Ogun 2012: Budgeting to Rebuild

Generally, a budget is one of the most important activities for any individual, organisation or government. It is a systematic plan for the expenditure of a usually fixed resource during a financial year. It shows the detailed plan of finances.

That is why the recent 2012 appropriation bills presented to the Ogun State House of Assembly by Governor Ibikunle Amosun of Ogun State is very significant.

The governor, who made his first budget estimates since assumption of office, presented a proposed budget of N187.901 billion for the 2012 fiscal year. The estimated income and expenditure for the forthcoming year was N65 billion higher that the N124.61 billion budgeted for the current 2011, with education taking the largest percentage.

Amosun had explained that the budget christened: “Budget to Rebuild,” was made up of N99.594 billion (53 percent) capital expenditure and N88.306 billion (47 percent) recurrent expenditure He said the budget would be financed through Internally Generated Revenue (IGR) of N63.601 billion, or 47 percent and Federation Account of N70.800 billion.

Presenting the budget estimates, recently, at the State House of Assembly, in Oke-Mosan, the governor had also explained that 65 percent of the 2012 budget would be spent on his five point agenda of “Affordable education (N41.483 billion or 22 percent), rural and Infrastructural development/ Employment Generation (N33.432 billion or 18 percent), affordable housing and Urban Renewal(N22.956 billion or 12 percent), Efficient Healthcare Delivery ( N15.706 billion or 8 percent) and Agriculture Production/ Industrialization (N8,813 billion or 5 percent).”


Review of 2011 Budget
In his review of the budget for the outgoing year, the governor explained that the approved budget size for 2011 was N124.61 billion. Of that amount, N41.88 billion was earmarked for salaries and allowances (33.61 per cent), N15.10 billion for Overhead Costs (12.12 per cent) and N21.83 billion for Consolidated Revenue Fund/Public Debt Charges (17.52 per cent) whilst N45.80 billion was allocated to Capital Expenditure (36.75 per cent).

“The expenditure pattern during the period under review can be attributed to the lull in the economic activities in the first half of the year as a result of the general elections. In charting the way forward for the state, we have refused to be daunted by the obvious financial odds.

“This administration has shown that development is not just about having a large amount of funds and resources but judiciously allocating them to meet the needs of the people. In the last six months, we have been able to impact on every sector of our socio-economic life.

“In the area of education, we released funds to cover the half-term running costs of public secondary schools to enable the immediate implementation of the qualitative and affordable education policy; pupils and students in our primary and secondary schools across the State no longer pay school fees; we have completed renovation work on blocks of classrooms in 100 schools across the 20 local government areas in the State. Just recently, we released funds as running cost to all the seven Government Technical Colleges in the state.”


He also revealed that the government had distributed free exercise books and other instructional materials to primary and secondary schools in the state, since he became the governor. This according to him was in addition to the 143,034 free text-books for junior secondary school students and 120,857 for senior secondary school students.

“The infrastructural development in public schools will also be complemented with the construction of 50 new schools. The contract is currently being awarded. The tertiary education sub-sector is not left behind. We fulfilled our promise to reduce tuition fees in the 10 higher institutions owned by the state government.

“We have paid up to date monthly subventions to these institutions of learning since May. To engender qualitative education at this sub-sector, we inaugurated fact-finding and visitation panels to afford us the opportunity to appraise the present situation of these institutions and find lasting solutions. The panels have all submitted their reports and we will soon issue White Papers on the reports, prior to implementing their recommendations,” he added.

The governor also pointed out that another area where his administration recorded success is the area of housing because it affects the workers of the State. He also revealed that the government have been able to resolve the controversy on the Deed of Assignment with regard to the Workers’ Estate, Laderin, Abeokuta.

“Let me explain that this issue had been pending before the advent of the present administration. The allottees had refused to sign the documents as a result of some issues which they felt should not be part of the contract documents. It is interesting to note that our administration has successfully resolved these issues and the deeds of assignment have been signed by the allottees, “Amosun said further.

Education for 2012
The governor said he had decided to give premium to the education sector because of the belief that education is the future of the state, stressing that with a sound education, the future of the state is secured.

