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State Governments Revenue To Be Strained over High Debt-To-Revenue Ratio

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Zainab-Ahmed

Eniola Olayemi

 
The revenue of the states in the country will be further strained in the coming months owing to their rising debt portfolio and cost of servicing those debts.

This is coming on the back of the latest report on the states’ internally generated revenue by the National Bureau of Statistics (NBS), tagged, “Internally Generated Revenue at State Level”, which showed a high debt to revenue ratio for the first half of 2018 (H1’18).

The report showed that total states’ Internally Generated Revenue, IGR, grew by 27.7 percent year-on-year (y/y) to N579.40 billion from N453.83 billion in H1’17.

Of the 36 states, 28 states grew their IGRs, while states such as Ebonyi, Anambra, Benue, Abia and Kebbi recorded declines in IGR by 21.79 percent to N2.46 billion, 21.62 percent to N7.07 billion, 18.86 percent to N6.06 billion, 12.29 percent to N6.98 billion and 10.85 percent to N2.03 trillion respectively in H1 2018.

Lagos retained its number one spot, with an IGR of N196.4 billion, up 16.9 percent y/y and Rivers State recorded N60.9 billion, the second largest state by IGR.

The report showed that not much changed in terms of revenue sources as federation account allocation inflows continued to account for more than 70 percent of the total revenue (FAAC + IGR) for most states. Net federation accounts allocation to states grew y/y by 65.14 percent to N1.23 trillion in H1 2018 from N0.74 trillion in H1 2017 amid increases in production and price of crude oil.

The states’ total debt stood at N4.78 trillion in the year under review, comprising of N1.30 trillion external debt and N3.38 trillion domestic debt.

The high debt to revenue ratio, according to economy watchers, will put more pressure on fiscal operation of the states and also make implementation of capital expenditure more difficult.

In his reaction, Mustapha Wahab, a research analyst at Cordros Capital Limited, explained that adding growing debt to servicing cost and to the already depressed state revenues will put pressure on their fiscal operation. He said: “Currently a number of states can’t cover their recurrent expenditures on the back of insufficient FAAC allocations despite gains from higher crude prices relative to last year and significantly low internally generated revenues.

“Adding growing debt service cost to the already depressed state revenues will further put pressure on fiscal operations of the federating units, the impact of which will not only make capital expenditure, CAPEX, implementation a tall order but overhead spending also.”

According to him, the situation would mean growing risk of default on interest and principle payment for the states. He urged the states to increase their IGR to reduce the impact of declining crude oil price. “With IGR to FAAC ratio remaining abysmally low, states government must ramp up internally generated revenues to reduce the impact of volatile oil earnings on fiscal performance by significantly expanding the tax base and considerably monitoring revenue generating state owned corporations to effectively block all loopholes,” he said.

Cowry Asset Management, a Lagos-based investment banking firm, said: “Given states’ IGR of N579 billion and net Federal Accounts Allocation of N1.23 trillion in H1 2018, ‘dependency multiple’, FAAC to IGR, was 2.13 times.

In spite of the y-o-y increases in IGR and net Federation Accounts Allocation to the states by 27.7 percent and 65.14 percent respectively, the states’ average total debt to gross revenue still remained high at 2.75 times in H1 2018.

“We opine that high debt to gross revenue ratios of the states would further increase their debt servicing costs which in turn would burden future generated income of the affected states going forward, given that most of the borrowed fund would have gone into recurrent expenses such as payment of salaries.”

In a report titled, “State of States IGR in H1’18: Creating more “Lagos” across Nigeria”, analysts at United Capital Plc, another investment banking firm, emphasised the need for the state to up their IGR in line with Lagos State while expressing concern at the underwhelming performance of other states.

They also pointed out the need to expand the revenue base across states, saying that it would reduce dependence on FAAC inflows, which is largely exposed to the vagaries of the oil market. Increasing the revenue base of the states, according to them, would limit future fiscal crisis. “In addition, this would boost the credit ratings of states and enhance their ability to finance developmental projects,” they said.

