Editorial
Editorial: State govts and the case for new order of business
With the inauguration of governors in the 36 states of the federation on May 29 2019 to conclude the general elections process, public expectations are again high as usual for the fulfillment of some promises that have been made by delivering dividends of democracy. Nigerians are again hopeful that the next four years will change their economic conditions.
Unfortunately, such hopes may be dashed as before unless there is a concrete and definite change in the way the business of governance is done in the states. Usually public attention on the performance of government is focused on the federal government. This has generally diverted attention from what is happening at the states and insulated the governors from public scrutiny. Meanwhile almost half of the national income, 46 percent, goes to the states through the Joint State/Local Government Account.
However, if the lives of Nigerians are to improve, the quality of governance at the states and local government levels must of necessity improve because they are the closest government to the people. To improve the standard of performance by the states requires a change in the order of doing business, because we cannot be doing the same things and expecting a different result. There are difficult challenges facing the country such as poverty, unemployment, insecurity, corruption, etc., and it will require the collective effort of all the tiers of government to address them.
Nigeria is not made up of the federal government alone; as a federal system there are three tiers of government. Although our federal system is skewed disproportionately in favour of the centre, it is still a federal system and there are responsibilities for each tier. The weakness of our system is that the states have been so decimated and castrated that the federal structure looks more or less quasi. But in principle and constitutionally it is still so.
Without the states and by extension, local governments, operating optimally to justify the huge resources at their disposal, the much needed development of the country will be an illusion. The federal government alone cannot develop the country; perish the thought. Unless states live up their responsibility and the reason for their existence, Nigeria will be like a bird flying with one wing; it can never meet up to its full potential.
Unknown to many Nigerians especially the workers and those in support of the recently approved minimum wage of N30,000 per month, the personnel cost of government may have been increased by almost 67 percent after the adjustment. For the federal government, this means that government would spend over N6 trillion of the budget of N8.9 trillion; for the states some may spend as much as 80 percent on personnel cost alone.
Based on this proportion of the budget going to the personnel cost, government will be borrowing about N3 trillion for both debt service and capital expenditure. This will be the highest borrowing level since this government assumed office in 2015. Even in 2018 when the budget was N9.1 trillion the level of borrowing was less than N2 trillion. While the federal government can borrow to reflect this new cash deficit reality, the states may not directly borrow but will all the same accumulate new debts through unpaid salaries and pensions, and contract sums, which may result to more abandoned projects.
Given the insolvent and low Internally Generated revenue conditions of the states, experts say that only a life-line or increase in the revenue allocation formula will save the states from financial collapse. Generally, all the states except Lagos, Rivers and Ogun depend heavily on the FAAC allocation for their survival. Apart from these three states, no other state has enough IGR to too sustain itself. This means that a lot of work and new thinking is needed in the states to change this situation to make them more self reliant.
World’ first billionaire, Andrew Carnegie had a financial management approach which forms the basic principle in cost accounting, namely, “control your cost and you are guaranteed a surplus or profit”. Also in times of declining income, the first survival step is to reduce cost. This should be recommended to all the states. It is an unsustainable policy to use government as a source of employment, because paying salaries will be an opportunity cost for the foregone development.
So the states must reduce their cost beginning with the number of political appointees; the era of using political positions to reward party supporters should be gone. With what happened to Governor Akinwumi Ambode of Lagos and may be awaiting Governor Godwin Obaseki of Edo, two men who refused to play the usual party patronage game, other governors will be cautious treading that route for political survival. But the truth is that without doing so regardless of the political cost to the person, governance will be absent and development denied.
Secondly, governor should turn states’ liabilities to assets by reducing its involvement in some economic and social activities which the private sector can best provide. By ceding certain areas of its activities to private people, it will reduce its own overhead and budgetary provisions. For instance, government should not be involved in transportation, hospitality, secondary health care, industry and trade, and some white elephant projects such as airports and stadiums etc. The purpose is to create an economy which can be taxed as a source of IGR.
Thirdly, the states must improve their personnel capacity and processes. The difference between the federal and states is that the former tries to tap available human resources in the country. On the other hand, the states have limited their recruitment to politicians around them without seeking out the best materials from the state to contribute their expertise to its growth and development. By so doing they deny the state the opportunity to be the best they can.
Finally, states should introduce transparency and best practice in their processes, particularly in their payroll and contracting to ensure prudence and value for money. A characteristic feature of contracts in states is their overvaluation and shoddy execution, which is a double jeopardy for the people – who lose money and don’t get the required value for the projects. Without checking the leakages that occur through payroll and contracts, any effort made to improve states finances will not be effective.
This newspaper believes that the critical role of the Governors’ Forum has been lost to politics and enlightened self interest. It has departed from its original mandate and objective which is to serve as a peer review mechanism for the governors to exchange governance notes and model their best performing colleagues. This is no longer the case as party politics has overshadowed every other thing. We believe that this noble purpose should be revived to improve governance at the states’ level.
