By Omodele Adigun
It seems the Lagos State Governor, Mr. Babajide Sanwo-Olu, finally caught their attention after saying local banks should lend a helping hand in developing Nigerian cities and states, particularly Lagos. Now, a consortium of Nigerian lenders “have thought very deeply about the fact that they only get better if Lagos becomes more efficient, and the country as a whole gets better if Lagos become more efficient”, says Mr Sam Egube, the Commissioner for Budget and Planning.
According to him, they have decided “to ensure that we are able to get the kind of funding that is cheap enough to undertake that kind of (rail) projects without breaking anybody’s back in the future.”
At the media presentation of the Facts Behind the Figures of 2021 Lagos State Budget , Thursday in Lagos, Egube, amid other commissioners, urged the country to come together, “through its various corporate and institutional mechanisms to ensure that we are able to get the kind of funding that is cheap enough” to bankroll capital projects.
Even though I raised a lot of comments on what we have done, it is clear that there is a lot that still needs to be done. And those things that need to be done come out of the size of the budget.So there is a rate at which Lagos must grow to address some of these things. It is not only to grow on the revenue side, but also to grow in the ingenuity at which we work with the private sector to deliver some of these objectives. We are thankful that last year, we achieved over 90 per cent of our revenue projections. Revenue is at the heart of what we are doing, and the Commissioner of Finance and myself spend times daily, monthly on self assessment, peer review mechanism with Mr Governor and the deputy governor, sitting to ensure that we are able to unlock the opportunities that we have in Lagos to grow our revenue line. We don’t have a choice other than to grow this revenue line. We don’t have a choice that to have a budget like this that address all the many important infrastructure requirements that we raised. That is why we were able to do we what we do. The lives of the people of Lagos are at stake if we don’t deliver on the budget. But we are convinced that we will deliver on the budget because we are clear on how to achieve this; we have invested in our revenue channels to do this. We are investing in our processes and improving our technology .
Our performance management system are bespoke. We have our hands on it to make sure that it happens.It is because of that faith that we believe that we will deliver.All that I have explained is to manage the downside risk to prevent it from occurring.
The 2021 budget is consistent with the THEMES agenda and designed to prioritise the completion of inherited ongoing projects
The total budget size is N1.164 trillion and will be funded from a total revenue estimate of N971.028 billion, comprising the following: Internally Generated Revenue(IGR), N723.817 billion; Capital Receipts, N71.811 billion and Federal Transfer, N175.400 billion.
A significant percentage of the projected IGR of N512 billion is expected to be contributed by the Lagos Intr=ernal Revenue Service(LIRS). We shall achieve this by expanding the tax net by simplifying the tax process, improving the work environment, training, and providing tools for our tax administration personnel. This will improve the efficiency in operations of all revenue-generating agencies.
We believe that there are huge revenue-generating opportunities in the state, including real estates, transportation sectors and our markets generally, etc. We will continue to use data and intelligence to unravel revenue opportunities and leakages.
We have continued to maintain a relatively conservative posture in our projection for Federal Transfers/Receipts compared to our annual run rate in 2020 in view of the production challenges within the oil sector by keeping our expectation at N175 billion.
The deficit of N192.494 billion is projected to be funded by a combination of internal and external loans. Our existing internal loans were restructured from an interest rate of 20 per cent to 12 per cent, and single digit interest rates in some cases resulting in a cost savings of about N12 billion.
Part of our achievement was the review of the 2018 Land Use Charge Law to accommodate our people’s yearnings and other initiatives like the E-GIS, E-Tax and the Lagos State Real Estate Regulatory Authority (LASRERA).
Health: A total of N97.26 billion was budgeted for the construction, refurbishment and equipping of our health care facilities across the state.
As part of our strong response to the pandemic, an additional N20 billion COVID-19 intervention fund was provided for the health sector.
Key projects executed in the health sector include the completion of the furnishing and equipping of the Maternal and Child Centre at Badagry and Epe; ongoing renovation of the general hospitals at Isolo, Ebute-Metta and Harvey Road; ongoing construction of the New Massey Children’s Hospital (when completed, it will be the largest children’s in sub-Saharan Africa), and flagging off the redesign and construction of 280-bed General Hospital, Ojo, Lagos.
