Cover Story
Sanwo-Olu’s gambit: N1.17,000,000,000,000
- To spend 63% on infrastructure
By AYOOLA OLAOLUWA
After one hundred and sixty five days of seeming apathy, Lagos State Governor, Mr. Babajide Sanwo-Olu, has signaled his administration’s intention to stop the slide, with the launch of an audacious plan to transform the nation’s economic powerhouse. The 2020 budget of N1.17 trillion present to the house of Assembly last week has given indication of the direction and commitment of his government to keep his promise.
The budget is committing 70 percent of revenue to infrastructure development which is expected to ease the increasing difficulties experienced by Lagosians especially with traffic worsened by bad roads.
The governor had swept to power on May 29, 2019, defeating his closest rival, Mr. Jimi Agbaje of the Peoples Democratic Party (PDP) in a ‘no contest’ battle that many experts had predicted would be vicious and arduous. Owing to the swift victory the governor and his All Progressives Congress (APC) recorded at the polls, many Lagosians had expected the governor to hit the ground running. However, the opposite was the case.
Confronted by many challenges, including the fallout from the crisis that rocked the state APC during its governorship primaries, dwindling income, a burgeoning population, together with the additional burden of being a former federal capital, Sanwo-Olu quickly lost favour with many Lagosians who concluded that the governor had gone to sleep.
To make matter worse for the governor, he was further exposed by the torrential rains that pummeled the state between the months of July and October which left most roads in the state un-motorable. Unable to withstand the poor state of infrastructure, angry Lagosians criticized and accused the governor and his administration of incompetence.
However, Sanwo-Olu demonstrated uncommon trait shared by many Nigerians leaders, who, rather than listen to the masses, abused them as whiners and wailers. Rather than angrily replying his subjects, the governor came out on many occasions to apologize for their sufferings, while promising he would soon address their concerns. And the governor is currently keeping his promise. In the last one month, the governor had unveiled measures aimed at correcting the rot to the delight of many residents.
On October 13, Sanwo-Olu declared a state of emergency on various dilapidated highways and carriages in the state, when he ordered massive construction work on them, beginning from October 14. The governor’s directive followed the conclusion of his series of meetings with eight multi-national engineering firms, which began in September.
The governor said all the eight engineering firms had been given the mandate to immediately mobilise their equipment to the sites and commence major construction works on the identified roads.
The contractors deployed by the government included Julius Berger, Hitech, Arab Contractors, Metropolitan Construction, Slavabogu Construction, China Civil Engineering Construction Corporation (CCECC), Rajaf Foundation Construction, Reynolds Construction Company (RCC) and RCF Nigeria Limited.
“This afternoon, we concluded a meeting with various reputable construction companies and all of them have been given the brief to immediately commence major construction work in various parts of the State. The exercise will begin tomorrow with palliative work on the selected roads, which are both on the Island and mainland divisions of the state.
“The contractors have been given the mandate to start mobilising their equipment to their respective sites without further delay. Their activities must first give our people an immediate relief on the affected roads so that there can be free flow of traffic even during the rehabilitation work,” the governor had said.
To complement the major construction work on the highways, Sanwo-Olu also ordered the Lagos State Public Works Corporation to carry out repairs of 116 inner roads across the state. This, he said, would be in addition to the over 200 roads already rehabilitated by the corporation in the last three months.
The governor said he was not unaware of the pain experienced by road users in the past few weeks, which was compound by persistent downpour. He appealed to residents to bear with the government while efforts were being made to assuage their pains and bring permanent relief to them.
“We expect the rains will begin to subside in the month of October and this is why we are mobilising our contractors to immediately start the major construction work on the identified highways and bring permanent relief to residents.
“I am giving all Lagosians the assurance that the contractors will start the construction in earnest and will deliver on the terms of agreements reached with them,” he said.
Sanwo-Olu said officials of the Lagos State Traffic Management Authority will be working round the clock to control traffic on the areas where the construction would take place.
While speaking with Business Hallmark, the Special Adviser to the Governor on Works and Infrastructure, Mrs. Aramide Adeyoye, listed some of the critical highways and roads to be constructed to include Ojota stretch of the Ikorodu Road, Motorways-Kudirat Abiola Way, Apogbon Highway, Babs Animashaun Road, Agric/Ishawo Road and Ijede Road in Ikorodu, and Lekki-Epe Expressway from Abraham Adesanya to Eleko Junction.
She added that there would be massive re-construction work on a network of roads in Ikoyi, Ikeja GRA and Victoria Island.
BH checks around Lagos also revealed that contractors have resumed work on several abandoned projects. Work, it was observed, has resumed at the almost 1 kilometer stretch Agege/Pen Cinema flyover which was abandoned in December 2018 by the administration of former governor Akinwunmi Ambode. The project is being done by HITEC Construction Company
Also, engineering firm, Reynolds Construction Company (RCC), has started work on the reconstruction of the Abule-Egba/Charity/Oko-Oba/Agege Road. Likewise, work is ongoing on at the Fagba/Jonathan Coker to Olayiwola Road in the New Oko Oba area of the state.
