SEARCHING INWARDS

Our worst fears are beginning to creep up on us, and we have made no plans to deal with the situation. One way or the other, the petrodollars serving as the backbone of our survival is dwindling. Data from the Ministry of Finance, Budget Office and the Central Bank of Nigeria show that Nigeria’s earnings from oil continue to plummet this year. It has been estimated that this might result in a $12billion shortfall of budgetary estimates. What next? We are forced to dip our hands into the Excess Crude Account (ECA) to augment the deficit. That account is supposed to be our Sovereign Wealth Fund, which should insulate our economy from external shocks. Already, we have drawn $4billion from the account this year; it is down from the $9billion we had in the beginning of the year to $5billion.

Government at all levels is feeling the impact of our declining oil wealth. The federal government’s quarterly disbursement for capital projects has reduced. Funds shared among the three tiers of government in the months of August and September were way below expected allocations. If oil production continues to be disrupted and the 80,000-barrels-a-day oil theft goes on unabated, it means we will keep dipping into the ECA until it runs dry. What happens next? Your guess is as good as mine. By now, it should be clear to the government, especially at state level, that they have been left with little option than to look inwards. For too long, we have neglected the economic potency in developing the mineral resources within state territories and devising sound internally generated revenue strategies. The time to go back to the drawing board is now.       

According to the Gross Summary of Statutory Revenue Allocation and VAT released by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) in March 2013, apart from Akwa Ibom (N22, 205,383,781); Bayelsa (N13, 350,351,654); Delta (N17, 057,045,907); Rivers (N20, 934,686,737); Kano (N12, 333,095,855) and Lagos (N14, 219,026,551), no other state got up to 10billion naira from the Federation Account. In many of these states, internally generated revenue is near zero. For instance, Plateau State got N6, 099,168,412 during the month in review, and has only succeeded in generating just over 6billion in IGR between January and October. The state makes roughly 600million in IGR per month; a pantry 10 percent of its monthly allocation. This is why any reduction in Federation Account allocation creates panic among states.     

On the other hand, a state like Lagos may not be overly alarmed by these allocation shortfalls. As at May, Lagos State’s internally generated revenue (IGR) is put at an average of N30 billion monthly. In fact, figures released by the state’s Ministry of Finance show that in 2012, Lagos generated an average of N29.0 billion monthly, as against an average of N18.9 billion in 2008.  Over the past five years, the state’s monthly IGR maintained an average increase of 10.7 percent, and its IGR accounts for over 65 percent of the total revenue of the state. Meaning, Lagos State generates three times more funds for itself than it receives from the Federation Account. Without being insensitive to the peculiarity of Lagos, I still believe that the IGR base of other states can improve if they engage and empower their citizens, who, in turn, would be the driving force behind improved IGR.  

I have said it before that for states to start preparing for life with limited crude oil resources, we have to attract investment in agriculture and industry by genuinely courting prospective investors with incentives. States like Plateau, Bauchi and Taraba amongst others should be reaping bountiful IGR from tourism and agriculture, but first, they have to get their act together. We have to focus our collective effort on providing infrastructure as the first step towards diversifying our economy. There is no guarantee that petroleum will continue to dominate global exchange because every day the world inches closer to cleaner and renewable energy sources. Rather than groan and grieve about the insufficiency of their monthly allocations, state governors should take up the challenge of using what they have to open up sectors where they reserve competitive advantage to investors. 
 
It is important for us to start following global trends and investing in human capital, industry and technology. Fresh thinking and the ability to prepare for “what-if” have propelled other countries to self-sufficiency. Dubai is a perfect example. What has happened there is what we should have been thinking of years ago. Imagine what a desert state has been able to achieve. We are here in the midst of plenty but a visit to the Murtala International Airport in Lagos alone is enough to let any serious minded person understand that we live in the country of the blind.