“Further analysis of the IGR report indicated that Pay As You Earn, PAYE, is two times the size of FAAC inflow in Lagos and 1.1 times in Ogun States, implying that both states are significantly benefiting from a dominant formal sector relative to other states. Hence, to create more “Lagos States” across the country, there is a need for a concerted effort to develop the formal sector in the rest of the country. Put differently, tax authorities in other states may need to find creative ways to boost revenue from the informal sector going forward,” they asserted.

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Government Plans Social Welfare Packages for Policemen Working in Imo

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Imo State Governor, Senator Hope Uzodimma (2nd right) cuts the tape to Commission operational vans he donated to the Rapid Response Squad (RRS) of the Imo State Police Command. With him is Imo Commissioner of Police, Mr. Abutu Yaro (2nd left) and others when the Governor paid a Condolence visit to the Police Command Headquarters, Owerri on Tuesday

Government Plans Social Welfare Packages for Policemen Working in Imo

Imo State Governor, Senator Hope Uzodimma (2nd right) cuts the tape to Commission operational vans he donated to the Rapid Response Squad (RRS) of the Imo State Police Command. With him is Imo Commissioner of Police, Mr. Abutu Yaro (2nd left) and others when the Governor paid a Condolence visit to the Police Command Headquarters, Owerri on Tuesday

Imo State Governor, Senator Hope Uzodimma (2nd right) cuts the tape to Commission operational vans he donated to the Rapid Response Squad (RRS) of the Imo State Police Command. With him is Imo Commissioner of Police, Mr. Abutu Yaro (2nd left) and others when the Governor paid a Condolence visit to the Police Command Headquarters, Owerri on Tuesday

Imo State Governor, Senator Hope Uzodimma (left) receives a survenir from the Imo State Commissioner of Police, Mr. Abutu Yaro (right), when the Governor paid a condolence visit to the Police Command Headquarters, Owerri on Tuesday

Imo State Governor, Senator Hope Uzodimma (left) receives a survenir from the Imo State Commissioner of Police, Mr. Abutu Yaro (right), when the Governor paid a condolence visit to the Police Command Headquarters, Owerri on Tuesday

OKPU UGOCHUKU (Oweri)

Sponsored by: H&H

Governor Hope Uzodimma of Imo State has said that his government was working out a Social Welfare package to encourage policemen and all security agencies working in Imo.

The Governor dropped the hint on Tuesday when he paid a condolence visit to the Police Command in Imo State to commiserate the leadership and personnel over the death of some of their members at the peak of insecurity in the state and in their efforts to repel the bandits who attacked them and their formations in the State.

The Governor said that the social welfare package is “aimed at motivating and encouraging the security agencies in the State, and enhancing the performance of the security men and boosting business activities in the State so that the welfare of Imo people will be guaranteed.”

The Governor also highlighted the need to insure all the policemen serving in Imo in addition to what the Nigerian Police Force has in place already for her personnel.

He said: “We intend to insure men and women of the Nigerian Police working in Imo State to an extent that where there is any casualty not only the palliative measure will be provided by the government, the Insurance Company will take the responsibility of making sure that the liabilities and obligations of those who died, including family obligations will be contained in the policy.”

Governor Uzodimma who expressed serious sympathy for those who lost their lives in an effort to secure Imo State and its people, noted that  “in everything we do in life, what will be will be and what will not be will not be,’’ emphasizing that the Nigerian Police is the last hope of the common man in terms of security.

“If the Nigerian Police is challenged, the security and protection of Nigeria is challenged,” the Governor said, adding that “Government will not only partner with the police, but will do her best to supply in sufficient number, what they need to succeed in their operations.”

He reminded the officers and men that their role is critical in the society and commended them for having played such role very effectively.

Governor Uzodimma also advised the officers and men to show courage in the discharge of their duties whenever the bandits try to test their professional competence. He encouraged them to defend themselves as mush as possible from any external aggression that threatens their lives and that of the property entrusted in their care.

The Governor commended the Police Commissioner in Imo State, Mr. Abutu Yaro and his team for their gallantry and assured them that they are not alone in their effort to restore peace and security in Imo. He prayed God to always be with them in their effort to protect lives and property in Imo State.

The Governor reiterated that Government is doing all within her powers to reach out to all families that lost their loved ones recently, including their children and wives, and extended his condolences to the entire police formation and families of the victims in Imo State who were affected in the effort to return sanity to Imo State.

