Lagos faces cash crunch as abandoned projects litter state

By AYOOLA OLAOLUWA

The gloomy economic situation in Nigeria has impacted negatively on Lagos, the commercial capital of the nation, as the state government is currently struggling to finance governance and execute capital projects owing to months of dwindling revenue, Business Hallmark findings reveal.

The problem is exacerbated by the drastic reduction in allocation from the federation account, arising from decline in oil revenue as well as dwindling internally generated revenue from generating agencies.
According to findings, the increasing cost of running government coupled with the need to service its huge foreign and domestic debts, despite diminishing revenue, have led to the abandonment of key infrastructural projects such as access roads, public schools, health care centres, bridges and stadiums in the state hitherto referred to as a huge construction site.

Checks around the state indicate that several projects are either going on at a very slow and skeletal pace or totally abandoned due to paucity of funds. Some of the projects affected by the cash crunch include the Light Rail Project; Agege/Pen Cinema Flyover; Agric/Ishawo; Badagry Expressway and the 4th Mainland Bridge; among several others. It was also observed that while most of the 181 local governments roads approved for construction by the Akinwunmi Ambode administration in 2017 are abandoned, work has not yet started on several others. BH however observed that works have resumed on some of the roads, albeit at a slower pace.

Agege/Pen Cinema Flyover
The Agege/Pen Cinema flyover project was flagged of by former Governor Akinwunmi Ambode in June 2017 and was expected to be completed in December 2018. However, the project was abandoned in December 2018 with no activity on the site for several months. In July 2019, the project contractor, Hitech Construction Company was mobilsed to the old Abeokuta end of the project to do some skeletal work.

Due to the slow pace of work on the project, coupled with heavy rain falls, traffic situation has worsened in the Agege/Pen Cinema, Road; Abule-Egba and Fagba axis, with many Lagosians having various tales of woes to tell.

Lagos Light Rail Project
Initiated towards the end of the administration of former Governor Bola Ahmed Tinubu in 2008, the ambitious Lagos Light Rail Project was slated to be completed in 2011. However, the project, being constructed by the China Civil Engineering Construction Corporation (CCECC), was abandoned by the administration of former Governor Babatunde Fashola in his first term in office. Fasholas administration however did some work on the project but could not complete it before his exit in 2015.

Ex-Governor Ambode promised to deliver the project in 12 months when he won the governorship election in 2015. However, after failing to deliver the project, he shifted the date to December 2016. The pace of work on the project which decreased drastically towards the end of his regime on May 29, 2019, is now abandoned with no set date for completion.

Lagos Badagry Expressway
Like other acclaimed projects, the construction of the Lagos Badagry Expressway has stalled due to paucity of funds. Worst hit are the Alakija and Mazamaza to Okokomaiko sections. Though, the newly elected governor, Babajide Sanwo-Olu, promised that rehabilitation work will commence on the road in June, three months later, nothing visible is on ground.
Alaba Road project

This project has also been abandoned. The project was started two years back by the Ambode administration. There had been no explanation for the present situation of the project. Many projects, particularly roads and bridges in the state are also stalled.

While the political power game which played out among powerful blocs in the state prior to the 2019 general election contributed to almost grinding the state to a halt, the paucity of funds has further compounded the problem. Also the Lagos Assembly denied the governor access to the 2019 budget which was presented and passed by the House but was never sent to the governor for assent. So effective, the former governor only had three budgets in his term of four years.

CASH CRUNCH

After several denials by the state government, Gov. Sanwo-Olu last week at the Platform to mark the Independence Day admitted for the first time the precarious financial state of the government. According to him, the previous government left huge debts, some of which are irrevocable instrument that are first line charges deduct-able at source, as well as huge unfunded contracts. He said that government will be compelled to prioritize its expenditure to align with the present financial situation.

However, Lagosians are worried that government account is shrouded in secrecy and insist that a governor should publish the full details of the state account to ensure transparency and also inform the people on the true condition of the state.
For example, Governor Sanwo-Olu had in June 2019 signed the N873.5 billion 2019 Appropriation Bill of the state into law, promising that the budget would focus on the completion of abandoned projects in the state. The 2019 budget is N287.68 billion lower than that of 2018 which stood at N 1.046 trillion.

Speaking to BH in Lagos, the Chairman, Lagos State House of Assembly Committee on Economic Planning and Budget, Hon. Gbolahan Yishawu, said that rather than the widely held believe that the house prevented former Governor Ambode from signing the budget due to political reasons, the house withheld it because the total revenue proposed for 2019 was not realistic.

We observed during extensive deliberation with various ministries, departments and agencies, that the Internally Generated Revenue (IGR) Order needed to be reduced as empirical evidences did not support level of collection. We decided to reduce it from N91 billion to N60 billion, he said.

