What options are available for state funding? (1)

There’s a reason I have never contemplated becoming a state governor. But I won’t tell it straight away.

About a year ago, a friend who just contested for the APC ticket in Ekiti State asked me to put together an economic paper which he could use if he wins the ticket and becomes governor. I was a bit stumped I must confess. What do I tell his government to do? Increase taxes on already poor people? Dig up the ground and look for gems? Borrow huge amounts from the bank? Quarrel with the federal government.  Rely on ‘foreign donors’ who also have price tags? Anyway, one thing that occurred to me then is that a new government in Ekiti should make it a point to encourage indigenes of the state to return home. I used the East of Nigeria as example, where their first real estate investments go back to the village, thereby causing a spurt of cash flow among those we left back there. I believe this strategy is still valid. 

My friend’s APC primaries are done and dusted with, and I am somewhat involved in that foray, as the chairman of another party. It was a sorry sight to behold on Saturday 12th of May, 2018 as hundreds of ‘members’ of ADP, supporting Segun Adewale for governor, scrambled for Gala/Biggy sausage in the premises of the hotel where our event took place. The level of food poverty in Ekiti is appalling. Something is amiss, beyond Fayose’s mismanagement, or the mismanagement of the guys before him. There is something fundamentally wrong with state funding in Nigeria. I believe this even goes beyond the restructuring question by which states are angling for total control of all resources in their domains. If states will have control over all their resources, they will then have the kind of problems that our federal government has today; same issues with slush, mismanagement, scarcity, and then debt. How well has the FG performed with all the resources and powers in its kitty? Have governors not proven to be more wasteful?  Can a state have a different economic philosophy from all other states around it and the country as a whole? Have we not seen that when a single state ‘does well’, it tends to attract the most desperate people from other states?

And so another friend, interested in Imo governorship, asked me the same question casually the other day as we rode in the car. That question made me think of fleshing out my thoughts on this subject. 

The big question

Many people angle to be governor only to get famous and then spend 4 – or 8 – years complaining about how their predecessors emptied the treasury. In the first place what does anyone expect? That predecessors should not undertake any project and leave all the cash flow you need? This calls to question the ability for strategic planning on the part of most of our governments. Before aspiring to become governor, a serious person should have weighed all the possibilities and the reality on ground. Being a governor should not give anyone space to complain while the people suffer.

So if a governor happens on an empty treasury plus huge debts for projects that cannot be traced – like they usually do – what should they do to raise funds and run a reasonable government? Let’s explore some alternatives.

Debt

Usually the easiest way out for governors – and presidents – is to incur new debts wherever they can find such. The idea is to show some results. But as we may know in our own personal affairs, debts are usually easier to get into than to exit. That is not the only issue with debts though. The real issue is that it creates an illusion of progress, and that no matter the fact that some are labelled with humanitarian togas, they are still business decisions. Their rates may be low, but they are still business decisions. Indeed we often forget that rates like 3%, 4%, 5% or 7% are quite high if the loans are coming from European or American jurisdictions where rates have almost flatlined. Still we have to pay back at some point. Longer term debts are worse, as they lull us to sleep entirely and all of us are likely not to be here when the creditor will show up. Sometimes I fear that the nation has already been sold by this present regime, as we have never binged on debts like we have done lately.  The other day Nigeria was thinking of a debt of $46billion for its rail sector alone!  We have never taken such magnitude of loans for one sector and at a go. We certainly cannot manage such. All states are on the take as well. The wahala is that we are using dollar-denominated, business loans to fund projects that have no cashflow, in the hope that somehow, remotely, they will cause economic activity and we will be able to what? Tax unwilling people to repay? All the governors know that they will not be there when the trouble comes. And the creditors are coming for the soul of the nation. Yes, the body, spirit and soul of Nigeria will be demanded in the next round of debt collection. We escaped one in 2006 and have unbelievably sunk into another, such that even the usual suspects, IMF and World Bank are having cause to complain and warn us. Truly, we have never been insaner.

To be continued