaner Lagos Initiative, for instance, has seen reforms in the Lagos State Waste Management Authority (LAWMA) to make it more efficient, provisioning of scientifically treated land fill sites, functional compactors, and transfer loading stations, among others.

Despite this frenzy of construction/renewal activities, the infrastructure is still some way in meeting the demand from the ever-growing population. “Even with the kind of resources we have in Lagos, it is very clear that there is a huge infrastructural deficit in the state,” says the Lagos State Governor Akinwunmi Ambode. Indeed, the state has spent about N1 trillion on infrastructures over the past two years. This is but a drop in the ocean. According to experts, the state needs to spend over $120 billion (about N44 trillion) yearly on infrastructure to meet the infrastructure requirement of its population in the next decade. The government projects that it would need to spend an average of N18 trillion yearly for the next 18 years to bridge the infrastructure deficit. “The resources are not so huge as to make Lagos globally competitive and deliver the social infrastructure we all crave,” says Ambode, speaking on the huge infrastructure financing handicap.

In spite of the glaring financing gap, the state must still press on with its developmental agenda if it hopes to transform into a mega city and remain competitive alongside Tokyo, Hong-Kong, Sydney or other global cities. The state government must be commended though for the impact it has achieved in infrastructure development despite the meager resources available. It is clearly a function of smart thinking and smart deployment of available resources. However, the quest by the state government to “deliver a clean, safe and prosperous Lagos” will require, no doubt, smarter thinking, but most importantly a deeper pocket. “So, where will the money to drive the Lagos of our dreams come from?” queries Ambode.

The state’s share of the national purse, including capital receipts and federal transfers, is a paltry 34 per cent, on average, of the total revenue mix over the past five years. Internally generated revenue (IGR), particularly tax, contributed the bulk over the same period. With revenue from the centre dwindling consistently, this revenue mix is not likely to change anytime soon; IGR will continue to be the main component of the state’s revenue. So, it is fairly obvious that the state government needs the buy-in of Lagos residents, via tax compliance, to boost its revenue. That shouldn’t be difficult as many Lagosians trust the state government to judiciously utilize its revenue. The government has over the years shown fiscal prudence and discipline and has managed to utilize taxpayers’ money to achieve some level of success in transforming the state, despite its limited resources. Already, the government has set itself an IGR target of N50 billion monthly or N720 billion this year.

To achieve this target, the government is not so much about tax increases but importantly plans to strengthen its tax laws through amendments and enactments and make them more inclusive and efficient, and to reflect current economic realities. Of the about 13 million taxable population in Lagos State, only about 30 per cent pay their taxes consistently and accurately. It is expected that the new tax administration, with up-to-date tax laws, will address this. Enforcement is also one area the state government needs to be proactive to ensure compliance. The ongoing voluntary asset and income declaration (VAID) scheme is a very laudable campaign. The scheme has set a grace period till March 2018 for full compliance by all, after which offenders will face prosecution.

The state government has presented a N1.046 trillion budget for 2018, with a large chunk (67 per cent) of that figure expected to go into infrastructural development. The governor outlined some of the targeted projects for the year to include, four new stadia in Igbogbo, Epe, Badagry and Ajeromi Ifelodun (Ajegunle), an ICT incubator centre in Yaba, completion of five new art theatres, Igbonla Light Industrial Park, support for SMEs via the state’s Employment Trust Fund, investments in embedded power programme to provide regular power to Lagosians, completion of the ongoing Epe and Badagry Marina projects, completion of housing projects in Gbagada, Igbogbo, Iponri, Igando, Omole Phase I, Sangotedo and Ajara-Badagry under the Rent-to-Own policy, commencement of the rehabilitation of 181 local government roads, relocation of Mile 12 market to Imota, and continuous gridlock resolution, among several other projects.

For long, Lagos residents, and indeed Nigerians, had complained that the impact of government is hardly felt. That is no longer the case in Lagos. Since 1999, successive governments in the state have demonstrated good faith and each has shown that it can be trusted with taxpayers’ money to deliver people-oriented and impactful projects. Now is the time to show support and encourage the government to do more. One of the best ways to do this, experts have agreed, is by ensuring we exercise our civic responsibility of paying our taxes, consistently and accurately.

Gbadebo is Lagos-based tax consultant and public affairs commentator.