Nigerian states prioritise salaries over investment

Nigerian states are spending more on salaries and routine overhead expenditure rather than building roads, schools, hospitals, and other investments that will make them less dependent on Abuja, according to a new report.

Between 2018 and 2019, the rate at which states spend on overheads grew nearly twice what they spent on building infrastructure, an analysis of their budgets by BudgIT, a non-profit seeking to make budget data accessible to Nigerians, has shown.

The organisation’s report on the ‘Patterns in States Expenditure’ reveals the disturbing trend of governors prioritising overheads over capital spending.

While budgetary provisions are proposed income and expenditure, and actual spending may differ in reality, they nevertheless provide a window into the priorities of a government.

The cumulative actual expenditure for all 36 states grew by 2.73 percent from N5.12 trillion to N5.26 trillion between 2018 and 2019 fiscal years.

The growth in Nigeria’s sub-national government expenditure is not yielding economic growth and is not translating into meaningful economic performance with rising rates of unemployment, decaying infrastructure and worsening poverty rate, the report notes.

“State governments’ recurrent costs have increased significantly over the years with only a small portion of collected revenue and loans dedicated to meet capital expenditure,” the report states.

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According to the report, 36.73 percent or N1.93 trillion of the N5.26 trillion total expenditure in 2019 was dedicated to capital expenditure, while 63.27 percent or N3.33 trillion went to recurrent expenditure and loan repayments.

Year on year, between 2018 and 2019, actual expenditure on capital projects for all 36 states reduced by – 0.57 percent, from N1.94 trillion to N1.93 trillion.

According to 2019 state fiscal data analysed by BudgIT, only 11 states actually spent over 50 percent of their budgeted capital.

These are Kaduna who topped the list with 97.53 percent; followed by Rivers with 74.53 percent; others are Lagos, 69.81 percent; Jigawa, 67.99 percent; Abia, 65 percent; Delta, 59.01 percent; Enugu, 57.28 percent; Anambra, 53.92 percent; Kwara, 52.31 percent, and Gombe with 50.41 percent.

Thirty-one states gave more attention to their recurrent expenditure than capital expenditure.

“This spending pattern is not sustainable as this has opened gaps in providing quality healthcare services and educational systems, thus slowing down social development as well as growth in other key areas of the economy,” the report notes further.

Further analysis also shows that eight states – Osun, Bauchi, Plateau, Gombe, Adamawa, Ekiti, Kogi, and Oyo could not adequately cover their recurrent expenditure obligations with their total revenue – IGR and Gross FAAC, thereby building up their public debt.

Moody’s Investors Service study, cited in the report, says Nigeria needs an estimated $3 trillion infrastructure spend over the next 30 years to catch up with its emerging market peers

“This is the equivalent of spending N38 trillion per year for the next 30 years at today’s Naira-Dollar exchange rate,” the report states.

The results of this pattern of expenditure are high unemployment, unconscionable rates of rural-urban migration, and a rising spate of insecurity across the country.

Recent data published by the National Bureau of Statistics (NBS) show that Nigeria’s unemployment rate at 33.3 percent is the highest on record.

BudgIT called on states to restructure their spending, increase spending on capital projects, comparatively reduce recurrent expenditure to a sustainable level, and ensure the effectiveness of all expenditures.

“It is not to say that spending on recurrent expenditure is unimportant because workers’ salaries and retirees’ pensions need to be paid, but over time bloated overhead components of many states’ recurrent expenditure crowd out much-needed spending on infrastructure,” the report notes.