Nigeria's Economy Dying, Fashola Cries Out

Reports

Governor Babatunde Fashola of Lagos State late Tuesday appeared before members of the Lagos State House of Assembly, informing them that the state, like many other states in the country, is in trouble over the current economic situation of the country.

He said as a result of these economic challenges, including the fall in the price of crude oil, Lagos State is not getting the amount accruable to it from the Federal Government, part of which the budget of the state for 2015 was based.

He also took a swipe at the Federal Government for running down the country's economy while pleading with the House for an amendment of the 2015 Appropriation Law of the state.

In their reply, the lawmakers through the Speaker of the House, Adeyemi Ikuforiji, said the House would consider the governor's request.

Read Fashola's full speech below:

On November 24, 2014, I appeared before this House, of 40 elected representatives of our people to alert you about the worrying incidents of declining Federal revenues and the impact of our Budget and on service delivery.

Since the presentation of the Budget and the subsequent passage of the 2015 Appropriation Law, there had been certain developments in the Nigerian macro-economic environment which have profoundly impacted the revenue accretion to the Federation Account and the constituent tiers of Government.

While the fall in global oil prices, by over 50percent since mid-2014 had led to lower revenue earnings for the Nation, the political uncertainties which were further accentuated by the shift in election dates compounded the macro-economic situation and concomitantly triggered increased foreign portfolio investors’ divestment from Nigerian financial assets with a resultant depletion of the country’s external reserves.

Regrettably, the actions of our Economic Managers have at best been uncoordinated and inconsistent at both the Fiscal and Monetary Policy levels thus further exacerbating the Nation’s economic problems.

The panicky responses evident from a slew of policy interventions and reversals in quick succession have done little to redress the financial crisis facing the country. 

While our external reserves had depleted from US$37.0 billion in November 2014 to about US$30.06 billion currently, the official exchange rate of the Naira to the US Dollar dipped from N155/US$ in mid-November 2014 to the current exchange rate of N198.50/US$ (a 28percent devaluation over the last four months). The exchange rate at the parallel market foreign exchange window currently hovers around N228/US$ (a decline of about 36percent) and yet still on a downward spiral.

The summation of all these is that the purchasing power of the citizens has been considerably eroded, while simultaneously the investment activities of both the private and public sectors in production cum employment generation capacity and critical infrastructure is now being curtailed.

The consequences of the dwindling oil price are elaborated by the significant reduction in the revenues accruing into the Federation Account.

To put this in perspective, the revenues accruing into the Federation Account (inclusive of VAT Receipts) declined from a monthly average of N622 billion in year 2014 to the current monthly average of N541 billion (a decrease of 13percent). Lagos State’s share from the Federation Account has also correspondingly fell from monthly average of N11.05 billion in 2014 to the current monthly average of N10.34 billion. In fact, in February 2015 in comparison with January the State recorded a decline of 14percent. 

It is also instructive to note that the Internally Generated Revenue (IGR) fluctuates month-on-month, just as the Lagos State’s share from the Federation Account. 

In 2014, Gross Revenue (IGR and FAAC) performance was 86percent (2013 - 91percent). In actual fact, our Revenue performance over the past years has never achieved 100percent. However, the method of disbursement of funds to certain MDAs as First Line Overhead Cost as contemplated in Section 4 of the Lagos State 2015 Appropriation Law is based on 100percent revenue performance. This assumed revenue performance has never been achieved in reality.

In the light of the foregoing, I consider it expedient to advert the attention of the Honourable Speaker and the Distinguished Members of the House to this salient issue and to request a slight amendment to the 2015 Appropriation Law as it affects funds disbursements to the six (6) MDAs specifically listed to receive 100percent of their respective budgeted overhead costs on 12 equal monthly instalments to a more appropriate Consolidated Revenue Fund (CRF) performance-based methodology, that is tied to actual revenue performance. 

This modification shall also be applicable to other MDAs as relevant including the Lagos State Internal Revenue Service (LIRS), irrespective of the level of revenue generated.

The State Executive Council (EXCO) at its sitting on 2 March, 2015 unanimously passed a resolution approving the adoption of the Revenue-Based Disbursement methodology in respect of Overhead Cost disbursements, pursuant to an amendment of the year 2015 Appropriation Law by the House of Assembly.

