Lagos’ rising debt profile amid increase in tax worrisome—Funso Doherty
Article summary
Funso Doherty in an open letter to the Lagos State Governor said expressed worry that the state is racking up more debts even as its Internally Generated Revenue is increasing.
He said the State’s debt, which is the highest by any state in Nigeria has not had an impact on the living conditions of the residents of Lagos.
He urged the government to transition from what he described as an extractive model of governance.
The Governorship candidate of the ADC in the March 18 gubernatorial election in Lagos State, Funso Doherty, has expressed worry over the rising debt profile of the State.
Doherty shared his concerns in an open letter to Governor Babajide Sanwo-Olu against the backdrop of the State’s commencement of implementation of its N1 trillion bond issuance programme, by offering the first tranche of N100 billion in fixed-rate debt.
According to him, the situation becomes more worrisome because the State Government is borrowing more even as its tax revenue increases. He pointed out that under the APC, Lagos State’s outstanding debt rose from approximately N235 billion in 2011 to N1.2 trillion in 2021.
While noting that this came as the highest amount owed by any state in Nigeria, he said Lagos debt was almost 4 times the amount owed by the next highest state (Kaduna) and more than the total owed by the next 4 states combined (Kaduna, Rivers, Ogun, and Cross River) in 2021.
Borrowing amid increase in revenue
Doherty in the letter dated May 19, 2023, and addressed to the State Governor said:
“Lagos continues to borrow substantially despite rapid growth in Tax Revenues Assessed by traditional measures that compare the existing level of debts and repayments owed by the State with the Size of the State’s economy and the State Government’s annual income.
“Lagos State’s overall debt level is, for now, still considered sustainable. However, this debt is rising steadily, and almost half of it (measured at official rates) is foreign currency borrowing, which carries additional risks.
“Lagos State’s internally generated revenue (1GR), also the highest in the Federation, has risen from approximately N15bn in 1999 to approximately N570bn in 2021. The principal source of this IGR is the burden of taxes and levies borne by its residents and businesses that are productive, earning income, and paying their taxes.”
Noting that the All Progressives Congress government frequently seeks to take credit for significantly increasing the IGR of the state, he said that beyond this, the greater responsibility of the Government is to demonstrate the benefits that residents have derived from this ever-increasing tax burden borne by them.
Ineffective expenditure
According to Doherty, LASG’s expenditure and debt are substantial and growing, but lack effectiveness. He noted that effective governance is measured not by how much in taxes and fees have been levied and collected from the people, or by how much Government spends, but by how much the people’s education, healthcare, transportation, housing, security, employment and other components of standard of living have improved, as a result of the expenditures and actions of their Government over time.
“This is where, in my view, Lagos falls short. Over the past 24 years, LASG has massively deployed current and future societal wealth and increased its borrowing without substantial overall advancement in human development indices and living standards of the people.
“Lagos has consistently remained near the bottom of the scale on independently compiled “quality of life” rankings of major cities of the world. For example, Lagos is in 171 position out of 172 cities ranked in the 2022 Global Liveability Index rankings of the Economist Intelligence Unit (EIU) which assesses cities on measures like infrastructure, education, health, culture and environment, stability etc.,” he said.
Advice for the government
Doherty said the Government of Lagos State must transition from its existing, extractive model of governance. According to him,
“this means dealing decisively with its self-serving hegemony which some call “godfatherism”, the activities of corrupt elements in public office and the civil service, pervasive conflicts of interest, and dominant vested interests, all of which have created a wide gulf, over the last quarter-century, between Government’s use of the people’s resources and what the people of Lagos really need.
“If we fail to do this, it is certain that our resources will continue to be misdirected, diverted and misused, our future will be mortgaged through ever-expanding Government borrowing, our development over the next generation will remain tragically stunted and poverty will be widespread,” he said.
Doherty had earlier in another open letter challenged the State’s Office of Public-Private Partnerships over its recent Public-Private Partnership (PPP) deal with OANDO Plc. The Office in its response to the letter clarified some of the issues raised by Doherty.
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Full Story: https://nairametrics.com/2023/05/21/lagos-rising-debt-profile-amid-increase-in-tax-worrisome-funso-doherty/
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