By Ukpai Iro Ukpai
The Abia State governor, Dr. Alex Otti, on December 12, 2023, presented a historic N567.24 billion budget proposal to the State House of Assembly, marking a significant shift in the state’s fiscal direction and promising a “new beginning” for its development. Analysts have looked at the Abia 2024 budget from various perspectives. Some have made scathing remarks, dismissing it as a ‘borrow-borrow budget’ or more of a pipe dream, questioning its feasibility and potential impact, yet others have made cautious commending remarks, and still some have launched out praising it. I shall attempt in this article to critically analyse the 2024 budget, raise some fiscal management issues, and highlight what might be issues to chew on for subsequent budget proposals. I hope this attempt invites readers to scrutinise the budget numbers and to question the allocations in Abia’s 2024 budget.
General Remarks
Let me start by way of making general remarks and observations about the Abia 2024 budget and other sub-national budgets.
Political ideology’s influence on the Budget: Budget proposals in Nigeria hardly represent the political ideology of the governments proposing them. While the Labour Party in Nigeria should be seen as staying on the left of centre in the political ideological continuum (closer to socialism in ideology than social democrats I would submit, I could hardly decipher the Labour Party left-of-centre ideology in Dr. Otti’s proposal. The same ideological bug infests most budget proposals in Nigeria, national and sub-national budgets. Taking from the jurisdictions older in our kind of democracy, you could easily distinguish a Democratic Party budget proposal from a Republican Party budget proposal. You could easily differentiate a Conservative Party budget proposal from a Labour Party budget proposal in the UK, just to mention the two countries Nigerian politicians easily draw from.
Our Tripod might Break: There are good reasons to share the state cake equitably even while pushing for fast Aba development via the laudable passage of the Greater Aba Development Authority and the plan to spend heavily on Aba. High incidence of village-to-urban migration, apart from straining resources in the receiving urban area, will increase multidimensional poverty if some developments in some sections of the state are heavily paused in pursuit of mega-fast development in others. There should be a balance. Else one leg of the tripod stands jaundiced infrastructurally and developmentally. On this note, I call on Dr. Alex Otti to please seriously consider sending a bill to the House of Assembly for The Greater Ohafia Development Authority, seeing we should already have Umuahia Capital Development Authority.
Competing Priorities: While ICT infrastructure which digitally connects people and resources is known to be the cheapest infrastructure for fast-tracking development, given the dilapidated and non-existent infrastructure that Abia State has been left with over the years, one can understand Dr. Otti’s attempt to prioritise roads, bridges and other utilities which physically connect people (in Education and Health and other social and human services) and physical resources. The preponderance of focus on the Social Sector (Education and Health) and the Economy Sector – Works (roads, bridges, and utilities), Land and Housing, Agric and Finance makes strategic sense. This is in hope that, aware of competing priorities, in the budget years ahead, before the end of his tenure, Dr. Otti will bring ICT infrastructure to take a more sizable percentage of the CAPEX. I move on to Analysis.
BUDGET PROPOSAL ANALYSIS
SWOT: The proposed budget holds immense potential for transforming Abia. An analyst should easily identify at least 25 items that can be distributed under strengths, weaknesses, opportunities, and threats for the budget. Abia State’s 2024 budget proposal offers a potential path towards a brighter future. However, capitalising on its strengths, addressing its weaknesses, and seizing opportunities while mitigating threats, is crucial for success. Effective implementation, fostering partnerships, and prioritising transparency will determine whether this “Budget of New Beginning” truly marks a new dawn for Abia. For want of space, I have selected for consideration six of those factors that arose from my SWOT analysis of the budget proposal for analysis.
