Lagos state sound budget good government

By Nasir Ahmad El-Rufai

In continuation of our focus on state budgets’ with a view
to analyzing their viability, fiscal prudence and
accountability to citizens, the spotlight this week is on
Lagos.
Lagos state is one of the 13 states in the country which
have presented a fiscal responsibility bill to the state
House of Assembly, but unlike some states which have
enacted the law and barely implemented it, Lagos State
exhibits a high level of transparency and accountability in
its budget presentation which is detailed and available on
the Lagos State Government’s website.
Lagos State was created on May 27, 1967 by virtue of
State (Creation and Transitional Provisions) Decree No. 14
of 1967, which restructured Nigeria’s Federation into 12
states. Prior to this, Lagos Municipality had been
administered by the Federal Government through the
Ministry of Lagos Affairs as regional authority, while Lagos
City Council (LCC) governed the City of Lagos. The
metropolitan areas (Colony Province) of Ikeja, Agege,
Mushin, Ikorodu, Epe and Badagry were administered by
the old Western Region. The State took off as an
administrative entity on April 11, 1968 with Lagos Island
serving the dual role of being the State and Federal
Capital. However, with the creation of the Federal Capital
Territory of Abuja in 1976, Lagos Island ceased to be the
capital of the State which was then moved to Ikeja. With
the formal relocation of the seat of the Federal
Government to Abuja on 12 December 1991, Lagos Island
ceased to be Nigeria’s administrative capital.
Mobolaji Johnson was the first Governor of the state;
however Alhaji Lateef Jakande was the first elected
Governor of the state who served from October 1979 to
December 1983 under the Unity Party of Nigeria (UPN).
More recent and significant Governors of Lagos are Buba
Marwa (1996-1999), Bola Tinubu (1999-2007) and
Babatunde Fashola who was elected in 2007.
Babatunde Fashola is a lawyer by profession who excelled
in his professional career which spanned over a decade
and a half leading to his recognition as a Senior Advocate
of Nigeria. In 1999, he joined the public service and
served in various capacities with the Lagos State
Government until his rise to the position of Chief of Staff
to Governor Bola Tinubu. In his first four years in office,
marked improvements were noted within the state – the
cleanliness of the metropolis which residents and visitors
could attest to, improvements in roads and traffic within
the state, improved transportation systems with the
introduction of BRT and ferry services across the state –
Fashola is without doubt, one of the few “performing”
governors in the country and it must be credited to
Tinubu that politically, his succession strategy has worked.
The ground work for most of what is visible today in Lagos
was jointly laid by Tinubu and his team including the
current governor Fashola. The result is focus and
continuity in governance rather than “witch-hunting” of
predecessors which has bedeviled other “anointment
arrangements”. Fashola’s comparatively stellar
performance in office makes many wonder if professional
politicians are best suited to deliver on the difficult job of
good governance!
Lagos is the most populous state in Nigeria with over five
per cent of the national population estimate. Ironically, it
is the smallest state in terms of land mass; the state has
an area of 356,861 hectares of which 75,755 hectares are
wetlands. Interestingly, of this population, Metropolitan
Lagos, an area covering 37% of the land area of Lagos
State is home to over 85% of the State population making
it a densely populated state. UN estimates that at its
present growth rate, Lagos state will be third largest mega
city in the world by 2015 after Tokyo in Japan and Bombay
in India, with a population nearing 30 million!
According to the World Bank and DFID, Lagos’ 2009 GDP
is estimated at N4.163tn. Lagos which is a mega-city is the
largest contributor to the national GDP at 18%. Lagos’
GDP ranks 6th after Cairo ($98 billion); Johannesburg ($79
billion); Cape Town ($75 billion). Its GDP equals that of
Kenya ($29.5 billion) which has a higher population
(30million) than Lagos. Lagos boasts of a higher GDP than
Cameroun ($20.6 billion), Cote d’ Ivoire ($19.6 billion)
and Ghana ($15.2 billion) which have populations of 19,
21 and 24 million people respectively.
The South-west zone of Nigeria is the most prosperous
part of the country. According to National Bureau of
Statistics Poverty Profile 2012 which studied poverty
incidences nationwide using 2009 and 2010 data, poverty
is classified in four categories; absolute poverty (based on
daily food intake), relative poverty (determined by
household expenditure) and purchasing power parity
(dollar per day). 59.1% of the people in the region live
above poverty line which is appreciable given the
humongous 77.7% in the North-West region that live well
below poverty lines. 50.1% of people in the South-West
survive on about a dollar a day while only 25.4% are
absolutely (food) poor which is impressive compared to
other states in the country. Gini coefficients are used to
measure income inequalities and in Lagos, a co-efficient
of -26.2% indicates a decrease in income inequalities
within Lagos State between 2003 and 2010 – something
the governors should be proud of! Lagos has the highest
percentage in Nigeria (85.4%) of people who can feed
themselves. Statistics also indicate that 40.8% of the
population in Lagos live above poverty lines. Though there
is room for improvement in the poverty indices, it is much
better than states like Bauchi and Sokoto where only
16.3% and 13.6% respectively live above poverty lines!
Lagos state is one of the few in the country which has a
well detailed and structured budget made available to the
public on the state Government’s website which is fully
functional. The budgets are properly explained and
broken down by the MDAs with expenditures and
revenues properly accounted for. Also, the state posts its
