Vice President Yemi Osinbajo has told states of the federation that they must begin to behave as countries in order to achieve their growth and development potentialities.
The vice president stated this yesterday in Abuja at the 2018 LEADERSHIP Conference and Awards, with the theme: “Towards Financially Viable State Governments.”
Osinbajo, who was the keynote speaker, explained that the country was heading towards a time when states should be competing against each other for big investments.
He noted that governors must not wait for constitution amendments or restructuring for them to begin to harness the potential in their state.
“States must behave as countries as the dynamics of success are changes. We are heading towards a time when our states would be competing heavily against one another for big-ticket investments. It is already happening elsewhere in the world.
“Think about what this development would mean for Nigeria soon. When companies make important decisions about citing their business primarily based on how easy it is for customers to do business with them; a state must make it for people to do business in it.
“State can make it easy for investors to acquire land, to register property, to pay taxes, to access broadband internet and they would be winners, while states that make these things difficult or impossible for investors will languish as the world carries on without them,” Prof Osinbajo said.
He emphasised that if all of this sounds theoretical, Nigerians should consider information and communication technology, which of course does not require natural resources for location, contributes about a tenth of Nigeria’s GDP already up from negligible levels less than two decades ago.
Osinbajo observed that, according to the Nigeria Communications Commission (NCC), the telecom sector had attracted $70 billion in foreign direct investment in the last 16 years.
“That is the size of the economy potential they are talking about, and they can take their business anywhere once infrastructure is right,” he said.
According to the vice president, access to broadband is worth highlighting as an example of how states can make decisions that can make or mar their economic future, adding that this is an issue that is frequently debated at National Economic Council.
The argument was that states should not charge prohibitive prices for installing fibre optic cables, he said.
“As good as the country is in this time, we should be covering the country with broadband as an investment in our future.
“The alternative, of course, is for state governments to look only on how it can maximise today’s revenues by charging exorbitant fees for broadband installation. This will be a case of penny wise, pound foolish – short term gains at the expense of future potential and profit.
“In the future, and that future is right at our door steps as states will strive or suffer on the strength of things. That’s how fast and cheap the internet is.
“There must always be the temptation to prioritise raising IGR at all cost but if this is done in a manner that stifles today’s entrepreneurs and investors, then clearly, there would be great price to pay along the line.
“Governors have to think beyond four or eight-year cycle. There must be a commitment to laying a foundation.”
Recalling the six years of the Obafemi Awolowo government as Premier of the Western Region, which is often cited as one of the most progressive of any government in the developing world , Osinbajo said the government devoted as much as 42 per cent of 1958/1959 recurrent budget to education, one of the highest in the world at the time.
At the same time, he added that the region nurtured a vibrant civil service and a judicial system which is widely acknowledged till date.
Osinbajo continued: “How was our phenomenal achievement possible? There was no oil revenue, no federal revenue; in fact, the Western Region Government gave revenue to the central government. How did they achieve financial viability? Mostly, it was taxes and revenues from agriculture, especially cocoa, and some from mineral resources.
“Free education which was audaciously launched by that government was directly on the back of income taxes. A capitation of pool tax was imposed by the Western Region mainly to fund free education projects despite much opposition and protest.”
He revealed that, that gradual progress was truncated by military rule in 1967 as the tax regime was abandoned and focus was directed to the central government for monthly allocation.
The vice president declared that no state in the entire South West, aside Lagos, earns enough in taxes to pay salaries, let alone do major capital projects, adding that without federal allocation, most states cannot survive.
He observed that the problem of the state was not different from that of the federal government – a complete reliance on a source of revenue that is extractive and so requires no creativity and productivity.
“Most resource-rich nations and sub-nationals in developing worlds end up being poor and financially unviable because making easy revenue from extractive source is habit forming – the habit of easy money without effort; thus few jobs are created because there is no value added.
“You have countries like Japan, Singapore and South Korea with no significant natural resources and they are some of the most successful economies in the world because they create enough jobs for most of their population.
“This is possible because financial viability is based on innovation and productivity. Productivity means adding value, not necessarily possessing the resources but adding value to the resources, even if it means importing the resources.
“I think a lot of the answers to the challenge of creating financially viable state government are the same as the problem of creating a financially viable country or nation states,” he said.
