Published On: Wed, Dec 20th, 2017

Cross Rivers State’s budget of smokes and mirrors

When a state’s budget rises from N301 billion in 2017 to N1.35 trillion in 2018, it is not just a sign of fanciful accounting but of fiscal delusion; it is a poor man’s dream masquerading as a rich man’s fantasy. An increasing number of analysts have noted that the Cross Rivers State government’s spanking new budget for the year 2018 is a dangerous bridge between wishful thinking and irrational expectations.

According to economist and entrepreneur, Surajudeen Akinyemi, chief executive officer of Surak 713, ‘budgets as plans must be seasoned with reason and tempered with foresight, as General Gordon Sullivan of the United States Army once said “hope is not a method”.

Cross Rivers State’s 2017 budget certainly had no illusions of its stature as it fell from a relatively modest N 303 billion in 2016 (revised downwards from the earlier N350 billion) to N301billion, representing a 0.7 per cent drop from the previous year, most of which was tilted in favour of capital expenditure which carved up N220 billion or 73 per cent of the budget while recurrent expenditure of N81 billion or 27 per cent, took up the rest. Huge capital expenditure outlays have been a consistently strong suit of the Cross River state government in the past two years but with its low industrial base, straggly commercial economy and its heavy public sector dependence, recurrent expenditure tends to exceed budget provisions. The new fiscal arithmetic has, therefore, shocked watchers of the state’s treasury finances. Dr Adi Bongo Faculty member of the Lagos Business School (LBS) notes that, ‘optimism is a good thing, but to fly a kite on a playground and to do so in public office are two separate issues; while on the playground it is fun, in public office it is irresponsible’, he says.

According to Bongo, ‘even a housewife knows that she should plan based on immediate past income trends and not on what is likely to come; nobody (or at least no sensible person) makes financial arrangements on the basis of a recently purchased lottery ticket. Ayade appears to be a great gambler and has decided to bet the house that Cross Rivers State will win the 2018 revenue lottery!’. But unfortunately, few people share Ayade’s optimism. On a compound average annual basis Cross River state has so far grown budget size by 23 per cent per annum over the last seven years. The new budget growth, therefore, represents 15 times the average annual growth rate of the state budget in a single fiscal year. Seun Alatise, an economist and head corporate finance at Century Finance and Securities notes that, indigenes of the state would soon be, ‘seeing pigs fly’. He says that the assumptions of the state’s 2018 budget are, ‘heady, unattainable and queer’.  Even a state like Lagos state that generates internal revenue of 70 per cent of its annual budget with a current IGR of about N40billion monthly or N480billion annually just recently extended its budget expectations to N1.046trillion for the year 2018. Therefore, for Ayade’s Cross River State to match Lagos State in budget size says a lot for guts, ‘but not much for fiscal prudence and conservatism’, observes Alatise.

Agriculture, a revolution yet to come

Cross River state’s bold fiscal adventure will be capped by a narrow economic base that has been unable to expand significantly in last few years and is unlikely to do so over the next twelve months as investors become knowingly wary of the states rising crime rate and lack of security. The state’s largest internal revenue sources come from agriculture and the public service sector. Although there has been some gradual progress in primary agricultural production, nevertheless the processing segment of the agricultural value chain that might raise revenue, grow employment and improve skills has not been managed in a manner would achieve significant results over the next twelve months. This is in contrast to developments in Akwa Ibom State that has already entered into a broad private sector partnership with a United Arab Emirate (UAE) consortium to develop an agricultural export-processing zone. The Akwa Ibom initiative would involve the development of a deep sea port, and could hurt the competitive capacity of Cross Rivers State in the area of agricultural processing unless both states enter into joint venture agreements.

According to a source close to the Akwa Ibom transaction that declined being mentioned in print, ‘we have already gone some distance in our own Environmental Impact Assessment (EIA), as we review the government’s earlier data for levels of silting, geology and topography. We are getting some pretty decent results, but in 2018 we expect, everything being equal, to be able to move, men and material to the zone’. This is in stark contrast to the Calabar Export Processing Zone (CEPZ) which has remained a monument to Nigeria’s waste and plunder.

Cross River state’s once flourishing oil and gas business is in lockdown (after losing 76 oil wells to its neighboring, state Akwa Ibom , and the federal government). The once burgeoning sector has since taken a catwalk across state lines to the wealthier, Akwa Ibom, resulting in the money from the Federation Accounts derivation fund drying up. This has hurt the states monthly FAAC revenues and its ancillary internal revenues that come from oil and gas companies resident in the state. This is not necessarily bad but it does require creative thinking on how to diversify the economy and whip up alternative streams of incomes to replace the lost revenues from previous oil well assets. While Christian Nestell Bovee might have been right when he observed that, ‘No man is happy without a delusion of some kind. Delusions are as necessary to our happiness as realities.’, nevertheless in the serious business of state budgeting delusions are too dangerous to go unrestrained.

