Ekiti State’s love for private capital yielding results

A rare love affair between a Nigerian state and private investors is yielding results and sparking a gradual turnaround in fortunes for the southwestern state.

Since the Ekiti State government sold 76 percent of its stake in Ikun Dairy Farm to Promassidor Nigeria, the farm has become operational for the first time in 40 years and is producing over 80,000 litres of milk per month, creating jobs and adding to the state’s rapid economic development.

Privatisation of redundant government assets is fast becoming a major hallmark of how the southwestern Nigerian state is boosting internally-generated revenue (IGR) and reducing its reliance on federal allocations, a model several other states and even the Federal Government can adopt to grow revenues.

Ekiti State is also in public private partnerships with other large-scale agriculture processors like FMS Farms, JMK Foods, Promise Point, AROG Limited, Stallion Group and Egbeja Snail Village, who are now fully operational and creating jobs.

“Our strategy draws from the ideology that the government has no business doing business rather it should create an enabling environment for the private sector to thrive,” Akin Oyebode, the state’s commissioner of finance and economic development, told BusinessDay, during an investment summit organised by the state last Thursday.

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“We are also trying to divest our stake in several other entities which have been run sub-optimally in order to inject much needed efficiency and optimise our assets,” Oyebode, who also spoke of a deal with private firms, Irin Ajo Travels and Tours and Future Africa, to take on Ikogosi Warm Springs, said.

“These are still early days but the signalling is important,” Oyebode said when asked about the impact of the state’s increasing openness to private capital. “We are getting more people asking what they can do in Ekiti.”

The results of Ekiti State’s focus on private capital on the state’s finances are beginning to trickle in.

The state has managed to grow IGR by 55 percent to N800 million from an average of N450 million per month and the goal is to achieve N1 billion per month in 2022, a target that Governor Kayode Fayemi said had been attained twice in 2021 already.

The state defied the impact of the COVID-19 pandemic on economic activity in 2020 to boost its IGR by 1.9 percent to N8.72 billion from N8.55 billion when many other states saw a decline, according to data by BudgIT.

The state’s IGR has grown by 191.64 percent from N2.99 billion in 2016 to N8.72 billion in 2020.

“Our efforts have started to yield results, with the Ikun Dairy Farm now operational and producing over 80,000 litres of milk per month, thanks to the Public-Private Partnership with Promasidor Nigeria Limited,” Fayemi proudly declared during the Ekiti Investment and Economic Summit, tagged the Fountain Summit, last Thursday.

Ekiti is keen to attract more private capital and that is why it sped up the process to ensure the Ekiti State Development and Investment Promotion Agency (EKDIPA), is now fully operational.

EKDIPA acts as a one stop shop to onboard and support investors, while also acting as the hub of all investment related activities.

The state is also poised to improve its position among sub-nationals on the home-grown Ease of Doing Business indicators measured by the Presidential Enabling Business Council (PEBEC), according to Governor Fayemi.

“Our weakest section, enforcement of contracts, has been addressed by the collaborative efforts of the Judiciary, Legislature, our Ministry of Justice, and EKDIPA,” Fayemi said.

We have also made significant progress with our Ekiti Knowledge Zone, Special Agro-Industrial Processing Zone, and Cargo Airport projects, which are all designed to increase economic activity in the State. We have started construction of the airport, and expect it to be completed by this time next year.

Ekiti received a grant of $250,000 from the African Development Bank to prepare a full feasibility study for Ekiti Knowledge Zone, and should announce an anchor investor and partner for the project before the end of this year.

The State’s agro-industrial processing zone is already occupied, and the expectation is for additional occupants over the next few months, according to the governor.

The investment-led growth, which Ekiti is pushing for, has often been held up by development economists as a sustainable model for Nigeria and its sub-national entities to achieve robust economic growth.

Ekiti however still has some work to do in reducing its reliance on federal allocations. The state’s revenue structure indicates the high dependency on federally distributed revenue which brings in 84 percent of the total recurrent revenue pool, while IGR rakes in the balance 16 percent.

The state is also one of 33 states that would be unable to finance its operating expenses using just its IGR and VAT.

With a poverty rate of 28.04%, a labour force of 1.45m people, and an unemployment rate of 32.21 percent, Ekiti still has some work to do before it can adequately rely on its labour force for revenue generation.

It will need to stimulate the creation of at least 116,756 jobs yearly for the next four years to significantly reduce its unemployment and underemployment rate.