• Friday, March 29, 2024
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Cross River’s N1.3 trillion budget of ‘magic’ expectations

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It initially began like a joke when news first filtered in that the Cross River State Government was planning a N1.3 trillion expenditure plan for 2018. That joke took shape when the governor went ahead to present the budget to the Cross River State House of Assembly on November 30. Ben Ayade, the governor of the state, who personally presented the budget, called it a ‘Budget of Kinetic Crystallization” which he said was designed to ‘add value to the socio-economic development and well-being of the people of the state.”

So what looked like a joke became real when the budget ‘surprisingly’ went through the scrutiny of the State House of Assembly and was passed into law on 14 February. Ayade is reported in the media to have broken down in tears while signing the N1.3 trillion budget into law on April 11. Amidst sobs, he was quoted to have said that ‘In the 21st century, you don’t look before you leap, you leap before you look.’ This statement is a recipe for suicide and aptly captures what the governor has done.

Interestingly the 2018 ‘suicide’ budget is not anywhere in the public domain. I checked the state’s website (http://www.crossriverstate.gov.ng), hoping I could get a breakdown of the budget but it is not there. There is a table of contents of the 2018 budget on the website, but there is no link to the actual budget.

So what we have is a bulk sum with little or no understanding of the specific components of this bulk sum. But some key projects that the government is said to have made provision for in the budget include an ongoing deep seaport project and Ayade’s dream super highway project. These are two big dreams of his administration which he seeks to complete.

The estimated total budget for the deep seaport has been put at about N500 billion, while the Superhighway project is estimated at about N250 billion. Both projects, if they were included in the budget, may have caused the total expenditure to hit new highs.

But then, the state’s total budget for 2017 was just N301 billion. This means that the 2018 expenditure is four times higher. So what makes the governor think that he could suddenly raise his expenditure by 400 percent within a year?

Figures from BudgIT’s 2018 “States of the States” report show that the state is already struggling with its finances. Net allocation from the Federation Account for the whole of 2017 was just N23.45 billion. Net allocations represents total allocations made to the state, less deduction for debts and other obligations. A total of N18.5 billion was made as deduction from the state’s allocation in 2017 towards payment of outstanding debts.

Cross Rivers ranks high as one of the most indebted states in the country already. Total external debt stood at approximately US$168 million as at December 2017 while domestic debt as at the same date, stood at N128 billion. This brings the total internal and external debt of the state to N179 billion (using official exchange rate of US$1/305 to convert the foreign debt to local debt). If the state were to use its combined internally generated revenues, estimated at N14 billion in 2017, and its FAAC allocations to service its current existing debts, it would take the state about five years to repay its debts.

Considering how poor the state’s finances are, it is not clear how the government managed to fund its N301 billion 2017 budget. There is no budget performance report on the state’s website.  It is even more difficult to see how the governor plans to fund the 2018 budget of N1.3 trillion. Certainly, the state does not have the internally generated revenues to fund the budget, neither would the receipts from the Federation Account be enough to fund the budget.

The alternative is for the state to go borrowing to fund the budget. But the gap between the states revenue generating capacity and planned expenditure is so wide that the state will need to borrow about a trillion naira to bridge that gap. In the domestic financial markets, only the Federal Government has the capacity to do that kind of borrowing in any particular year.

Lagos state comes close because of its comparably higher internal revenue generating capacity of about N400 billion per annum, compared to the N14 billion in Cross Rivers. No other state in the federation has the capacity to raise a trillion naira from the domestic capital markets. Cross Rivers State, based on current financial capacity, is one of the states with the least capacity to raise that kind of money.

Chances of funding the N1.0 trillion funding with external borrowing are nil. The state will need the approval of the National Assembly to do that and there is no chance that the country will want to guarantee a trillion loan (US$3.2 billion) loan for just one state in the federation.

Grants from external bodies could also help the state bridge the funding gap. But external governments do not give grants for such projects in such amounts in a single year. Sadly, the state has not put the 2018 expenditure plan in the public domain. That could have provided some clues on how the governor plans to fund it. For now, the N1.3 trillion is just worth the paper it was written on and nothing more. It is clearly a budget that the state has no capacity to fund.

There is no harm in having big ideas. But they must be rooted in reality, or else they starts looking like hallucinations. The governor’s big ideas of a deep seaport and a super highway can be funded through the private sector. But the private sector will only fund such projects if they are commercially viable. There are question marks on the commercial viability of both projects, perhaps the reason the governor is thinking of funding them with public funds.

But considering the strong tourism potential of Cross Rivers, one would have thought the governor would concentrate on enhancing low hanging fruits like the Obudu Cattle Ranch and many of the state’s tourism sites, which some years ago, were fast becoming the choice destination for both internal and external tourism. Many of the state’s tourist sites are fast losing their attraction, sadly because of government negligence.

Cross River is easily seen as the tourism capital of the country and the state could build on that brand and become the country’s alternative to Dubai instead of seeking to become another Lagos. Tourism is estimated to have contributed US$64 billion to the Dubai economy in 2016 and this amount is set to double over 10 years according to the World Travel & Tourism Council (WTTC). This is more money than oil earns for Nigeria.

This shows that the potential revenue from tourism can rival any industrial hub that the government aims to build. Besides, the investment required to build a tourism hub is usually already available. You do not need to build Obudu, you just need to enhance access and provide entertainment and the returns will start coming in almost immediately. What the governor needs, is the right policies to make tourism the ‘magic’ of attraction to Cross Rivers and not to aim for ‘magic’ money that will obviously never come.

 Anthony Osae Brown