Breaking the Cycle of Under-Budgeting: One of the most striking aspects of Otti’s 55-paragraph budget proposal is its sheer size at N567.24 billion. Compared to the preceding year’s N160.5 billion budget, it represents a staggering 253 per cent increase. Even though one must factor in the increased inflationary trend and nose diving of the Naira against the US dollar, one is justified in stating here as I did elsewhere that recent Abia State Governments have been grossly under-budgeting, an indication of lack of ambition and clear vision. Between 2020 and 2023 budgets, Abia State government made only an average of 16.3% increments in budget. Embarrassingly, YoY budget increments were decreasing sharply within these years under review, when Naira was losing its value against the dollar and our minuscule traditional infrastructure was decaying under the watch of the PDP government. That’s what dug us into the infrastructure hole. Time will fail us to do a comparative analysis to see what kind of budget figures Abia’s peers used in those years.
This scourge of under-budgeting crystallises better when you compare Abia’s recent budgets against her peers’ budgets. Ogun State, created the same day as Abia State, which was seen then by analysts as having a promise of a more prosperous state, had N472.25 billion budget in 2023 more than double Abia’s budget in same 2023 and N703 billion budget in 2024. Enugu State had a budget of N166.6bn in 2023 (poor though but higher than Abia’s which many believe has better economic potential than Enugu State), and now has a budget of N521.5Bn in 2024. Anambra State had N259-N280 billion budget in 2023 and, N410bn budget for 2024. Edo State had N321.4 billion budget in 2023 and proposed a N325.3 billion budget for 2024. No wonder that Abia was lagging behind other states in many development indices.
Shifting Priorities for a Brighter Future: The proposed allocation of 84 per cent of the budget to capital expenditure marks a dramatic departure from the past, where recurrent expenditure has dominated. This focus on infrastructure development, including roads, schools, and medical facilities, signifies a clear commitment to building the foundation for a strong and sustainable future.
Investing in Education and Health: Recognising the critical role of education and health in human capital development, Otti has allocated 20 per cent and 15 per cent of the budget to these sectors, respectively. This commitment to education is particularly commendable and aligns with UNESCO’s recommendation of allocating 15-20 per cent of the budget to education. Dr Otti has tried at 20 per cent for education but must do better than 20 per cent in his next budget if we are to meet the “SDG goals on quality education” given the grounds to cover. Ogun and Enugu States are spending slightly more on Education.
Africa Union member states in their Abuja Declaration 2001 on public finance for the health sector recommended that member states allocate 15 per cent of their budgets to health. Data in the public domain records that “currently African countries spend $8 to $129 per capita on health, compared to high income countries that spend above $4,000”. With nearly $96.18 set for Health sector in the Abia State 2024 budget proposal, we plan a health spend per capita of $23.4 which is far below what some African countries who we are more endowed to spend – $129 per capita – and a far cry from what developed nations spend – $4,000 per capita. While the allocation by the 2024 Abia budget proposal for the health sector meets the minimum recommended 15per cent, continued efforts are needed to bridge the gap with wealthier nations, which as can be seen spend significantly more per capita.
Investing in infrastructure: That’s 84 per cent there on CAPEX heavy on infrastructure. I can hear Gov Otti saying: ‘It’s Infrastructure stupid’! With nearly $540M dollars spent on different kinds of infrastructural development (touching the works and social sectors) in the 2024 fiscal year, Abia State will be, put mildly, a construction site. I advise the Otti government to ensure that those who handle budget implementation and performance numbers in his government regularly calculate the number of jobs created as add-on benefits to the construction that will go on in the 2024 fiscal year. The government should find a way to ensure that firms that get contracts for these projects locate their offices in Abia State if they don’t have them already. A case of operating from outside the state in a “work and go” fashion should be a no–no! Those handling the contract bids should add an extra criterion that having an operational office in Abia State is a serious requirement to get our construction contracts. That way Abians are gainfully employed and the activities of these firms rub off handsomely on Abia’s economy.
Jobs and Economic Growth: Otti’s budget seems not just about bricks and mortar; it aims to create jobs and stimulate economic growth. The massive investment in infrastructure projects is expected to generate significant employment opportunities across the state. Additionally, the focus on sectors like agriculture and land and housing is designed to attract private-sector investment and encourage entrepreneurial activity.
