Volunteer Statesmen? To be Governor of a Heavily Indebted State..

17 Apr

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates, a full-service investment, political and economic risk consultancy, and asset management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

Currently most Nigerian states are fiscally unstable. They collectively account for about half the debt attributed to Nigeria. Many even had to seek emergency relief from the federal government in the form of bailouts. The current crop of governors have crippled their states with an ever increasing debt burden that their states cannot service. Coupled with this there are chronic arrears in both salaries and pensions with a few exceptions. Without federal government backing and bailouts, most states in Nigeria completely insolvent while almost all the rest are close behind. Accordingly, going forward it is imperative that all the states implement a solid fiscal plan to rip states from the edge of the cliff of financial collapse.

Given the dire state of finances in Nigeria’s States, it is a shock that there are so many vying to become governors. It is safe to conclude that either they are totally ignorant of the current financial crisis gripping their state, or are ignorant of what will be required of them to address it, or they know but have no intention of addressing it in accordance with state needs. Not surprisingly, not a single person who has been elevated as a candidate (potential candidate) for the states governorship has tabled a government financial plan to address the states fiscal deficits. If the people want to put the days where salaries are 6 months in arears, and pensions are unpaid, in the rearview, they are going to have to pay much closer attention to the gross deficiencies in the acumen of current aspirants and their collective lack of a concrete plan to address the states dire need for money.

#1. Deny Himself & Shoulder His Cross

In-kind of what Jesus says in Matthew 16:24, Luke 9:23, Mark 8:34, if anyone wants to be the next governor of a highly indebted Nigerian State, they must first deny themselves daily, shoulder their cross, and like a common house servant–work diligently for the people of their state. The next governors must be willing to work as governor, without any compensation, salary, allowance, pension, or benefits. In a state like Kwara State, the government spends 16 million annually servicing debts, and spend another 10 million on the office of the governor alone! Its no surprise that the states debts continue to grow. Further the corrupt budgeting practices utilized by states like Kwara State include vague unspecified line-items like “Overhead” that accounts for 100 million dollars of the states budget annually. With no real forensic auditing, there is no telling how much of this has gone to the wind over the past 8 years. All the while, the debt has continued to grow at an unsustainable pace.

Going forward governors will not be able to dip into the states finances to provide themselves with any of the perks of office that their predecessors enjoyed unless of course they can afford to provide those things for themselves through their own means. Just recently Kwara State borrowed N4 billion simply to partially clear a backlog of salaries and pensions. Typically, when a government borrows responsibly, the money is spent on capital projects that generate revenue, like toll bridges, transit systems, and state-owned businesses or private sector loan schemes. Given that paying workers and pensions are not capital investments, the state is obviously broke, too broke for an elected governor to pay themselves anything or to utilize any of the perks of office. For the next crop of governors to actually lead a fiscally responsible state, they must lead by example by denying themselves while carrying out duties. Further if the governor (the Oga at the top) is willing to volunteer their time, it is quite likely that they will be able to find special advisers and aides also willing to volunteer and serve with little to no compensation as well.

In the past (& present), the disposition of the leadership has been to pay themselves while leaving the masses to suffer and to be paid last. The new leader has to turn this disgraceful conduct on its head, and make themselves the last to receive anything. This will save the state a tremendous amount of money when statehouse wastes at e channeled toward plugging the fiscal holes, servicing debts, and ensuring that state workers and pensioners are adequately and properly taken care of without further irresponsible and unsustainable borrowing. The current administrations have repeatedly asked for permission to borrow even more than they currently have, which thankfully has often been refused. This borrowing is basically a dirty band aid being used temporarily to hide a gaping wound. Going into elections, this type of behavior is likely to continue at an even more alarming clip. This will make taking over governance in the state, financially more difficult than ever before.

#2. Internally Generated Revenue

While there have been some improvements across the country in internal revenue collection, states still ranks relatively low on internally generated revenue nationwide levels nationwide. Many states like Kwara State adopted the current Buhari administrations policy of not introducing new schemes to generate more revenue. This has clearly been a colossal failure (hence all the new borrowing) at national and state levels. The no new taxes policy should be scuttled within the first day of office by the next administration. Nigeria ranks at 6% tax to GDP ratio, one of the lowest ratio’s in the world. States like Kwara State are likely collecting even less than this national average. With all the new borrowing, the state must generate new revenue and introduce new schemes. It cannot rely solely on enforcing existing laws (which just began a year ago). There are a number of new measures that previous administrations should have undertaken to rectify the states fiscal imbalances that are yet to be done. For sake of  this article I contained just 5 examples below (which is unfortunately more concrete policy proposals than anyone who has claimed they want to be the states next governor has done):

  •  Motor Vehicles: Parking in the three major cities and on state campuses should be regulated and metered, new bridges on various roads should have tolls in place, luxury vehicles should be taxed, and any household that own multiple vehicles should also be taxed.
  • While the government banned alcohol, it would make more sense for them to use it as another means of generating revenue. The taxes and fees levied on those that consume in the state and the establishments that serve/sell the commodities will serve as a deterrent while also generating revenue for the state. The current policy, only encourages proprietors to go underground and for patrons to cross state lines and take their money outside of the state rather than keeping it with Kwara State. Both alcohol, tabacco, and gambling within the state should be targeted for new taxes and fees.
  • Out-of-State cattle and livestock herders known for abusing Kwara State lands and terrorizing its people, should no longer be able to operate in the state and/or bring their livestock to graze without paying taxes and fees to graze livestock. All herders must register, upon entry with the state through the LGA office, and pay for a governors consent livestock grazing permit, that will be determined based on the number of livestock in there possession. Failure to do so will result in stiff fines for herders and/or loss of livestock.
  • State “big boy” taxes should be considered. In the VAIDS scheme, we are identifying new tax payers previously not paying and ripping off the state. These individuals own property and business in multiple states and at times multiple countries. Despite this many of them have little within the state, except a village home or a residence in the states capital. These are the people who the state needs to invest in the state, create jobs, and start businesses. However if our “big boys” are only invested outside of the state (country) and only own a token home in the state, the state should levy additional taxes on these individuals and their property in the state that will be waved if and when they decide to invest in the state and create an agreed amount of jobs.

Ultimately the Nigerian people deserve better, but they collectively must call for it. Ongoing right now is the usual bribing of traditional leaders and community groups with pathetic disingenuous handouts where failed, unaccountable, and unqualified political elites give small fractions of their looted spoils around election time. Already in Kwara State we are seeing all of this take place. If people want the past to continue to repeat itself, they can participate and accept this token patronage and sell their future and that of their children in exchange for it. The days where we could afford to have personalities and those with connections as leaders are long gone. Moving forward, only the right policies (which should be stated in the agenda of every candidate) can transform and rescue Nigeria’s States. Nigeria has received numerous warnings over its ballooning debt burden and investor sentiment surrounding it.

Kuranga and Associates Limited is an investment management advisory firm and an asset manager with a principle practice area of Africa. To learn more about Kuranga and Associates LTD contact us at theassociatesincubator@gmail.com. © Copyright 2018 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


David O. Kuranga; Ph.D.
Managing Director
Kuranga & Associates Limited
Phone: 646.481.6263

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