Godwin Emefiele’s term as governor of the Central Bank of Nigeria (CBN) officially ends on 2 June. His dual exchange rate structure, which the IMF has long urged Nigeria to scrap, may not last much longer.
Lagos stays cool despite rising debt concerns
Lagos is often deemed to be the most progressive of Nigeria's 36 states, but a new report from Nigeria's Debt Management Office (DMO) shows it is also the most indebted.
Nigeria’s commercial, economic and entertainment capital is so independent that it is sometimes referred to as Africa’s seventh largest economy. Lagos is regularly feted for outshining its peers in many different metrics; including its tax base:
- According to fiscal transparency nonprofit BudgIT, only 21.6% of its total revenue comes from statutory allocations.
- It is home to the two busiest and most functional ports in the country.
- It is also the seat of power of Bola Tinubu, governor of Lagos between 1999-2007 and undisputed political godfather ever since. A long-running feud with then president Olusegun Obasanjo, sparked by central government withholding money, led Tinubu to push through fiscal reforms that resulted in more revenue for the state.
The DMO’s report reveals that Lagos has:
- A foreign debt portfolio of $1.43bn, representing a substantial 33.8% of the foreign sub-national debt portfolio.
- Domestic debts piling up to N530.24bn: more than that of the next two states combined.
But there is a curious mismatch between the lack of obvious major outlays and the size of the debt: there have been few major expensive infrastructure projects outside roads – much of the federal infrastructure was built when Lagos was still the nation’s capital (until 1991).
- The city currently has no organised mass transit system and no proper drainage system.
Since 2009, the Lagos metro has been under construction and has a proposed completion date of 2022.
So where does the money go? Everyone has an idea but no one knows for sure. The state has never opened its books and contract details are often clouded in secrecy and controversy.
- Several Freedom of Information (FOI) requests have been sent by journalists and civil society groups but the government has turned them all down, claiming the law – which came into effect in 2011 – was not applicable in the state.
- In April 2018, an appeal court judgement ruled against this, insisting that no state has the power to reject FOI requests, but Lagos has refused to budge on its culture of silence.
In its 2018 data book on Lagos, BudgIT stressed that “the State does not publish its detailed budget, budget implementation reports, audited statements and other critical documents needed for holistic, independent assessment”.
- It also lamented that “the low level of transparency in Lagos’ finances is reflected in the quality of service and abysmal range of infrastructure in the state; the paradox of Lagos is its reality as a place where rubbish dumps grow on streets, in tandem with six-figure skyscrapers.”
The state procurement agency stopped publishing the details of contracts after a controversial revelation that then governor Babatunde Fashola (now minister of works, power and housing) had dipped into the state coffers to upgrade his personal website at a cost of N78m ($216,666).
- Thanks to the Lagos State Governor and Deputy Governor Pensions Law of 2007, he and his successors now live comfortably in retirement.
- They each get the same annual basic salary as the current governor, in addition to houses in the state and in Abuja, at least three cars every three years and an assortment of security and domestic staff with pensions.
- In December 2018, the Punch newspaper sent an FOI request to know the total amount spent on governors and their deputies since the enactment of the law in 2007, but is yet to get a response.
In February 2019, the head of the Lagos civil service lectured government officials in a workshop on “Entrenching transparency and prudence in management of government procurement process”.
For now, no-one is talking about issues of debt sustainability. But the conversation is coming.
The recent devaluation of the naira makes things harder, given Lagos’s large debt in dollars, says Seun Onigbinde of BudgIT:
- “Lagos debt is still sustainable as its internal revenues are still strong and largely immune from oil price swings. Lagos makes around $1bn in internal revenues on an annual basis and spent N65bn ($210m) on public debt servicing in 2017. “
Bottom line: “This is still a healthy ratio, far better than the Federal Government. However, there are concerns if these funds are actually used for frivolities and over-invoiced opaque contracts”, says Onigbinde.