Burden of Borrowing and Implementation: While the budget’s commitment to infrastructure is commendable, it’s crucial to address the high ratio (241.5%) of borrowing to total revenue generated and borrowing being 71 per cent of the total budget figure. The dependence on external borrowing raises concerns about future debt sustainability. To mitigate this risk, the Abia State government must prioritise increasing its internally generated revenue (IGR) drastically.
This can be achieved through various measures, including carefully selecting the infrastructure mix, streamlining tax collection and administration, expanding the tax base to include the informal sector, and incentivising businesses to operate formally. Taking advantage of its commercial and industrial base and regional positioning, by boosting IGR, Abia State can reduce its reliance on borrowing and create a more sustainable foundation for future development.
If Otti can implement this budget better than the 2023 budget performance, he can truly earn the name “Mr. Infrastructure.” Such an achievement would establish him as a visionary leader dedicated to transforming Abia’s landscape and accelerating its economic growth.
Standing Above Politics: As a member of an opposition political party, I recognise that objectivity and fairness are paramount in evaluating this budget. While political differences exist, the well being of Abians transcends party lines. It is in this spirit that I commend Dr. Otti for presenting a bold and ambitious budget that holds immense potential for laying the foundation for driving Abia’s development. Together, let us ensure that this budget becomes a catalyst for progress and a testament to the collective aspirations of the people of Abia State.
Concluding Remarks: Three issues stare Dr Alex Chioma Otti in the face and he has to find a way to tackle them headlong.
1) Budget Implementation and Budget Performance. His predecessor had his last budget performance in the 60% region. Otti has to better that appreciably, especially now that he has what some analysts have termed ‘an ambitious budget’ and others, a pipe dream.
2) How to convert ‘excessive borrowing’, seen as a threat and a weakness into an opportunity and strength. Without the intention of becoming Otti’s spokesperson, truth must be told: Previous governments in Abia State left Abia’s economy in ruins, resources were wasted, infrastructure decayed and dilapidated or non-existent for the most part, leaving any subsequent government intent on catching up and growing the economy in a fiscal fix. While ‘excessive borrowing’ can be viewed as a potential threat and weakness, strategic management can turn it into an opportunity and strength. I will leave that argument for another day.
3) Otti has his job cut out for him. He either fights for massive IGR or sinks! My hunch is that utilising traditional infrastructure as a means to chase massive IGR and fast-track development while doing massive debt servicing is a tall order. Aware of competing priorities, the Abia State government must critically consider what mix of infrastructure targets/expansion best suits Abia at this time.
Let me be clear. This budget, christened “Budget of New Beginning,” represents a bold and ambitious step towards propelling Abia into a new era of prosperity and progress. Abia State under the Labour Party must move fast to catch up with and even overtake other Nigerian subnational states. In juxtaposition to Ogun’s impressive N703.028 billion, Rivers’ N800 billion, and Delta’s N714.4 billion 2024 budgets, Abia’s N567.24 billion budget underscores the state’s emergence as a formidable player in the Southern region. Why not? The resources and potential are there. It is often said that, “where there’s a will there’s a way”! I call on Governor Otti to be more audacious in the pursuit of massive IGR and in overall budget implementation and tracking of budget performance.
This can be shown by consciously translating every CAPEX project into a catalyst for economic growth, reducing excessive village-to-urban migration through a balanced distribution of capital projects amongst the three zones, amongst other measures. Successful implementation requires the collective effort of all stakeholders.
It is crucial that Abia State government ensures transparency and accountability in the use of public funds, minimizes waste and corruption, and promotes efficiency in project execution. By working together, the government, citizens, and private sector can transform Abia into a thriving and prosperous state.
•Dr Ukpai, Co-Founder and CEO of PolitIQ Limited, is an engineering and management consultant and governorship candidate of the NNPP in Abia State in the last 2023 general elections