The vice president further explained that many of the same principles that work for a national government will also work for a state government, saying that one of the priorities of the federal government today is diversifying it’s revenue base through taxes and blocking most of the leakages.
He disclosed that the federal government had been able to increase the number of tax payers from 14 million to almost 20 million, out of the 70 million economically active Nigerian citizens
“How can any country survive when only five per cent of those who should be paying taxes actually pay them? It is taxes usually that will pay for development,” he stated.
On agriculture, he said that value addition through processing along the agro value chain was helping Nigeria to create jobs, reduce imports and export more.
According to him, since all the lands are in the states, the ones that have focused on agriculture and the value chain have created the most jobs.
Osinbajo noted that rice producing states had witnessed a tremendous rise in the prosperity of their people, as states like Kebbi and Jigawa have witnessed significant improvement in the earnings of farmers and settling of more farmers.
On creating an enable environment for business, he said it was another policy the current administration had pursued aggressively since 2016.
“I am pleased to note that we have already started seeing the results. We have reduced business registration time; we have implemented a functioning visa- on-arrival system, launched an online system for value added taxes and other reforms.
“By dismantling bureaucratic obstacles in the way of businesses and investors, we are hoping to unleash the full potential of private enterprise.”
Osinbajo pointed out that it was on account of the above reforms that the World Bank recognised Nigeria as one of the top 10 most improved economies in the world, citing the business climate reform in the country.
States Must Be Productive Entities – Duke
On his part, former governor of Cross Rivers State, Donald Duke, has stressed the need for states to be self-reliant and to provide quality living conditions for their people.
Duke, who spoke yesterday at the LEADERSHIP 2017 Annual Conference and Awards Ceremony in Abuja , warned that the country’s future was a serious concern should nothing be done to re-vamp the economy.
He also called for the extension of the derivation formula to all revenues, saying there is a strain on infrastructure to generate revenue.
Speaking on the theme: ‘Towards Financially Viable State Government’, the ex-governor said the country needed a system where both federal and state governments thrived on the prosperity of its people based on structures put in place.
“States need to be able to generate revenue and derive something from that; if you are going to sustain it, you will also have to support it so that it is sustainable.
“Take a state like Gombe, it has Ashaka cement factory; something goes to federal government for that investment, something should also return to the state because the state will be involved, one way or the other, in providing infrastructure even if it’s for the evacuation of cement. This makes states have a stake in developing their economy even more than is being done today.
“I once advocated for this derivation formula in the Constitution to extend to all revenues, not just natural resources, because there is wear and tear on the infrastructure to generate the revenue.
“Each state in Nigeria can, and ought to, be financially viable, not just being a political entity; it must be an economic entity.
“We need to have a system where states and the federal government thrive due to the prosperity of their people and not in spite of it, because this rent-seeking economy that we run not only affects the states, it also affects the federal government.
“The federal government is abnormally poor; only about 5 per cent of our budget is reflecting on our GDP and it ought to be 20-25 per cent. So, great numbers are not collected because we’ve not been able as a nation-state to extract revenue through taxes or through the prosperity of the people themselves in creating wealth,” he said.
Duke said while some states may seem to be doing well as per infrastructure, their major goal should be an improved quality of life of the people.
“States also have to ensure that the prosperity of the people is the number one objective in governance. Each state must be a productive entity able to not only fend for himself but also contribute to the national purse; this is not happening and it will not happen until states are forced to make it happen.
“In another 30 years, we will be the third most populous nation in the world after India and China; if we do not change the trajectory of Nigeria today, you can imagine what we will be in another 20 years?
“If we think what is happening is a problem, compare it to what will happen in the future; it’s a child’s play when you do,” the former Cross River governor stated.
While asserting that the banking system in Nigeria was impeding the growth of the nation’s economy through interest rates, Duke noted that Nigeria requires an annual growth rate of 15 percent for at least 10 years to recalibrate its economic mechanism. That, according to him, will take the economy to a $2.5trillion economy.
“You cannot grow an economy with a 30 percent interest rate regime; it’s not possible and, therefore, the banking sector is constricting the economy of this country.
“We should stop micro-managing exchange rates and focus on growth, ensuring that our people can set up small and medium scale industries. That is not sustainable at 30 percent interest rate,” he said.