budget performance reviews online which indicates
transparency and accountability in governance. It is ironic
that even with the enactment of freedom of information
and fiscal responsibility acts, most State Governments still
hide their budgets and breakdowns from the citizens of
their states and the general public.
In the 2012 budget, there was an increase from the
previous years’ budget of N450.8b to N491.9b (9%). The
total revenue for 2012 is estimated at N399.8b and
impressively, the ordinary revenue (Lagos IGR, other IGR,
dedicated revenue, etc.) of the state is N289.7b which is
about 73% of total revenue. This is more than double of
the N110.2b that Lagos expects from the federation
account in 2012. Lagos is therefore not one of the
numerous “parastatal states” that cannot pay salaries
unless the FAAC meets in Abuja! Compared to some other
states whose budgets have grown astronomically with no
commensurate growth in IGR, the budget of Lagos state
has steadily increased alongside its IGR as shown by an
8% (N262.6b to N289.7b) increase in ordinary revenues
between 2011 and 2012. So while the federal government
preaches fiscal consolidation without practicing, it is Lagos
State that is practicing it without all the noise!
Comparing both years’ budgets, there is a projected
increase in ordinary revenue (IGR inclusive) by about
N27b between 2011 and 2012. Taking the case study of
Bauchi state whose budget was analyzed last week, it’s
projected increase in IGR for this year was just N1b!
Unlike the case of Bauchi state where the government
spends money on maintaining many commissioners and
924 aides that it’s IGR cannot support, Lagos State
Government has 23 commissioners and 20 Special
Advisers, and yet is performing much better. In fact,
looking at the revenue earning capacity of Lagos in
comparison to many states of the federation is going from
one extreme to another.
Capital expenditure for 2012 is N258.3b (53%) while
recurrent expenditure is N233.6b (47%) of the total
budget. Although the ratio does not meet the best
practice of 70% for capital expenditure, it must be
acknowledged that Lagos enjoys the dual advantages of
limited geographic spread and legacy of inherited federal
infrastructure, and therefore does not need as much
greenfield infrastructural investments as other rural
states. What it needs though is high levels of spending on
maintenance and running costs. These are perhaps
reflected in the higher recurrent portions of the budget.
The government, in 2012 increased its recurrent
expenditures on education from N28.4b in 2011 to
N35.4b and justifiably too as there has been continuous
increase in both volumes and pass rates of SSCE
candidates from Lagos. The number of candidates who
obtained five credits in WASCE including English and
Mathematics has improved from a miserable 7.58% in
2007 to an impressive 21.11% in 2010.The 2010 National
Literacy Survey also shows that Lagos has the highest
literacy rate in any language. Increased allocation of funds
to this sector is definitely a commendable step in the right
direction.
The environmental sub-sector of Lagos state which
receives about 6% of the overall budget allocation,
recorded a huge leap from the N335m revenue generated
in 2011 to projected N2b in 2012. This is one sector which
the residents of Lagos have felt a visible difference. There
was a slight increase in health allocation from N32.9b in
2011 to N33.3b in 2012. In spite of the increase, the
health sector is expected to double its revenue from
N393m to N655m. Works and Infrastructure received
18% (N88.1b) of the budget reflecting investments to
address existing infrastructure deficits. The transportation
sector however, dropped in projected revenue by about
N400m whereas its budgetary allocation increased by
about 11% for the same reason.
The personnel cost budget for the entire Lagos State
government for 2012 is about N81.6b. This is less than
one third of its IGR and less than 5% of the federal
governments (N1,600b) staff costs, yet many would say
that Lagos runs better than Nigeria these days.
Departments such as lands, environmental protection,
works and infrastructure, transportation, and even the
judiciary earn sufficient revenues to cover their personnel
costs. In fact, the lands department earns enough to cover
all its recurrent expenditures while the state’s Ordinary
Revenue (N289.7b) can cover its total recurrent costs
(N233.6b) with a surplus of N56.1b. That is how a
federating unit’s finances should be!
In year 2011, Lagos State High Courts alone made
revenues of about N700m and are expected to earn about
N1.2b in 2012 which is higher than the IGR of most states
of the federation now depending on the Federal
Government for monthly handouts. The lesson and
experience of Lagos is this – each MDA is a revenue as well
as a cost centre. Each government department that offers
services charges some fees to cover all or part of the cost
of the service. That is how to run a department, state, or
country! My admiration for the business-like way Lagos is
run is clear by now.
Lagos is only state in the country which can survive solely
on its incomes from taxation. However according to the
World Bank Doing Business rankings 2010, the state was
ranked 25th out of 37 in Nigeria in terms of ease of doing
business. Lagos is not an agrarian state, neither is it
endowed with any mineral resources. It is therefore
disturbing that despite the huge amount of private sector
investment and potential, the business environment is far
from friendly. The authorities need to create a thriving
environment for businesses in Lagos especially since taxes
and land charges are the major source of fiscal
sustenance of the state.
All our states should learn lessons from Lagos not only in
the areas of budget transparency but fiscal independence
from Abuja, delivery of public services, investment in
education and even governance succession. With these
outlier qualities, it is not surprising that Lagos is run by a
party other than the PDP of today!

#CONSENSUS 2015