In addition, the Governor appealed to all Divisional Police Officers (DPO’s) in Imo state to ensure that all criminals in the local governments, communities and rural areas are arrested and made to face the law. He promised that at the State level all who had been found culpable and confessed to crime will be charged to court and made to face the law.

The Governor thanked the Inspector General of Police (IGP) for the support he gave to Imo State during the time of the crisis.

He also expressed sincere gratitude of the Imo Government and her people to President Muhamadu Buhari for accepting to support Imo fight insecurity through the State Command.

Finally, the Governor enjoined all politicians who are involved in the crises and bloodletting business in Imo State in particular and Nigeria in general, “to repent and refrain forthwith or be ready to face the wrath of God.”

Earlier in his welcome address, the Commissioner of Police, Imo State Mr. Yaro had welcomed the Governor on the visit, describing the visit as significant in three ways.

“First, it is the first time in 40 years of Police formation in Imo State that a Governor will pay a condolence visit to the Police Command in the State.

“Secondly, the visit has demonstrated to a large extent the cordial relationship as well as the value the Governor attaches to the Police operations in Imo State.

“Thirdly, the visit has rejuvenated the morale of the Police Command to the highest level which acts as a boost and encouragement for the police to bounce back to do what they know how to do best.”

Yaro used the opportunity to reassure Imo people that the State’s police formation is back to her normal duties, “which goes to mean that Imo is back to business.” He called on Imo people to come out and go about their normal business without molestation and harassment.

He further thanked the Governor for all his support to the police and urged Imo people to cooperate with the his officers and men as the police is your friend.’’

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Lagos Assembly Calls for Engagement With Agitators, True Federalism

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Lagos Assembly Calls for Engagement With Agitators, True FederalismObasa

AJAGBE ADEYEMI TESLIM (Lagos)

Sponsored by: H&H

The Lagos State House of Assembly on Tuesday called on the federal government to engage agitators across the country rather than employ the use of force.

This is as the Speaker of the House, Rt. Hon. (Dr) Mudashiru Obasa, argued that the use of the military in an attempt to quell agitations for secession would not yield the desired result since it is part of democracy for a people to speak out concerning how they are governed.

Obasa, who noted that the 22 years of unbroken democracy being enjoyed by Nigeria is worthy of celebration, however, said there many things yet to be done after so long adding that these had led to the tension in the country.

The Speaker, who made the comment during the debate on a motion about the 22 years of unbroken democracy in Nigeria raised by Hon. Setonji David, commended President Muhammadu Buhari for signing an executive order granting autonomy to state legislatures and judiciary and for honouring the late MKO Abiola with the declaration of June 12 as democracy day.

Noting that democracy is a wholesome package, he added: “It is not about electing us alone. Those that elected us also have freedom, they have the right to protest where they think things are not working.

“The right to protest should not be taken away from them as long as such right is not taken for granted.

“There is no crime in seeking for separate nations within an existing nation,” he said as he mentioned some countries where the citizens have called for disintegration.

“Those representing the people through the ideology of social contract must listen to the people,” he said urging the government to engage the groups and calling on the National Assembly members to go beyond weeping on the floor of the House and truly rejig the constitution.

“For the southern governors, having stated their position, they should not go to sleep. They should follow it through,” he urged.

Concerning the issues of insecurity, the Speaker said: “We will continue to cry that we have state police and devolution of power.”

He said restructuring, which he described as part of the solutions and not a problem, should have addressed economic challenges and poverty level just as he lamented that the Naira has continued to fall against the Dollar.

He praised Lagos as the true example of democracy and promised that the state would continue to lead in this area.

The House observed a minute silence in honour of the late MKO Abiola and all those who lost their lives in the course of the struggle for democracy.

Earlier in his contribution, Hon. Rotimi Olowo described the current constitution as fraud.

“This 1999 constitution amended so many times can no longer be embellished. It is fraud,” he said as he called for the semblance of regionalism where the interest of the minority is taken care of.

To him, the current amendment is another effort in futility and a new constitution reflecting the will of the people has to be produced.

Hon. Gbolahan Yishawu suggested an overhaul of the constitution while noting that some items on the exclusive list be devolved.