The Honourable Speaker and Distinguished Members of the House are hereby invited to note the declining revenue performance at national level, in particular the extant macro-economic condition of the Nation, its impact on the revenue accretion to the three tiers of Government and the realities of the State’s Revenue performance thus warranting certain proactive measures to address the fall outs, including those advocated in this Letter. 

I therefore crave the indulgence of this Honourable House to consider the proposed amendment(s) to the 2015 Appropriation Law and pass them into law.

Before I conclude, Mr. Speaker, let me say with all emphasis, that the Nigerian economy is caught in very troubled waters.

Without constant electric power, the real prospects for alternative revenues for Nigeria from Agriculture, manufacturing, mining and tourism look very bleak. Retail of imported rather than local produce will not help either, with a highly devalued naira.Our State as the most populous and the largest contributor to the GDP will be impacted.

While so far we have through rigorous thinking and dedicated service, protected our people from th failure of national security, failure of power supply, failure of public health management and many other failures of the PDP Federal Government, by evolving progressive, development and sustenance policies that provide jobs, drive the economy and keep the dignity of our people, it is sadly our lot once again to find a solution to the PDP’s amateurish management of our national economy.

Today the Honourable Minister for Finance, if any honour still attaches to her actions, has stopped Nigerian banks from funding State Governments because of elections, as if the needs of the people for roads, healthcare, drugs, education and security has stopped.

She has insisted that inspite of individual appraisals of each bank by their credit committees, all State requests for funding by banks must be approved by her Ministry.

To the best of my knowledge, she has not granted any of the requests submitted to her for approval in her new coordinating role as the retail banker for the Nigerian economy.

A recent study that I commissioned just two months ago shows that construction workers are losing their jobs in the thousands across the country.

Reports from 4 (Four) major construction companies show that a total of 5,170 (Five Thousand, One Hundred and Seventy) local workers and 450 (Four Hundred and Fifty) expatriate workers have been laid off between December 2014 and February 2015 and there will be more to follow, from only 4 (Four) companies.

Your guess is then as good as mine about what is happening in several other hundreds of middle and small construction companies.

The disposable income value of rich and poor Nigerians have been diminished considerably, and the prognosis is not encouraging having regard to the high unemployment rates, high interest rate, and the necessity for self-generation of electricity which further erodes this income.

In this month of March, some banks have laid off some of their workers.

My quick check revealed that at least 2,400 (Two Thousand, Four Hundred) bank workers have been laid off in March 2015 alone.

Investigations at the port showed that many importers cannot collect their goods because the prices between when they ordered and when they arrived has risen sharply.

This is largely as a result of the devaluation of the Naira that followed the postponement of the election.

These goods include raw materials for factories and small businesses. Without these raw materials, they cannot produce.

If they cannot produce they will most likely lay off workers.

The stock market has lost an estimated N4 Trillion as a result of the postponement of the elections.

 

According to Mr. President when he visited the Stock Exchange last week, in his opinion this is not that bad, because when he took office, the market had crashed to N6 Trillion as a result of the global financial crises.

I will leave you the representatives of the people of Lagos to form your own opinion, but I know that fallen stock prices, mean huge personal financial loses to the owners of those shares, and they are in their millions.

Indeed, the picture that is emerging on our economic canvass where we substantially import goods and services is not a pretty one.

There is a news headline that IMF is recommending a further devaluation of the Naira.

This is frightening for me as it should be for any citizen and more so for any leader.

Yes, this is an election season, but it is not a season for irrationality. I find it laughable that Governors of the PDP can still not see that it is extremely insensitive to use their peoples’ money to travel to Lagos to protest against the use of Electronic Card Readers by INEC, as if Lagos is the headquarters of INEC.

They desecrate Nigeria’s commercial capital by their poorly conceived misadventure and the Agenda for their thoughtless gathering.

The PDP model of leadership is now fully revealed.

The proposal I am laying before you as the peoples’ representatives is about how to amend the Appropriation Law to provide service to our people and keep the economy going.

Mr. Speaker and Distinguished Members, please accept the assurances of my highest esteem and warm regards.