Others include increasing the number of empanelled health facilities under the Lagos State Health Management Agency (LASHMA) to 205 to provide healthcare services under the State Insurance Health Scheme, and recruitment of 760 health workers to boost service delivery in the health sector. Considering COVID-19. Overall, the state did well with Year-2020 budget despite all the troubles. The Y2020 budget signed into law on December 31, 2019 reflected the administration’s goal of enhancing Lagos development. It anticipated a world without COVID-19 but the pandemic with its resultant health and economic impacts greatly affected the state like other geographies around the world and changed the context within which we execute our development agenda. In response to the pandemic and the need to mitigate the resultant effect, the budget was revised and signed into law on July 15, 2020. Following the exigencies of the coronavirus pandemic, we were constrained to reduce the 2020 budget by 21 per cent from N1.169 trillion to N920.5 billion.
There was a 10 per cent reduction in Recurrent Expenditure and a 24 per cent reduction in Capital Expenditure. The total revenue was revised to N812.47 billion with a deficit financing of N108 billion. The Recurrent and Capital Expenditures were N413.41 billion and N507.06 billion respectively, with capital to recurrent ratio of 55:45.While we were recovering from the pandemic, the EndSARS protests and the aftermath of its hijack took us back economically and socially, further compounding the situation. However, attributable to our resilient nature, as at third week of December 2020, our total revenue performed at 93 per cent while our total Capital Expenditure and Recurrent Expenditure performed at 80 per cent and 86 per cent respectively. Most importantly, we made remarkable progress in all crucial sectors, especially finance, health, education, transportation, agriculture, infrastructure and the environment.
We are working on publishing our GDP as a stand alone sub-national. We are working with the National Bureau of Statistics (NBS). We have teams working together to make sure that happens.
In terms of the rail project, we are basically working with special funds that are available nationally, with first-tier banks who have thought very deeply about the fact that they only get better if Lagos becomes more efficient, the country as a whole gets better if Lagos become more efficient.And so the country needs to come together through its various corporate and institutional mechanisms to ensure that we are able to get the kind of funding that is cheap enough to undertake that kind of projects without breaking anybody’s back in the future. It is completely Nigerian parties that are clean in making this funding available. We also have a very strong support from the Central Bank[of Nigeria, CBN]. I think it is coming from the idea that Lagos is a gateway to Nigeria; it is also a gateway out of Nigeria. The truth is that there are many economies around the Nigerian state that would not thrive if Lagos capitulates in the infrastructural requirement to drive efficient city; smart city.
Revenue to debt service
[Rabiu Olowo, Commissioner for Finance]
Let me start by saying that for a state like Lagos, with a lot of structural deficit, there is a lot we need to do in terms of continuous improvement drive. Debt is good especially when we are using it for capital projects. I think what is more important is our debt sustainability benchmark. We have two benchmarks that we follow: there is federal Debt Management Office (DMO) benchmark of 30 per cent revenue to debt. And of course, there is a World Bank benchmark of 40 per cent. So, on that basis, we closed the year 2020 at 19.8 per cent; very far from any of the benchmarks we are talking about. As for the implications of the additional debt as regards the 2021 budget, we see ourselves landing at about 22 per cent. Debt charges as shown in the budget is about N81billion; total debt repayment is about N158 billion.
On deficit financing, of course, most of the budget is predicated, and the foundation lies, on revenue. It means we have to go a-borrowing.
The breakdown of the N192billion deficit financing as shown in the budget is as follows: We will go for some domestic fund raising at the local capital market; two bonds of N100billion; we will do external loans of about N52billion; and we will also do internal loans of about N41billion.Everything adds up to about N192 billion.All these will be used 100 per cent for capital project.
Fourth Mainland bridge
[Special Adviser for Works & Infrastructure to the Lagos State Governor, Engr Aramide Adeyoye]
The Third Mainland Bridge was constructed well over 30 years ago and we ought to have finished on this Fourth Mainland Bridge. One of the things that have not allowed us to close on that is the transparency that we have to show if we are getting funding on a PPP (Public-Private Partnership) basis. We started that process in November 2019 when we gave Expression of Interest (EOI) requests and by that way we declared to the whole world that we are going to throw up the field open. That commenced the selection process. It is a six steps process, we are in step three of the process. We have seen the EOI, we have seen the analysis, and now we have the fourth process where we clarify and ask questions, and then we are in the process of concluding the process, where you get proposals from people as to all the alternatives. “Fourth Mainland Bridge is a 38 kilometre road and bridge section starting from Abraham Adesanya (in Lekki-Ajah Express) road all across the lagoon.