Fiscal Priorities

I have always believed wasteful spending that is nonetheless technically legal consumes (i.e. wastes) more of our money that "corruption" (i.e. direct theft, extortion, rent-seeking, rent-extraction, etc).

Bauchi governor Isa Yuguda is spending millions in state government revenue to fund his political machine ahead of the 2011 general elections. Technically speaking, he is legally entitled to put all these non-productive functionaries on the state payroll. They will spend the next year on duties that have nothing to do with governing the state (i.e. working to "deliver" an election victory for Yuguda).

Borno is part of the great a beautiful Northeast, the region of the country that has the worst social and economic indicators. Ali Modu Sheriff, the state's imperial governor, has decided his priority is to create new emirates and chiefdoms, which will suck additional state government resources and funding. Sheriff wants to reward his allies with their own little kingdoms to rule, and might also wants to create a kingdom specifically for his father to be emir of.

In Lagos, the popular Babatunde Fashola has been accused of fiscal impropriety by a previously unknown group. It is hard to know how to react in the absence of a credible academic, researcher, media outlet, think-tank or other entity capable of analyzing the accusations and pronoucing believably on their truth or falsehood.

It is public knowledge that Fashola awarded the contract for collecting at least a portion of Lagos State's internal generated revenue (i.e. taxes) to a tax-collection firm owned by his godfather, Bola Ahmed Tinubu, also Fashola's predecessor as governor. Awarding tax-collection contracts to your godfather(s), and allowing him(them) to keep an unnatural percentage of the money they collect ostensibly on the state's behalf is a technically "legal" way of funneling state revenue to your godfathers. It is the sort of arrangement Chris Uba wished to set up under the Chris Ngige administration in Anambra, before their relationship went sour.

With that said, Babatunde Fashola is one of the more popular governors in Nigeria because he is seen to have plowed public funds (and encouraged private investement) in a vast array of infrastructure projects that are beginning to give Lagosians hope that the "mega-city" could come closer to achieving some of its full potential. As one acquaintance (and Lagos resident) said to me, "People are now happy to pay their taxes, where before they would dodge their taxes, because they can see their money going into positive improvements."

But Lagos is a city-state with enormous needs, and as much as Fashola does, he will need so much more resources to meet the city-state's vast challenges and opportunities. So if a too-large proportion of the state's revenues are going into corruption, patronage, rent-seeking, rent-extracting, conflict-of-interest, self-enrichment, and (the most important of all) waste, then it is appropriate to put a stop to it so all resources are properly focused on this most important Nigerian city.

Still, what to believe? The rumour is these accusations emanate from Bola Ahmed Tinubu's political machine, and are a way to remind Fashola (who is now more popular than Tinubu ever was) that he could be broken just as easily as he was created. I am not sure what Tinubu could be afraid of; Fashola has no political machine of his own, and Lagos State is as much Tinubu's "private property" as Kwara State is to the Saraki family.

In Kano State, children as young as 10 are working to earn money to buy themselves a plate of rice a day. And inasmuch as I championed the cause of forthrightly dealing with the issue of toxic assets in the Nigerian banking industry (posts on this topic dominate the early days of this blog), it does seem a little humbling (if not depressing) when you think about the difficult lives of these children and contrast it with the =N=620 billion (about $4.13 billion) the Central Bank of Nigeria has spent to recapitalize troubled banks.


On a positive note, the federal government will spend =N=19 billion (about $127 million) to for land reclamation and shore protection in the Niger-Delta. The islands that make up the Delta have been losing land to the Atlantic Ocean for as long as I can remember. I am not sure the sum released will be sufficient; the Eko Atlantic City project in Lagos costs much more, and it will take more than that level of investment to restore land eroded by the ocean and to protect the new reclaimed land.

I have long believed that the "oil derivation" money that goes to Niger-Delta states should not be paid into the states' general fund accounts, but should instead be set aside to deal with the issue of reclaiming and protecting land ... particularly since the world's oceans are set to rise over the course of this century. To be honest, I have more faith in using 21st century technology to enhand and protect the Niger-Delta island shorelines than I do in these pointless international conferences about climate change. I don't think anything will happen, or that anybody will do anything, to stop the oceans rising. We have to prepare ourselves and our coastline for the inevitable, or we are looking at serious problems a few decades down the road.

Giving "oil derivation" money to state governors is like begging, pleading and asking for the money to be wasted (if not stolen). If Nigeria had a functioning democracy (we don't), I would have opted for putting a referendum to the people of the Niger-Delta as to whether they want to earmark a portion of the derivation money for environmental recovery (including reclamation and protection, as well as cleaning up areas damaged by the oil industry) -- and to mandate a portion of that earmark to pay a trusted auditing firm that can monitor how the money is spent (to see if it is being used efficiently/effectively or being wasted), without said firm fearing that its contract will be cancelled if it does not doctor its reports to match what the governments wants to hear.