He disclosed that his administration intended to “ensure the sustenance of the provision of the free and qualitative education at primary and secondary school levels, construct additional buildings in public educational institutions, embark on massive renovation/maintenance of dilapidated structure in our school and supply furniture to enhance student enrolment, retention and performance.”

He further revealed plans to establish five model secondary schools with hostel facilities in the three senatorial districts of the state, as well as to procure instructional material and textbooks for all students in public schools.

Amosun further told the gathering which included some former governors of the state such as Mr. Olusegun Osoba, Mr. Oladeinde Joseph, Major General Oladayo Popoola, former deputy governor, Alhaji Rafiu Ogunleye as well as the Gubernatorial candidate of the People’s Democratic Party (PDP) in the 2011 election, Gen. Adetunji Olurin, that his government plans to put in place an economic plan that would not continue to be dependent on allocation from the Federation Account.

He explained that he had put in motion a process of re-engineering the finances and the accounting process in the state to eliminate wastages and make the state become financially self-dependent.

Infrastructural Provision
On road, he disclosed that the “sum of N24.56 billion representing 13.07 per cent of the total budget for the year, has been earmarked for rural and infrastructural development in our dear State.

"It is hoped that this will transform the face of our dilapidated infrastructure,’ adding that a total of seventeen roads would be rehabilitated during the year.

On Industrialisation, Amosun said, “our Administration will kick-start the process of industrialization through the implementation of the Industrialisation Master Plan which is currently being fine-tuned. A major initiative in this regard will be the creation of several Industrial Parks across the State while access roads will be constructed in the rural areas to link the existing major roads.”

Other initiatives to be implemented in 2012, includes the provision of soft loan/empowerment facilities to micro, small and medium enterprise in the state, the establishment of technology incubation Centres in Ogun West and Ogun East senatorial districts of the state, as well as the provision of access roads to the Technology Incubation Centre in Ogun Central senatorial district

Transportation
The state government also plans to ease the transportation problems faced by the citizenry as it has decided to provide mass transit buses and taxis. According to the appropriation bills, over N2 billion has been earmarked for this purpose.

Water Supply
The appropriation bill also showed that the state intends to pay special attention to the provision of potable water to residents of the State next year.
According to Amosun, the “government has approved N63 billion for the State Water Corporation to procure water treatment chemicals, especially aluminium sulphate. Approval has also been given for the procurement of another consignment of chemicals for water treatment.

“Our administration is working in collaboration with the federal government and the World Bank regarding increasing access to pipe-borne water in line with the Millennium Development Goals through on-going rehabilitation of water treatment plants at Abeokuta, Papalanto (Ifo/Ilaro), Ijebu-Ode, Sagamu, Ogere and Apoje in Ijebu-Igbo. In 2012, we will spend over N5b on water supply.”

Revenue
The 2012 appropriation bill also revealed the government’s resolve to grow its internally generated revenue substantially. The governor insisted that the state has enormous potential which his administration intends utilise to achieve (or surpass) its revenue targets.
He explained: “Our appeal to the people is to perform their civic responsibility of paying their taxes as and when due. On our part, we will block all leakages in revenue collection and ensure judicious utilization in the service of the good people of our State.

“From the record, the State has been losing substantial revenues through revenue flight for years either out of ignorance of the Tax law on Residency Rule by the public or payment to one Tax authority by the employers for convenience or outright refusal to obey the tax laws, especially the Personal Income Tax Act 2004 (as amended).

“We have therefore launched a mass appeal to residents of the State, in the first instance, to ensure true declaration of their addresses in Ogun State while we expect employers of labour and other self-employed persons to fully comply. We shall continue to put necessary strategies in place to collect all legitimate revenues due to Ogun State.”

Agriculture/Food Production
Amosun, who posited that agriculture remained the mainstay of the state’s economy, added that urgent action would be taken to increase the production of food to keep pace with the population growth and reduce the current inflationary situation.

He emphasised that since food constituted a major item in the cost of living index, especially of the low-income workers, any serious efforts to improve the standard of living of the people must, of necessity, give priority to agriculture.

“It is in this regard that our Administration is poised to act as a major facilitator in stimulating agricultural development at every level of the supply value chain. As a sign of our commitment to Agriculture, a total sum of N5 billion has been allocated to the agricultural sector in the coming fiscal year. I enjoin you to note that our strategy is to concentrate on facilitating huge investments by private sector operators in this sector through the creation of an enabling environment,” he added.

