07/08/2019
Repositioning Nasarawa State Towards Sustainability
Nasarawa State is one of the states in very poor fiscal health classified as one of the 17 States in Nigeria that are bankrupt with internally generated revenue that is less or a little more than 10% of Federal Accounts Allocations based on 2018 statistical data provided by BudgIT and NBS. Furthermore, as at April 2019, domestic debt of the State stood at N90 billion with an eternal debt of US$59 million. Total revenue earnings for 2018 stood at N85billion. This amount represented 57% of budgeted figures of N148.7, signifying a paucity of revenue. The percentage of the State’s debt in relation to its annual revenue is 128% which is more than double the 50% level recommended by the Fiscal Responsibility Act. This further paints the precarious state of the financial position of the State and the limited options available to it. This is why the State is ranked very low on the sustainability index.
A synopsis into the 2018 details indicates an average monthly statutory allocation from the Federal Accounts Allocation (FAA) of N3.7 Billion and average monthly Internally Generated Revenue (IGR) of N514 Million giving a total average monthly revenue of N4.29 Billion. Meanwhile, our average monthly personnel cost is N2.01 Billion and overhead cost of N2.43 Billion, giving a total average monthly recurrent expenditure of N4.44 Billion. This means, the State is running on a deficit of about N150 Million on its recurrent expenditure only! These figures are in spite the payment of LGA salaries in percentages and N18,000 minimum wage. In financial terms, Nasarawa State could be classified as bankrupt as can be seen by the inability of the LGAs to pay their salaries using the whole of their statutory allocations!
The State is faced with an impending rise in personnel cost due to the recent minimum wage bill signed into law. This is in addition to the numerous challenges of infrastructural development facing the State. Whereas the previous administration did a yeoman job in developing roads and other infrastructures in Lafia and mostly urban centres, a huge gulf exist in the rural areas where a large percentage of people live and need to be opened up for economic growth and development. There is a huge mismatch between financial capacities and responsibilities.
What Can be done
The man on the saddle as Governor of Nasarawa State, Engr Abdullahi A. Sule has an unenviable job cut out for him, but I believe he is the right man for the job considering his wealth of experience in corporate governance. His feat in turning around the fortunes of African Petroleum when he held sway as the Managing Director and know-how acquired while managing one of the Dangote conglomerates should come very handy to lead the State out of troubled waters. Our Trouble-Time Governor has to find ways to save cost and increase internal revenue earnings.
The Governor has started taking the right steps by firstly trying to identify areas of cost savings. The setting up of a committee to reposition the Civil service and identifying areas of duplication is pertinent. There are obviously redundant workers and overlapping MDAs giving rise to a bloated bureaucracy with a high wage bill and overhead cost. This situation is exacerbated by payroll fraud at both the State and LGA levels. Urgent actions are required to redress this situation.
Similarly, the inauguration of the Investment and Economic Advisory Council with a proposed Nasarawa State Economic Development Strategy (NEDS) by the Governor also seeks to provide the necessary enabling environment to turn the State into an investment destination in the areas of agriculture, solid mineral and manufacturing. Successes recorded here would create employment for the teeming youths and open up new sources of revenue to the State. However, the gestation period is long before the benefits will begin to roll in, if and when the investors come.
How Can it be done
The indication by the Revenue Mobilization, Allocation and Fiscal Commission (RMAFC) to review the revenue sharing formula is a welcome development, hoping that the State will get more. However, the State needs to position itself to be self-sustaining rather than depending on Federal Allocations. Moreover, there are emerging global realities that awaits economies that depend on oil with slowing growth in the world economy and trade conflict between US and China likely to push oil prices down by nearly $30 from its current price according to some estimates. It may be ambitious, but we must aim to stop depending on statutory sharing of oil revenue. The potentials are there.
As it stands, the government requires deft public financial management to navigate itself from the current quagmire. States/LGAs cannot exist just to pay salaries with a yawning gap in public infrastructure. There is always great expectations from every new government and there is already palpable frustration among the citizenry as the financial crunch in the State bares itself. The old adage is to cut your coat according to your size, but these days, you cut your coat according to your pocket! The state must reposition itself in the face of reality by trying to do more with less and perhaps adopt some of the following suggested actions for a way forward:
1. Immediate and full implementation of the Treasury Single Account (TSA) for all government accounts including those of all the tertiary institutions in the State. Governments needs to track and know the revenue at its disposal to implement the budget and block loopholes for revenue leakages.
2. There should be immediate and rigorous implementation of an Integrated Payroll and Personnel Information System (IPPIS) for the State and LGA Civil Services. There are many instances of ghost personnel and dual employment within the civil service that we cannot afford with dire financial challenges. Those found to be behind payroll fraud must be made to face the full wrath of the law.
3. A reputable financial advisory company should be immediately engaged to rigorously ascertain the actual pension/gratuity liability of the State, undertake a full biometric verification and documentation of pensioners as well migrate the State into the contributory pension scheme. There is an urgent need to clean the pension house of any skullduggery.
4. The State needs to work with the FCTA, and relevant agencies of the Federal civil service to ensure that the tax deduction of all Federal workers resident in State but working in Abuja should be paid to the State coffers. This is just and equitable as these workers live and enjoy the social services provided by the State.
5. There are lots of small businesses as well as small holder farmers operating within the informal sector, which excludes them from the tax bracket or there are those deliberately avoiding taxation. Efforts must be intensified to organize these farmers into cooperatives to provide them incentives and open them up for taxation.
6. The State can seek multi-lateral financing from the World Bank, AfDB or the Islamic Development Bank in order to improve the business enabling environment, strengthen fiscal management and accountability, which are necessary ingredients to attracting the much needed investment.
The Governor will require to take hard decisions with a possible backlash from the people, shun a flamboyant lifestyle, maintain only a productive workforce and embark on economic development that can attract investment and create jobs. Some of the actions would be painful but, all well-meaning citizens of the state have to wake up to our reality and support the government in this onerous task.