Debt, high and scary

With the fourth largest debt stock for any state in the country, Cross River states illusion of grandeur can come crashing down fairly quickly. Its proposed 275km superhighway project designed to run from the deep sea port of the state to Northern Nigeria and then on to Chad and Niger Republics is not just grandiloquent in its ambition it also lacks a sound financial blueprint to internalize and optimize economic benefits to the state. In all likelihood it will end up becoming another white obelisk similar to Tinapa, in Akpabuyo. The revision of the project’s cost from its initial N800 billion to N200 billion, notwithstanding, the immediate merit of the superhighway is difficult to see. The state needs to work on revving its agricultural sector by providing industrial estates that create infrastructure for sustained agricultural production. Revenues from taxing the profits of companies in these specialized agricultural zones would improve the state’s IGR, raise employment levels and reduce the youth crime rate. Jumping from a budget of N301billion in 2017 to N1.35 trillion in 2018 is an amazingly careless leap of confidence destined to crash in a heap. Christian Ita, the governor’s Chief Press Secretary, seems to have enjoyed some leisurely time in the sun and unfortunately suffered sunstroke, when he reportedly said that, ‘…those who are long native to envelope budgeting were quick to derisively dismiss it as unrealistic and unachievable, serious states like Lagos went back to the drawing board X-raying every detail of the proposed statement of income and expenditure of Cross River State’. Comparing Lagos State to Cross Rivers State is like comparing the states Drill Monkeys to Republic of Congo’s Grauer’s gorillas. Apart from the clear difference in the size and structure of the two state economies, the operating status of their treasuries are as dissimilar as Efikis to Yoruba.

To be sure, both states publicize high and rising debt profiles but to believe that this represents photo opportunities for fiscal chest thumping is, to put it mildly, queer. Lagos state plans to achieve a monthly IGR figure ofN60 billion in 2018 which comes to N720billion for the whole year and represents a traditional 70 per cent of the state’s normal annual revenue.  Given the fact that Lagos state now qualifies as an oil producing state and will begin to share in the nation’s oil derivation fund, the projected rise in its IGR by 50 per cent makes good fiscal sense. The same cannot be said of Cross Rivers state.

Ayade’s boldness is refreshing and his attempt at a new approach to public sector budgeting alluring but the quantum leap in the states projected revenue still gives analysts butterflies as it creates a feeling of acrophobia(fear of heights) not many care to stomach; falling from Olympian heights even in a dream is a nasty experience.

Cross River’s 2018 budget makes a play at Blore’s razor, which states that in a situation where one is faced with two competing theories, the smart move would be to pick the funnier. The problem here is that it is not certain that the beautiful maidens of Calabar will have much to smile about come December 2018 when the government’s budget falls flat on its nose but perhaps the electrifying dance steps they perform with their delightful waists at the colourful annual year-end Calabar carnival will make up for the disappointment?

© 2017, Hallmarknews. All rights reserved. Reference and link to this site is required if you wish to reuse any article.

Reactions from Facebook

comments and opinions

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Most Shared

Recent posts

  • Oshiomhole tackles Saraki in fight to finish

      By OBINNA EZUGWU Adams Oshiomhole, National Chairman of the All Progressive Congress (APC), has since made the removal of Senate President, Dr. Abubakar Bukola Saraki from office as Senate helmsman his major preoccupation. But his plots in this regard, as well as his hard-line stance on otherwise delicate issues, are not only threatening APC […]

  • Financial crisis in power sector endanger banks

    By AYOOLA OLAOLUWA   Except prompt actions are urgently taken, the banking sector could face another major financial crisis, no thanks to their heavy exposure to distressed power firms operating in the country. According to concerned experts in the power industry, a large chunk of the loans to power firms might be impaired likely throw […]

  • NSE: Investors devise survival strategies

    By TESLIM SHITTA-BEY As the Nigerian All Shares Index (ASI) scrapes past a downward slanting tunnel, a growing number of investors in the local stock market have started to rebalance their equity portfolios. Investors who have largely been exposed to fast moving consumer goods industries (FMCG’s) are beginning to redirect scarce cash to banking sector […]

  • Interim Dividends: Naira rain at GT Bank

    By OKEY ONYENWEAKU With its year on year yield at 9.98 per cent, GT Bank Plc has become the toast of local investors as its stock price bounced from N24 per share at the start of 2017 to a more recent price of N38. Audited accounts for the bank released last week saw gross earnings […]

  • Python Dance 3: Uwazurike condemns planned military operation in the South East as unnecessary intimidation