Source: http://www.thisdaylive.com/articles/ogun-2012-budgeting-to-rebuild/105013/

These are the sort of thread that should ordinarily get a lot of attention because they detail broadly the bread and butter of Governance i.e how money is to be spent. We can see that capital spending is 53%. Up from 36.75% under the PDP last year. Recurrent expenditure was high last year under the PDP at 63.25%. Amosun is budgeting 47% on the same expenditure. All in all, we can see that indeed the Party does matter. Nigerian Parties are not the same and not many believe in the hideous profligacy of the PDP we are told makes "leaner government impossible" yet every ACN Governor is managing to bring down recurrent expenditure while allocating more funds towards capital spendings . The statistics say it all for those who are into facts and not self-deception. Below Ajimobi is equally impressive in how he improves on what was on ground last year under the PDP. These are the sort of threads we should be discussing robustly yet I have come to accept the limitations of this forum and the preference of some to focus on personalities rather than poltical ideology, macroeconomics policies and fiscal planning.


http://234next.com/csp/cms/sites/Next/Home/5749793-146/ajimobi_presents_n160.6b_2012_budget_to.csp

Ajimobi presents N160.6b 2012 budget to Oyo Assembly

December 21, 2011 02:53PM



Governor Abiola Ajimobi of Oyo State on Tuesday presented a N160.6 billion budget proposal to the state House of Assembly for the 2012 fiscal year.

Tagged ``Budget of Restoration'', the appropriation bill, representing an increase of 8.4 per cent over the 2011 budget, has N72.7 billion which represents 45.3 per cent as recurrent expenditure and N87.9 billion representing 54.7 per cent as capital expenditure.

The governor, at the ceremony witnessed by party leaders, traditional rulers, top government officials and other stakeholders, said the budget was a significant improvement over 76.4 per cent and 23.6 per cent of recurrent and capital expenditure respectively for 2011.

According to him, the 2012 revenue estimate of N110 billion is a decrease of 32.4 per cent compared with the N163 billion approved in the 2011 estimates, stressing that this was meant to truncate the culture of bloated, unrealistic and unrealizable revenue projections that had been the hallmark of the state's fiscal operations as noted earlier.

``Our analyses of budget performance in recent years have shown that the performance is low, this poor performance is acerbated by low spending on capital expenditure.

``No state that focuses on consumptive item can grow, which explains our undesirable state of affairs, which this administration inherited. If we want to break the vicious cycle of under-development, we have to take the bull by the horns to focus on capital expenditure that will be able to secure development that we are all craving for,'' he said.

Gov. Ajimobi further disclosed that his administration's strategy would be to increase the internally-generated revenue penetration by extending the tax net to those who were hitherto outside the net.

While stating that his government would soon request for legislative muscle from the Assembly on taxation and other sundry regulatory issues which were due for review, he also stressed the need to raise bond from the capital market, public-private sector participation (PPP) and other financing options to cover the financing of the N50.16 billion deficit.

The governor particularly said that the proposed bond issue would be used to finance specific flagship projects as well as some critical sectors, all of which would facilitate significant growth of the state's economy, adding that a large proportion of the beneficiary projects would be self-financing.

He highlighted the priority sectors to include economy (49 per cent); social services (20.9 per cent); general administration (16.66 per cent) and regional development (13.1 per cent), pointing out that the heavy percentage of 70.39 of the total budget allocated to the economic and social services sectors underscored his administration's determination to pursue a people-centered, employment-driven economic agenda.

In her remarks, the Speaker of the Assembly, Mrs. Monsurat Sunmonu, lauded the restoration agenda of the Ajimobi administration, pledging that the lawmakers would provide all necessary legal framework to ensure the successful execution of the programmes.

Although Sen. Ajimobi said that the outgoing year posed several challenges to his administration, he, however, added that it had provided a rallying point for purposeful partnership among the executive, legislature and the people of the state.

``We will support Your Excellency to fast-track the reposition of this state for maximum positive impact on our people,'' she assured, urging the executive arm to address the power problem by going into public-private partnership arrangement in power generation.