Further checks revealed that work stopped on several abandoned roads and projects due to paucity of funds. Some of the projects witnessing construction activities include the Light Rail Project; Agric/Ishawo; Badagry Expressway.
It was also observed that work had restarted on most of the 181 local governments roads approved for construction by the Akinwunmi Ambode administration in 2017 but abandoned towards the end of his administration. Gov. Ambode was denied a budget for 2019 by the House Assembly and had no money to continue the projects.
In his quest to move the state to the next level, Gov. Sanwo-Olu on November 8 presented an audacious budget of N1.17trillion for 2020 to the Lagos State House of Assembly. Christened “The Budget of Awakening to a Greater Lagos”, the budget, according to the governor, would give priority to the completion of ongoing projects.
A copy of the budget speech obtained by BH shows that the budget would be funded by projected total revenue of N1.071 trillion, and a deficit amounting to N97.53 billion. The budget size is higher than the 2019 budget of N873.5billion by 34 per cent.
In the proposal, N167.81 billion of the Recurrent Expenditure would be applied towards personnel costs and other staff-related expenses. This represented 22.02 per cent of the proposed total revenue, which was within the acceptable wage policy of 25 per cent of total revenue, and included a provision for the new minimum wage. According to the governor, the budget deficit of N97.53 billion will be financed by both internal and external loans.
“The capital expenditure amounts to N723.75 billion while the recurrent expenditure is N444.81 billion, giving a 62:38 capital to recurrent ratio.
“This, in our view, is strong for development. We have placed an increased focus on wealth creation, where we will take deliberate steps in courting a partnership between our people and various development institutions. In line with this, we have provided N11.8 billion as counterpart funds in preparation for various social impact schemes.
“In addition, we have made provisions for N7.1 billion this year, to provide for industrial hubs, parks, graduate internship programmes and virtual markets for artisans. This is in support for Micro, Small and Medium Enterprises, which are the engines for both economic and employment growth.
“Since revenue generation is the spine of any budget, this budget supports investment in our revenue generating agencies. This budget seeks to aggressively invest in and develop our education, health and other physical infrastructure sectors.
“Although our capital spending on works and infrastructure was just N31 billion as at September 2019, as against the 2019 budget proposal of N78 billion, it is our intention to spend N115 billion in 2020.
“Education will see a significantly increased capital budgetary allocation of N48 billion, an increase of 60 per cent over the 2019 provision of N30 billion.
“We must improve the standard and relevance of our education outcomes to our industries,” he said.
Sanwo-Olu also said that his administration would work together with local governments to strengthen early child education and teachers training/administration, while leveraging technology.
He said that similarly, in healthcare, government had provided for a capital expenditure of N33 billion, compared to the 2019 budget proposal of N21 billion.
Sanwo-Olu said that his administration would ensure that the primary healthcare institutions remained active and attractive to the primary healthcare needs of the people. Lagos belongs to us all; we will continue therefore to drive partnerships with the private sector in promoting health services within our institutions.
“Given the perennial challenges of flooding in the metropolis, we have tripled the capital budget provision to tackle this from N3 billion in 2019 to N9 billion in 2020,” he said.
However, some economic experts have expressed doubt over the ability of the state government to fully execute the ambitious 2020 budget. Some of the respondent, who spoke with BH in a telephone interview, said that though Lagos is not broke, the state like other states in the federation has been experiencing declining revenue in recent years.
They pointed to the 2019 budget of N873.5 billion signed by Sanwo-Olu in June 2019, which was N287.68billion lower than that of 2018 budget which stood at N 1.046 trillion.
They also noted that while the state finances have not significantly improved, the cost of governance and executing projects has continued to rise.
According to a lecturer at the Department of Economics, Osun State University, Osogbo, Dr. Tunji Bewaji, the near collapse of the national economy has not only created serious financial stress for the federal government, but all tiers of government, including Lagos.
“As you know, Lagos 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 nation’s ports. Unoccupied premises mean lost income to both owners and government. Several tax-paying businesses have wound 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.
Speaking to BH in June, the Chairman, Lagos State House of Assembly Committee on Economic Planning and Budget, Hon. Gbolahan Yishawu, had maintained 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 had said.
The experts argued that they have not been told what has changed between June and November to 2019 to make the state government believe it can achieve the impossible. However, others believe the budget estimate is achievable.
According to Mr. Tunde Fisher, Managing Partner at Prime Finance Group, the financial situation of the state has improved.
“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.
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 178,606,493,854.14 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 state’s 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 state’s fiscal advantage.
“Lagos’ Internally Generated Revenue (IGR), when compared with other states, is relatively high. Her 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.
Meanwhile, the state government has rejected the insinuation that the state is broke, blaming the lull in activities to the hiccups caused by the 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, denied the suggestion that lack of resources was responsible, insisting 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.