Several financial reports obtained by BH indicate that though Lagos suffered revenue losses in the last four years owing to the drop in FAAC, the situation improved a bit in 2018 when the state got more than what it received in three years of 2015, 2016 and 2017.

Despite the improvement, the state finances have not significantly improved as the cost of governance and executing projects have continued to rise compared to static revenue.

According to a recent report by the Nigeria Extractive Industries Transparency Initiative (NEITI), Lagos State generated IGR of N382billion in 2018, compared to N260billion from FAAC. Added together, the state received N642billion revenue in 2018.
The National Bureau of Statistics (NBS) in a report released in April 2019, said Lagos State generated N333.96bn as IGR in 2017, as against 201.935bn from FAAC. Also in 2016, while the state got the sum of N178,606,493,854.14 from the federation account, it realized N302.42bn as IGR in the same year.

According to Proshare in its Fiscal Sustainability Index Analysis, State of States 2018, released on September 19, Rivers State sits on top of the Fiscal Sustainability Index due to its robust revenue profile and manageable recurrent expenditure obligation.

The states actual revenue of N209.12 billion in 2017, when juxtaposed with its recurrent expenditure obligation of N141 billion in the same year, indicates Rivers is fiscally stable, and able to cover its recurrent expenditure without borrowing.

However, Lagos dropped from 2nd to 4th place on the Fiscal Sustainability Index notwithstanding the states fiscal advantage.

Lagos Internally Generated Revenue (IGR), when compared with other states, is relatively high. Its IGR as at the end of 2016 was N287 billion, higher than its 2015 level of N268.2 billion. In 2017, the state planned a recurrent expenditure spending of N305 billion or N25 billion monthly.

With its IGR not expected to grow significantly above N300 billion, and its share of FAAC revenue in the first six months of 2017 at N6.6 billion, Lagos is expected to meet its recurrent expenditure obligations. However, Lagos unusually high overhead costs and debts continue to weigh its revenue down said Proshare in the report.

Value Added Tax

Due to its market size, Lagos tops in terms of VAT revenue in the first six months of 2018. Lagos VAT revenue receipts between January and June 2018 averaged N8.033 billion monthly up from the average of N6.38 billion in the first six months of 2017.
Debt Stock

Total debt stock of Nigerian states increased significantly from the 2012 level of N1.79 trillion to N4.49 trillion in 2017. With increased inability to meet recurrent expenditure obligations and growing pressure, Lagos, like other states has resorted to more debt uptake.

The total debt of Lagos State – the most indebted state in Nigeria – rose from the 2014 level of N456.8 billion to N813.04 billion in 2017, accounting for 18.08 percent of the total debt stock of state governments.
A state government official who spoke to BH in confidence said the economic crisis the country is currently facing has taken a huge toll on the states finances.

The near collapse of the national economy has created serious financial stress for all tiers of government in Nigeria. As you know, the state principally derives its revenue from taxes. So when businesses are not doing well, it will impact on their ability to make profit, which will also have impact on their paying taxes.

Many buildings are unoccupied in the state, particularly in Apapa, because of the bottlenecks on the road leading to the nations ports. Unoccupied premises mean lost income to both owners and government. Several tax-paying businesses have wounded up.

Also, the rate of construction in the building industry has gone done. Those that want to build will need to buy lands, get papers, do survey, right of occupancies and certificate of occupancies, get building approvals; do soil tests among several needs. These are sources of revenue to the government. What do we have today? They have been negatively impacted.

Importation has also dropped due to strict policies put in place by the Federal Government. That also means lost revenue for players in the haulage and maritime sectors. Several people have lost their jobs and are unable to pay income taxes.

As if these problems are not enough, the nation has been experiencing loss of revenue due to the fall in crude oil prices. When it is not fall in prices, it is disruptions in crude supply to our international buyers.

Though the situation has recently improved, the cumulative effect is what we are currently witnessing. While revenue is not increasing as envisaged, the cost of running government is rising every day. But let me assure you that the state government is formulating strategies to improve her revenue base, the official declared.

Meanwhile, the state government has denied the suggestions that the state is broke, blaming the lull in activities to the hiccups caused by the ongoing raining season.

The Special Adviser to Governor Babajide Sanwo-Olu on Works and Infrastructure, Engineer Aramide Adeyoye, while speaking with BH, said massive infrastructural projects, including road construction and rehabilitation would commence as soon as the rains subside.

Adeyoye, who noted that the government was not unaware of the deplorable state of some roads in Lagos, added that major construction work could not be embarked upon during the rainy season to avoid wastage of resources.

She pleaded with Lagosians to show more understanding and continue to support the state government in the drive to adopt a scientific approach in improving road infrastructure.
She listed the Lagos/Badagry Expressway, Agege Pen-Cinema Fly-over, Agric/Ishawo Road, Ojokoro Phases I and II, Command/Ejigbo NNPC and several other projects among priority projects that will receive urgent attention.