So true.

I think the state governors need to be watched closer and the more they outline the easier it is for us all to hold them to account.

Relatively detailed,Ajimobi was basically just faffing around really,without much flesh.
Model secondary schools fully privatised to bring more money in.
Renovate the rest and make it accessible.

Oga Fayemi Okun!,I am waiting.

Ufeolorun:

Relatively detailed[b],Ajimobi was basically just faffing around really,without much flesh.[/b]
Model secondary schools fully privatised to bring more money in.
Renovate the rest and make it accessible.

Oga Fayemi Okun!,I am waiting.

There is nothing wrong with a broadly outlined budget. Everyone genuinely interested, because we now live in an information age, can gain access to the details. It is therefore wrong to speak as if Ajimobi skimps on details. These budgets are official Government documents in which the books will have to be balanced fastidously. Breakdown details will no doubt be available for your perusal if you want it. Look at Ajimobi's career and you will see that this is a man who built an outstanding reputation for knowing what he is talking about and doing. It is a bit worrying we can now suggest he is evasive just because we have a culture of villifying all politicians when it may be easier to wait for detailed budget breakdown before making any conclusions either way.

Meanwhile GEJ has made a significant whopping 2.4% reduction in our recurrent expenditure.

Fresh Air indeed!

^^
We are talking about politicians with constituency not some squarepant in Aso rock.

@OP
Just felt a detailed plan indicate solid sense of direction.

Gekko:

Meanwhile GEJ has made a significant whopping 2.4% reduction in our recurrent expenditure.    

Fresh Air indeed!

This is why these sort of threads should ordinarily be informative to Nigerians. They indicate the leanings of our leaders while highlighting glaringly tthose who believe in sharing wealth with the people and the elitists who think ordinary Nigerians deserve nothing while they enjoy lavish existence that is nauseating considering the poverty the average Nigerian faces daily.

I don't think even one ACN Governor has worsened the statistics they inherited oncerning recurrent expenditure. Instead, all have chosen voluntarily to spend more on Nigerians by cutting down on waste and grotesque profligacy. Meanwhile, recurrent expenditure that outweighs capital spending by a ratio of 3 to 1 seems to be hallmarks of PDP fiscal thinking. Sad. 2015, the PDP will tell us that their Presidential candidate rode on the back of Crocodiles to get to school.

Nice.

Yeah the Oyo budget seemed pretty vague to me too. Projecting 110 billion in revenue or so, but wanting to spend 160


Regarding this:

Review of 2011 Budget
In his review of the budget for the outgoing year, the governor explained that the approved budget size for 2011 was N124.61 billion. Of that amount, N41.88 billion was earmarked for salaries and allowances (33.61 per cent), N15.10 billion for Overhead Costs (12.12 per cent) and N21.83 billion for Consolidated Revenue Fund/Public Debt Charges (17.52 per cent) whilst N45.80 billion was allocated to Capital Expenditure[b] (36.75 per cent)[/b].

OGD had no clue what he was doing, it appears All of that lofty talk of Ogun having a higher GDP than Ghana (or whatever else I've heard him say before) doesn't sound very realistic if you are spending money irresponsibly like he did.

Nice thread.

I can see the reason why people are dissatisfied with their governments at the end of each fiscal year. Their hopes are raised based on promises made by their governors; promises which do not reflect the true situation of things.

Ogun plans to spend N187B in 2012, but they are banking on IGR 0f N63B + Allocation of N70B (N133B total) income projected.

Even if they end up getting all their projected income, their is still a deficit of N54B.

According to the state govt, the IGR has only just increased to N1B a month, which means that as it stands today, they will only have N12B to work with, which is a shortfall of N51B. So their budget is already heading towards N104B deficit.

They received a lot less than N40B from the federal govt in 2011 but are hoping to receive N70B eventhough the federal budget did not increase by upto 2% but they expect about 100% increase in federal allocation.

I can see another deficit of at least N25B from the federal account making a total of at least N129B deficit.

Their income for now will fall short of the budget by at least N129B, so they should base their budget on N58B if they want a reasonable KPI for their budget. However, it's ok to talk a good game if it makes one feel good.

ekt_bear:

Nice.