    By OBINNA EZUGWU Senior lawyer and president emeritus of Igbo think tank group, Aka Ikenga, Chief Goddy Uwazurike has condemned the planned military operation in the South East zone, Python Dance 3, as unnecessary and an attempt to intimidate the people of the zone. Chief Uwazurike who registered his displeasure over the planned military exercise […]

  • Stocks: Oil sector stocks defy economic downturn in 2nd Quarter

    By TESLIM SHITTA-BEY Despite a mild economic recovery in 2018, Oil sector stocks listed on the main board of Nigeria’s stock exchange are only recently shaking off the anguish of last year’s sector melt down. Indeed of the six leading Oil-related companies that have published 2nd quarter results in 2018, Seplat beat the blues by […]

  • Bears clobber Bulls in major rout

    By FELIX OLOYEDE After a stellar 2017, The Nigerian Stock Exchange (NSE) has collapsed to becoming the fourth worst performing equity market on the global over the last six months as political pressure and a United States of America (USA) interest rate hike intensify investor’s apathy. The local bourse plunged 18.24 per cent over the […]

  • PDP Coalition: anxiety mounts over flag bearer

    By OBINNA EZUGWU With the recent defection of Senate President, Abubakar Bukola Saraki and Sokoto State governor, Aminu Waziri Tambuwal to the People’s Democratic Party (PDP), the list of anticipated presidential hopefuls under the main opposition party’s platform is complete. But it now faces an imminent danger of being torn apart by the collision of […]

  • H1: Zenith Bank waves the magic wand

    By OKEY ONYENWEAKU Despite weak economic tailwinds, Zenith Bank Plc is fashioning a path to stronger corporate earnings in the year 2018. The bank’s management has recently struck a pact with lower operating expenses relative income while putting a spear through the heart of nonperforming loans (NPLs) as the banks half year (H1) 2018 results […]

  • I will disclose my 2019 presidential ambition in due time – Saraki

    By OBINNA EZUGWU Senate President, Abubakar Bukola Saraki has said he will tell Nigerians whether or not he will run for president in 2019 when the time is ripe. Saraki who stated this while responding to questions from journalists during his world press conference earlier on Wednesday in Abuja, following Tuesday’s invasion of the National […]

  • 2019 election budget: NASS leadership meets INEC in Abuja

    The leadership of the National Assembly (NASS) is currently in a meeting with the Chairman of Independent National Electoral Commission (INEC), Prof. Mahmood Yakubu. The meeting is a special hearing on INEC’s budget for the 2019 elections. The ongoing meeting was also tweeted via INEC’s official handle, @inecnigeria, where it was stated that the meeting […]

  • At last, Senator Akpabio dumps PDP for APC

    Former Minority Leader of the Senate, Senator Godswill Akpabio, on Wednesday officially decamped from the Peoples Democratic Party (PDP) to the All Progressives Congress (APC). Akpabio was welcomed to the ruling party at a rally organised for him by the Akwa Ibom State chapter of the APC. Some of the senators in attendance were Abdullahi […]

  • Sack of DSS boss: Osinbajo has made it clear invasion order didn’t come from him – Uwazurike

    Senior lawyer and president emeritus of Igbo think tank group, Aka Ikenga, Chief Goddy Uwazurike has commended Nigeria’s Acting President, Professor Yemi Osinbajo for summoning courage to sack the Director General of the DSS, Lawal Daura over Tuesday’s invasion of the National Assembly, noting that the Acting President, has, by his action, made it clear […]

  • NASS siege: Acting President, Osinbajo sacks DSS boss, Lawal Daura

    Acting President, Yemi Osinbajo, has sacked the Director-General of the Department of State Service (DSS), Lawal Daura following the siege on the National Assembly by security operatives on Tuesday. Osinbajo’s spokesman, Laolu Akande, disclosed Daura’s sacking on his Twitter handle, @akandeoj. He wrote, “AgP Yemi Osinbajo has directed the termination of the appointment of the […]

  • We want to restore Abia to its deserved glory—Otti

    Okey Onyenweaku Dr. Alex Otti, a forefront contestant for the post of Governor of Abia State, yesterday Sunday August 5, 2018 said in Lagos that he was gunning for position of Governor of the State to change the story of the Igbo man in Nigeria and perhaps the world. Otti, who met with friends at […]

  • Stocks: Investors scout for hidden value as market turns bearish

    By TESLIM SHITTA-BEY As Nigeria’s Stock Exchange’s All Shares Index (ASI) dips below a year-to-date yield of zero per cent (-4.58 per cent at the close of the previous week’s business on Friday), a growing number of investors have put gun sights on emerging hidden value opportunities in the market. So far the results have […]