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Budget deficit: Lagos State eyes N100bn bond issuance

...debt service charges at N31bn

Lagos State will issue about N100 billion bonds to fund the deficit in its 2021 budget. The deficit of N192.494 billion in its total budget of N1.164 trillion is projected to be funded by a combination of internal and external loans.

Also, the state eyes N52 billion external loan and internal loan of about N41 billion.

Rabiu Olowo Onaolapo, the state commissioner for finance, disclosed this during the presentation of the Year 2021 Budget Analysis: Facts Behind the Figures, Thursday in Lagos.

The state closed the year 2020 with debt-to-revenue ratio of 19 percent well below Federal Government benchmark of 30 percent and 40 percent by World Bank, the commissioner said. Lagos debt charges as shown in the budget is at N31 billion.

This year’s state budget is consistent with the T.H.E.M.E.S agenda of the governor and it is designed to prioritise the completion of inherited ongoing projects across the state, he said.

The total budget size is N1.164 trillion and will be funded from a total revenue estimate of N971.028 billion, comprising the following: Internally Generated Revenue (IGR) of N723.817 billion; Capital receipts of N71.811 billion and Federal Transfer of N175.400 billion. The budget 2021 is christened “Budget of Rekindled Hope”.

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Breakdown of the recurrent expenditure shows: Total personnel cost (N168.726bn), Total overhead costs (N260.074bn) and Debt charges (N31.787bn).

Presenting the Year 2021 Budget Analysis: Facts Behind the Figures, Samuel Egube, the state commissioner for economic planning and budget, noted that a significant percentage (N512bn) of the projected IGR is expected to be contributed by Lagos State Internal Revenue Service (LIRS).

“We shall achieve this by expanding the tax net, by simplifying the tax process, improving our transaction taxes and the appropriate use of technology, and improving the work environment, training and tools of our tax administration personnel. This will improve the efficiency in operations of all revenue-generating agencies.

“We believe that there are huge revenue-generating opportunities in the state, including real estates, transportation sector and our markets generally, etc. We will continue to use data and intelligence to unravel revenue opportunities and leakages.

“We have continued to maintain a relatively conservative posture in our projections for Federal Transfers/Receipts compared to our annual run rate in 2020 in view of the production challenges within the oil sector by keeping our expectation at N175 billion.

“The deficit of N192.494 billion is projected to be funded by a combination of internal and external loans,” the commissioner told the media at the meeting. The external borrowings will be in naira to hedge against FX, while internally the state will issue bonds, he said.

Other members of the Lagos State economic management team at the event include: the Commissioner for Information and Strategy, Gbenga Omotoso; Commissioner for Finance, Rabiu Olowo Onaolapo; Commissioner for Health, Akin Abayomi; Commissioner for Transportation, Frederic Oladeinde; Commissioner for Education, Folashade Adefisayo, and Aramide Adeyoye, Special Adviser to the Governor on Works and Infrastructure, among others that included permanent secretaries, etc.

Governor Babajide Sanwo-Olu presented the year 2021 Appropriation Bill to the Lagos State House of Assembly for consideration and assent on Tuesday November 10, 2020. The bill was subsequently passed on Tuesday, December 29, 2020, by the House of Assembly and signed into law by the Governor on December 31, 2020.

The 2021 budget of Lagos State is tagged “Budget of Rekindled Hope” to reflect the government’s determination to rise above the challenges that have affected the state’s development indices in the last 11 months. The budget demonstrates the state government willingness to overcome all obstacles and deliver all electoral promises to Lagosians.

Capital expenditure takes the lion share in the 2021 budget. While recurrent expenditure is N460.587 billion, the capital expenditure is N702.935 billion. Capital expenditure accounts for 60 percent of the total 2021 budget size while recurrent expenditure is moderated at a level of 40 percent of the total expenditure. This is a big leap forward compared to 55:45 ratio of capital expenditure to recurrent expenditure in 2020 budget.

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