The chairman, Leadership Newspapers Group, Sam Nda-Isaiah, has urged state governors to begin to adopt the entrepreneurial practices of the chief executive officers (CEO) of corporations to better the lot of the citizens in their states.
The publisher of LEADERSHIP Newspaper gave this advice yesterday while delivering a welcome address during the LEADERSHIP Conference and Awards Ceremony held at the International Conference Centre, Abuja.
He said that a state governor must earn money for his state the same way corporations do for their shareholders, or else the people will start chasing them away from government houses with cutlasses.
‘’The days when states would go cap-in-hand every month to the federal government will soon be over because the federal government itself will be too busy struggling to solve its own federal problems. The good news is that every state in Nigeria can survive as a rich entity, with a little imagination from its leaders.
“The world is changing and our nation is also changing, and any leader who has not noticed this trend already is not worth the trust of the people.
‘’Those who lead and those who intend to lead at the state level must come to terms with the fact that it is no longer business as usual. State governments must now think out ways to be financially viable in order to survive. The federal government will no longer be able to maintain state governments,’’ he said.
Nda-Isaiah postulated that, perhaps, it might take the states to suffer some hard times in order to come to terms with the new reality.
‘’Lagos State found out the hard way that it could earn much more than its monthly allocations from Abuja when the then President Olusegun Obasanjo illegally impounded the monthly allocations of its local governments for selfish reasons.
‘’That was when the governor then, Bola Tinubu, knew the real definition of IGR. Since then, the state has not looked back,’’ Nda-Isaiah said.
He further averred that states needed to develop their own proprietary methods of boosting their IGR, noting that Lagos chose corporate taxes because that was where its advantages lay.
‘’It could be abundant mineral resources for some, and yet for others, it could be massive land resources. Any state government that gives the impression that it is waiting for a constitution amendment before it can take advantage of the state’s mineral resources is simply dumb.
‘’State governments can apply to the federal government for mining leases in their states and simply become mineral-rich. The problem is that no state has been able to do this. Some states are succeeding with agriculture, especially rice cultivation using the CBN intervention funds. It is the same logic’’, Nda-Isaiah stated.
Citing the example of Botswana, he said that it was a small diamond-rich country in Southern Africa, just as several Nigerian states are rich in different solid minerals.
Botswana, he added, got rich because its leaders were smart enough to invite De Beers of South Africa, the world’s largest diamond mining company, into an investment arrangement with the government, and that led to the formation of a company called Debswana in a 50:50% shareholding arrangement.
‘’Botswana as a country did not put in a dime into the arrangement; its mines made up its equity of 50 per cent. Today, Botswana is one of the fastest-growing economies in the world and has been so for decades, mainly on account of its partnership with De Beers.
‘’ This Botswana model will work perfectly for any serious state government in Nigeria.
‘’Another model is the Atlanta model. The Hartsfield-Jackson Atlanta Airport in the United States is the world’s busiest airport. But how many people know that the airport was built and is owned by a local government, the City of Atlanta?
‘’A long time ago, the city of Atlanta was a poor local government in the state of Georgia in the United States. The leaders sought a way out of their poverty. They therefore decided to leverage their comparative advantage – their location on the map of the United States – and decided to make Atlanta the gateway into the US.
“They took loans, built what is now called Hartfield-Jackson Airport, named after the mayor that initiated the idea. Today, the airport is the busiest in the world, raking in billions of dollars, and, as a result, the City of Atlanta is one of the richest local governments in the world today,’’ the LEADERSHIP newspapers chairman said.
Meanwhile, Nda-Isaiah said that the personalities conferred with LEADERSHIP Awards deserve commendation due to the rigorous and thorough measures their nominations went through before they emerged.
According to him, the organisation has painstakingly maintained the integrity of the awards and ensured that only those who meet the rigorous selection criteria emerge winners.
He said it was the consistency of the credible process of selection of the LEADERSHIP Newspapers award winners since 2008 when it began that has made it the most prestigious and credible in the country
“The process of selecting this year’s winners was no less thorough. I take this opportunity therefore to congratulate all the winners in their different categories.
‘’Every year during this ceremony, we choose a very germane and contemporary theme. Our theme for this year, “Towards Financially Viable State Governments,” cannot be more fitting’’, Nda-Isaiah said.