Yeah the Oyo budget seemed pretty vague to me too. Projecting 110 billion in revenue or so, but wanting to spend 160

FACE:

I can see the reason why people are dissatisfied with their governments at the end of each fiscal year. Their hopes are raised based on promises made by their governors; promises which do not reflect the true situation of things.

Ogun plans to spend N187B in 2012, but they are banking on IGR 0f N63B + Allocation of N70B (N133B total) income projected.

Even if they end up getting all their projected income, their is still a deficit of N54B.

No disrespect to you guys, but I hope you both know that those who draft these budget are actually experts who would ordinarily be too capable to propose spending that is unfeasible. That is amateurish and for you guys to think that sort of shoddiness would make its way into a state budget shows the disdain you have for your leaders who, contrary to what most of us think, are actually very intelligent. Amosun is an Accountant for god sake and I don't even need to brandish Ajimobi's CV to show he is not slow. the deficit may be made up in many ways eg improved tax collection , recourse to products available in the money market, etc,etc.

Ajimobi's budget, for example, shows how the shortfall will be bridged so I don't think it serves any purpose for us to focus on negatives without acknowledging that the budgets we are discussing are vast improvement on 2011 budgets:

[size=14pt]Gov. Ajimobi further disclosed that his administration's strategy would be to increase the internally-generated revenue penetration by extending the tax net to those who were hitherto outside the net.
[/size]
While stating that his government would soon request for legislative muscle from the Assembly on taxation and other sundry regulatory issues which were due for review, he also stressed the need to raise bond from the capital market, public-private sector participation (PPP) and other financing options to cover the financing of the N50.16 billion deficit.

Gbawe:


No disrespect to you guys, but I hope you both know that those who draft these budget are actually experts who would ordinarily be too capable to propose spending that is unfeasible. That is amateurish and for you guys to think that sort of shoddiness would make its way into a state budget shows the disdain you have for your leaders who, contrary to what most of us think, are actually very intelligent. Amosun is an Accountant for god sake and I don't even need to brandish Ajimobi's CV to show he is not slow. the deficit may be made up in many ways eg improved tax collection , recourse to products available in the money market, etc,etc.

Ajimobi's budget, for example, shows how the shortfall will be bridged so I don't think it serves any purpose for us to focus on negatives without acknowledging that the budgets we are discussing are vast improvement on 2011 budgets:

Good luck to them though. What is their IGR now and how much did they receive from FG last year ? The N50+ deficit they acnowledged is the glaring one.

Their IGR just hit N1B mark per month (N12B/annum) according to them and they are planning to spend N63B from the same IGR.

If they received less than N30B from FG last year, how did they arrive at £70B projection for next year (more than 100% increased), when FG budget did not increase by more than 2% ?

The numbers do not add up, but good luck to them.

The IGR probably hasn't been as low as N1 billion in half a decade not to talk of that N150 million you believed it to be a short time ago. . . if you chose to use clearly erroneous and nonsensical #s, that is your problem, not theirs.


Gbawe, accountant or not, magician or not, a N50 billion deficit is a tall order to make up.

ekt_bear:

The IGR probably hasn't been as low as N1 billion in half a decade not to talk of that N150 million you believed it to be a short time ago. . . if you chose to use clearly erroneous and nonsensical #s, that is your problem, not theirs.


Gbawe, accountant or not, magician or not, a N50 billion deficit is a tall order to make up.

My guy, listen to yourself. Was OGD not trying to float a N100 billion bond for retirement severance pay 'developmental spending' , i.e double the N50 billion you are now distractively basing your negativity on? The problem with most of your arguments is that they make no allowance at all for realities on the ground.

An enhanced tax regime (considering many pay little or no tax) combined with bond issuance and aggresive usage of PPP arrangement (automatically meaning the private sector contributes more towards overall spending) could easily provide the N50 billion required to bridge the gap. N50 billion (when OGD sought to raise double that in bonds alone) errs towards conservatism in my opinion. I don't think , based on solid premises, you have much of a point here.

So will he be borrowing every year for the next decade or so?

Or is this N160 billion budget just a one-time thing, and future budgets will be based on actual revenue generation? I.e., closer to N110 billion?

What he should have done was presented a budget of ~110, then also mention that he was looking to take a loan.

