Lagos State Public Debts—Much Ado About Nothing!

There has been so much brouhaha in the Nigerian media, including print and the electronic media especially some private bloggers who recently out of either malice or ignorance have presented to the public the “unsustainable” public debt levels of Lagos state, which to me, and any enlightened economist would agree, is the most financially prudently managed public state and indeed, the whole of the Nigerian federation in terms of value for money, and efficient management of its financial resources.

Nigerians are quick to praise-singing a governor who constructs some Roads, Schools and well equipped hospitals terming such persons as a “Performing Governor, or “he is performing,” without asking questions about how much they get from the “cake sharing” Monthly Federal Allocation, and how much they have been able to generate through their efforts in Internally Generated revenue.

I am surprised that despite these disreputable and bungling display of Economics knowledge by those parroting the message that Lagos state is insolvent or rather carries a huge burden of debts that will take donkey years to repay and will constitute a massive load on unborn Lagosians, sound and knowledgeable persona, particularly of Lagos state domiciliation have not come out to shut up its traducers that Lagos state is actually “under-borrowed” and have the capacity to borrow up to $2Billion external loans at any one time without suffering any shock or pain because it has the capacity to repay.

I was prompted to do this write-up when I saw a ridiculous posting by a group which called itself “Hope for Nigeria” in its facebook page. In fact they should call themselves-that's if they are not faceless- “hopeless for Nigeria,” if that malicious and divisive classification of state debts by political parties is all they could come up with to present to Nigerians. Not only where they clueless on the Economics of public debt but they were hopelessly involved in misleading disinformation. I had earlier seen a few of the mischief makers ignorant display of economics knowledge, where they classified debts owed by each state, with Lagos debt topping the list with an external debt level of $611 million (US Dollars).

Even though this was a pardonable inept display of Economics knowledge akin to saying that because Japan has a public debt figure of about $13 Trillion (US Dollars) with a debt/GDP ratio of over 200%, Japan is therefore insolvent, a bigger credit risk and will be unable to pay or service its debts compared to say Bangladesh because it has a Debt/GDP ratio of only 30%.

If we are to believe these lay Economists then Bangladesh should have a better credit rating than Japan in accessing government loans and credit; but that is not the case as bilateral and international lenders and investors still grant massive cash Loans and buy its Treasury securities/bills far more than they will even consider Bangladeshis.

But the most infuriating display of Economic ignorance to decide out of mischief, like Hope for Nigeria did in classifying state's Debt according to what each political party owes as if party chairmen tender their party registration certificates as security or guarantees to IMF and other international lenders before they get “party by party loans.” What manner of cheap and dirty politics are these guys up to? Its all in a bid to discredit the newly formed APC as prelude to the dog fight PDP and its agent wants sequel to the 2015 elections. The best governor, in my book, in APC, governor Fashola should be discredited and humiliated by all means no matter what he because of dirty politics. What has parties got to do with it? Did any one of the party chairmen or even the state governors go to Nigerian Banks and international lenders such as World bank brandishing their ACN, ANPP, PDP or APGA INEC registration certificates before been granted those loans?

So many buffoons occupy that space called Nigeria and enjoys the wholesale of ignorance to the unsuspecting and gullible public. What has the size of the debt of an autonomous state, or even a country, for that matter got to do with sound economic performance, development or the ability to repay loans if that state or country uses those debts for regenerative investment? America is the world's biggest debtor, with a debt profile of over $15 Trillion and owes China alone over a Trillion dollar in Treasury bills, Notes and Bonds. Japan with its over $13Trillion public debt still owns about $1.13Trillion of US public debts, and debts in itself is nothing bad or alarming if used for regenerative and infrastructural development. It is the Nigerian types of debt where the cash loans for projects grow wings and disappear into private pockets or used for consumption goods that borrowing will become a disaster to future generations.

American politicians are not playing politics with their burgeoning debt level, even though the state treasury was concerned by its rising debt levels and more debts used for military adventurism rather than capital investments that generate revenue over time to pay off long term debts and some reasonable returns on investment.

Lagos state can owe $1 billion dollars and will still be considered "under-borrowed" and more credit worthy in the international money and capital markets than badly managed Bayelsa, Delta, Bornu, or any other state in Nigeria for that matter because creditors know that Lagos state have the resources and ability to pay, and puts their cash in regenerative capital investments- first Suspension Bridge in Africa; Light Railway, Water ways services, various Toll roads etc.

So long as you can service your debt by paying the interests due and Instalmental retirement calls you are still on song and can borrow more. This Lagos has been doing effectively and they have never falling behind in its debt servicing because it has the capacity to pay up much larger value of its debt. But for unnecessary restrictions placed on Lagos by Federal government bureaucracy more of jaundiced politics than economic rationality, International creditors would be queuing to lend her more cash for development because they are aware Lagos can pay back easily without their sweating to get paid!

Even with the table of allocation by states posted here posted by the bloggers, Delta state got N62 Billion as annual Federal allocation in May, 2013 and Bayelsa got over N50 Billion whilst Lagos with a population of over 15million people got only N30 Billion- less than 50% ( less than half) of what our almighty Delta state gets, and about 60% of what small Bayelsa with a tiny population of less than 2million people got every month of the year.

Lagos with nearly 8 times the population of Bayelsa or 4 times the population of Delta state would need more teachers, more schools, more hospitals and of course more civil servants to pay salaries because of the huge population to attend to including more school children, yet it gets less money than tiny Bayelsa, Delta, Akwa Ibom, Rivers, Kano and Cross River states.

The mischievous facebook writer will not post this truth about the Economics of state debts and the underlying factors on his facebook- that is if he is not an Economics illiterate, or as blind as a Bat, nor will the "copy and paster" find the truth and post here, to educate us more properly. All they care about is dubious, wrongful, misleading analysis and the parade of ignorance to deceive and blackmail Fashola and any hardworking governor of the dreaded APC. Cheap and dirty politics that's what this is all about. The paster knows, or ought to have known, that this is trash!

Economists talk of debt ratios to give a more meaningful and relevant information about the debts of nation states. Some of the relevant ratios are Debt/GDP ( both in absolute figure and the more meaningful one Debt over GDP per capita- that is the size of your debt compared to the value of goods and service produced in a year, whether sold or consumed;

There is also comparison with Gross National Income GNI/debt value also the Per capita one that measures debt against total income earned in a year by the state per person.) There is a ratio of debt to Capital investments and others time and space will not permit to put down here.

Despite the federal government carting away the humongous Corporation Tax- states are only allowed to collect personal Income tax from those companies, not the huge company profits tax- VAT and Custom duties from Lagos state, and Lagos' comparatively very low Federal allocations, Fashola and before him BolaTinubu, but more of the former, had been very creative and innovative in generating internal revenue from Lagosians, such that Lagos has the biggest budget by miles in Nigeria, bigger than any other state. Not even Rivers or Delta states have budget close to Lagos annual budget. This Zombie on Facebook and that "blogsman of three days ago will not tell you this- one, because they are ignorant and, two because he wants cheap blackmail.

There should be true federalism and proper resource control, not just derivation for oil producing states but every state should be allowed to collects its corporation tax, VAT and even Import and Export taxes and it should be up to the states to decide how much they should give the federal government not the other way round.

Tony Ishiekwene

Email: [email protected]