On his part, Hon. Bisi Yusuff noted that Nigeria’s democracy is not a true reflection of the will of the people adding that the constitution was promulgated through a decree.

Supporting the motion, Hon. Desmond Elliot said Nigeria will not progress more than it is now if the constitution is not overhauled.

Other lawmakers who spoke concerning the motion include Hon. Tobun Abiodun, who complained that states are not allowed to manage their resources, and Hon. Kehinde Joseph, who noted the high level of insecurity in the country.

The House also called on the National Assembly to ensure true federalism while it urged Governor Babajide Sanwo-Olu and the government to engage in enlightenment of the people on security consciousness.

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Lagos Assembly To Investigate Cause of Delay In Selecting New LASU VC

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Lagos Assembly To Investigate Cause of Delay In Selecting New LASU VC

Obasa

Obasa

AJAGBE ADEYEMI TESLIM (Lagos)

SPONSORED BY: H&H

The Lagos State House of Assembly has ordered it’s Committee on Tertiary Education, headed by Hon. Ajani Owolabi to investigate the cause of the delay in selecting a new Vice Chancellor for the Lagos State University (LASU) and report back to the House in a week.

The matter was raised as Urgent Matter of Public Importance by the Majority Leader of the House, Hon. Sanai Agunbiade during plenary on Tuesday.

According to Agunbiade, LASU is currently having an acting Vice Chancellor as a new VC is yet to be selected for the institution.

The Majority Leader stated that a committee was raised towards the end of the tenure of the last VC of the institution, Professor Olanrewaju Fagbohun, but that the committee was dissolved because one of the three shortlisted candidates did not have PhD as he was said to have possessed just a university fellowship.

He said that, when another committee was raised they did an advertisement and said that someone with fellowship of an institution could apply for the office.

He added that nine persons were shortlisted, but that the second process has also been put on hold.

“Now, LASU does not have a VC or Governing Board. LASU has dropped from number two in the country to number five. Something must be done urgently about the selection of a new VC for the university.

“The House Committee on Education should be asked to commence investigation into the issues in LASU and come up with recommendations.

“The Lagos State Governor should also see into the issues surrounding the selection of a Vice Chancellor for the institution,” he said.

Speaking on the matter, the Speaker of the House, Rt. Hon
Mudashiru Obasa said that the process of handing over from one administration to another has always been a problem in the institution.

“We eulogised LASU over it’s feats recently only for the issue of succession to draw the institution back.

“They have regulations on how a VC should be selected. They did a test for the people shortlisted for the office and their marks were very close to one another.

“They should have selected one of the shortlisted candidates. But I believe that there is more to what is happening in the institution despite what we are seeing,” he said.

The Speaker then ordered the House Committee on Education (Tertiary) to investigate the matter and report back to the House in a week.
In his contribution, Hon. Ganiu Sanni (Kosofe 1) said that the issue of LASU is taking a worrisome trend despite it’s achievements over the years.

Okanlawon recalled that LASU was number two in Nigeria and between the first 500 to 600 universities in the world.

“What is happening in LASU is a clash of interest and intra campus politics.

“They all want to have stronghold in the affairs and activities of LASU. This will cause problem if there is no moderation.

“The advert for the position of Vice Chancellor stated that the person that would be the VC could be a fellow or PhD holder as stated in the law that established the university.

“I don’t know why that caused an issue now. The Govenor should take a bold step and take decisive actions. We must consider professionalism, competence and experience in the selection,” he said.

Another lawmaker, Hon. Desmond Elliot (Surulere 1) said that over 50% of the lawmakers in the assembly were graduates of LASU.

Elliot said that LASU has grown in leaps and bounds, and that accolades kept growing for it before the latest problem occured.

He then called for a seamless transition from one government to another in LASU.

This was corroborated by Hon. Gbolahan Yishawu (Eti Osa 2), who called for a stoppage to the noticeable lacuna in the selection of a new Vice Chancellor for the university.

In his comments, Hon. Rasheed Makinde (Ifako/Ijaiye 2) said that the issue did not project the image of the institution properly.

Makinde stated that the institution would be 38 years old and that they were being giving subvention so that the school could develop, adding that it is regrettable that crisis comes anytime a new VC is to be appointed in the institution.

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