Also, this N50 billion which he intends to borrow. . . . if he is borrowing so much then imo 90% of what he borrows must be spent on infrastructure. He has better not be mixing it into recurrent.

Should be something like 50%/50% on the 110, then most of the money borrowed should be spent on infrastructure.

So shouldn't really be spending more than ideally N65 billion on recurrent, as opposed to the current N88 billion he wants to actually spend. . . . .

I mean what excuse really is there for spending more money on recurrent expenditure than the free oil money you get from the federation account? Shouldn't that money be enough to take care of the basics, paying salaries, existing debt, etc?

I don't understand the way this guy reasons.

Speaking of which, if what Face says is correct and they in fact received only N30 billion from the federation account last year, then how does he expect to receive N70 this year?

ekt_bear:

So will he be borrowing every year for the next decade or so?

Or is this N160 billion budget just a one-time thing, and future budgets will be based on actual revenue generation? I.e., closer to N110 billion?

I would have no problem if you provided you original argument in this way and without needless negativity that does not stand up to scrutiny. You don't know how much of the N50 billion would be sourced from issuance of bonds so why assume , negatively, that the State would be indebted?

Fashola showed most Governors the huge income that can be derived from enhancing the tax collection process - especially for the private sector where PAYE does not apply as a way to automatically collect tax. Fashola also succeeded to shift the burden of spending much more towards the private sector , than was previously the case, with his aggressive usage of the PPP model. The tax sector alone is an untapped goldmine probably capable of providing the N50 Billion Ajimobi , IMO, conservatively projects. As regards PPP's, If , for example, certain roads will be tolled, why can Ajimobi not conservatively expect numerous private sector investors to show interest in financing the cost of road construction (going into billions) if those private sector partners can collect their capital and handsome profit over time?


http://www.tribune.com.ng/index.php/taxation/8957-why-do-nigerian-leaders-evade-tax

No one pays close attention to tax revenue, those who pay tax feel cheated and seek ways of avoiding it, and because no one is required to part with any significant portion of their earnings, not enough questions are asked about the management of public resources. This has to change.
Share

The rich in Nigeria enjoy privileges that they do not deserve, the unfairness of which provokes the poor and is partly at the root of social violence and alienation. First, tax payment in various parts of the country is easily manipulated. Tax officials double as consultants to whoever wants to evade tax; they help them to compromise the books and they collect a handsome fee for their services. Second, companies are reluctant to remit taxes, and nobody is wielding the big stick.

Third, it is common knowledge that Nigerian leaders routinely live above the law. How much tax did former President Olusegun Obasanjo and his Vice President pay between 1999 and 2007? How much tax has President Goodluck Ebele Jonathan paid in the last two years? And how about the governors? There was once a state governor, who boasted that he was richer than the state he was leading? Nobody asked him how much tax he paid to the same state. There are Nigerians, individuals and companies, on the World's Richest List. Is it possible to determine the percentage of their personal income or company income they have given back to the state?

In Nigeria , it takes more than a battle to get public officials to declare their assets. And who would dare ask them about personal income tax? It is taken for granted that public office is a vehicle for primitive accumulation. It is nearly a general principle that the wealthy in Nigeria can avoid tax. Tax avoidance is said to be a good evidence of creativity, except that it undercuts the country.

I gotta run some errands, I'll be back in a few hours. But the language the guy uses suggests he'll get this N50 billion through borrowing, not through increased revenue generation.

Anyway, ttyl.

Interesting points.

I think the focus of the budget is good. But as always more information is needed.

For example what is the funding mix:
- Can certain projects be deferred if the expected funding gap is not bridged?
- Is the total recurrent spend contingent on gap funding being secured?
- What is the connection between the recurrent expenditure and the capital. Ie if capital is deferred, will its associated recurrent be deferred as well?

I have copied below my understanding of the budget break down (also pointed out above by Gbawe and Ekt_Bear).

Is it me or is there a huge difference between what the two papers above are saying the budget is? One says 160, the other says 187?

Or maybe I've missed something.

EDIT: lol. OK, mixed up the two states. My bad.

Something doesn't add up in this budget, but hey let me not criticize. Spending more than you earn is a dangerous path that leads to burdened DEBT.