Sunday, 13 April 2014
State Budgets: Wrong Priorities, Pathetic Outcomes (2) By Nasir Ahmad El-Rufai
The paltry amounts allocated to agriculture exemplified the misplaced priorities of most of the states’ budgets. Rural Anambra budgeted less than 2% for agriculture, Bauchi with 80% of its population engaged in farming allocated only 5.5% of its budget to agriculture, Edo allocated only 1%, and Gombe with its arable land and 80% of its population engaged in agriculture allocated only 5% to agriculture. These poor allocations are in contexts of high levels of poverty and unemployment. In Kaduna and Gombe the rate of unemployment is respectively 25.7% and 29%, which are above the national average of 21.1%. For states like these, attracting businesses and encouraging SMEs should be the front-burning issue. Increasing the budgets of agriculture, mining and tourism to address constraints in the value chains should be the governors’ priorities.
The budgets’ analysis therefore showed that most states in the country are not viable economic entities, and the so-called ‘rich, oil-producing states’ are far more dependent on the federation than the rest in proportionate terms! Standing alone, virtually all states will be unable to perform their basic functions like providing education and healthcare to citizens. Most states in the country will be illiquid in months without federal allocations, which in turn are largely derived from oil and gas revenues. The six Northern states in our sample are engaged in significant borrowing to sustain their operations. An example of this is Bauchi where 40% of its 2012 budget is funded by loans.
To develop their states and meet the needs of the people, governors will have to change their strategic focus in a manner that will enable them to increase their IGR and reduce dependence on federal allocation. Among others, these will require increased capital investment in social and physical infrastructure and to create conditions to diversify their economies, including promoting manufacturing-based industrialization.
Each state needs to develop a blueprint for a post-oil economy and identify and promote investments in sectors that will generate jobs. Finally, as we can see from states like Lagos, developmentally-oriented leaders are required to pilot the affairs of the regional governments that will emerge from such political rearrangement. With these steps, may be our children will have a nation that has truly attained its potential.
Not only have the states neglected the economic sector but also the social sector. It is generally acknowledged that investment in healthcare is necessary to maintain a healthy and quality population. Similarly, investment in education is important for human resource development. In effect, education and health sectors are necessary for social and economic development. A healthy and educated population enhances the competitiveness of a nation. Unfortunately, these two sub-sectors are neglected by both the federal and states governments.
Given the contribution of education to development, the United Nations recommends that countries allocate 26 percent of their resources on education. In 2012 neither the federal government nor state governments meet this budgetary target. The Federal government allocated only 8 percent of its budget to the education sector, which is lower than comparable African countries such as South Africa (26%), Cote d’Ivoire (30%), Ghana (31%), Kenya (23%) and Uganda (27%).
Like the federal government, the ten states reviewed in this column did not meet the recommended benchmark. Gombe - the best of the sample - allocated about 17% of its N93.5bn budget; Edo (14%), Nasarawa (10%), Lagos (10%) and both Akwa Ibom and Zamfara (5%). This poor funding partly accounts for the deteriorating state of Nigeria’s education system.
Using the 180-point benchmark in JAMB amongst the 10 states analyzed, Lagos State had the best performance of 80% achievement improved upon by the large number of private schools in the megacity, in addition to investing a whopping N45bn in public education. This amount is over a third of Zamfara’s entire 2012 budget. As expected, Zamfara State which invested least in education also had one of the lowest pass rates of 44%. What is striking is that Nasarawa which invested the second highest percentage in education (14%) in 2012 did so mostly in response to poor performance of the state (43% pass) in the 2011 JAMB UTME. An open ended question here is, with our paltry allocations to education, is it possible that we can be among the 20 most developed economies in 2020?
Budgeting for education is one thing, getting commensurate outcomes in quite another thing. Most state governments invest in building schools and classrooms instead of the improvement of teacher quality and welfare, providing books and materials and ensuring that children remain in school. A free meal daily, free transportation to schools and back and enhanced welfare and incentive packages for teachers improve academic performance far more than spending on lucrative building contracts for political party apparatchiks. In education as in everything in public finance, the quality of spending is as important as amount and proportion of the total budget.
The health sector across Nigeria reveals an area of national life that is in dire need of rescue through new policies, regulations and strengthened institutions. In the two-part column titled "No Health, No Wealth", we x-rayed these problems at national level. Across the country, treatable diseases like malaria and cholera are still killers, infant and maternal mortality rates are amongst the worst in the world, while our life expectancy seems to be dropping. The state governments have greater responsibility for healthcare than any other tier, being in charge of primary and secondary healthcare. We had hoped that our states' budgets would be more effective, and higher in both quantity and quality. Sadly, that is not the reality the budgets revealed.
The World Helath Organisation (WHO) recommends that 15% of national budgets be allocated to healthcare. The 2012 federal budget of N282.77 billion is just about 6%. With many of the sampled states, the budgetary allocation is higher than the dismal FGN number, though nowhere near to the 15% benchmark. For instance, the only sensible thing about Bauchi's generally hopeless budget was the allocation of N13.7bn or 9.8% to health; Gombe 7.4%; Lagos 6.7%; and Nassarawa 6%. Edo's allocation is 5.5%; Kaduna 4.3%; Benue and Akwa Ibom 4% and Zamfara's, a very low 3%. Zamfara in particular is plagued by a tragic lead poisoning crisis that has claimed the lives of hundreds of children and it would need well above 15% of its budget to sanitize its health sector.
With the widespread dysfunctions in governance that we are experiencing as a country, the under-budgeting for the sector is worsened by the fact that actual releases are usually far less than the amounts allocated. Additionally, effective utilization of the little that gets released is hindered by the corruption and incompetence that exist in the public sector agencies.
We conclude with a brief comment on the huge sums state governments allocate as security vote. The bulk of these funds are usually budgeted under the Governor's Office, the Chief of Staff or the Secretary to the State Government (SSG), and spent at the discretion of the governors. Take for example, in a state like Bauchi, its security vote under the SSG’s office is about N17.6bn (12.6%) of its budget. This senseless amount is higher than the state's allocation to each of Agriculture, Health, Education and Water Resources. Indeed, the state’s combined budgetary allocations of N13.7bn for Health, and N3.2bn (2.3%) for Water Resources, would account for 12.1% of its budget, and less than Yuguda's 'pocket money' called the security vote. This is not the picture of a government that takes the interests of its citizens seriously.
The situation is slightly better in other states; happily my state of Kaduna allocated only N1.6bn (1%); Nasarawa about N2bn (1.9%); Lagos N2.4bn (0.4%); and Edo N4.5bn (2.9%). Some other states have hidden these votes in their budgets, but know where to find it. The need to beef up security to counter threatening forces currently terrorizing our states is understandable, but Nigerians are aware that security is mostly a federal responsibility today. And the solution to the rising wave of insecurity is immediate job creation, investing in the future and transparent governance, not bloated security votes, which add zero value to their state governance.
In conclusion, the budgets’ analysis has exposed the administrative and political incompetence of many state governments. We therefore need to rethink the role and size of states as constituted, as units of governance and economic development. There is therefore an urgent need for a constitutional review that will among other restructure the federating units to give way to a smaller number of states, regions and regional governments as political and economic management units. This calls to question the current and senseless clamor for creation of more states which would be even more unviable!.