Lagos State Governor, Mr. Babatunde Fashola (SAN), Thursday urged public officials to refrain from statements that could damage investor confidence in the country saying such statements pose greater danger to the National Economy.
Governor Fashola, who spoke at the 6th Annual Public Financial Lecture of the Lagos State House of Assembly, said such statements that allude to bankruptcy and crippling debts facing either the country or the states were capable of eroding the confidence of investors in the nation’s economy, a situation which could further stunt economic growth and development of the country.
Speaking against the backdrop of a recent statement credited to the Chairman of the Revenue Mobilization, Allocation and Fiscal Commission, Mr. Elias Noam, alleging that most of the 36 states of the country were under financial stress while others were bankrupt, Governor Fashola advised against generalization of statements about public accounting noting that the allegation of bankruptcy could send wrong signals to investors.
“In recent times, I have read reports, screaming headlines such as ‘States face bankruptcy’, ‘N346 billion debt cripples states’, ‘Nigerian states are broke’. In interrogating those statements, what has come to the fore is an expression of concern , very well meaning concern I must emphasize, about the amount states spend on either debt servicing , their recurrent liabilities and so on. But I dare say that there is an inherent danger in the way these concerns are reported”, the Governor said.
According to the Governor, “Here we are trying to grow the economy, trying to stimulate the local investment which is the most important investment, hopefully to be followed by international investments as is done everywhere. How many of us will continue to transact business with a state that is bankrupt?”
Governor Fashola noted that although spending a large percentage of income on debt servicing is not ideal, it is not the same thing as insolvency or bankruptcy. “I have looked up the meaning of bankruptcy and it clearly denotes an inability to pay debt. It means insolvency in the real sense of the word”, he said.
“Now, if from the body of what we read, the states are spending a large proportion of their revenue and are borrowing to finance their debts, the fact that you are paying those debts, to me, is the antithesis of insolvency”, the Governor said pointing out that a concern that is paying its debt is not insolvent.
On the question of reducing the borrowing power of states by the National Assembly, Governor Fashola declared, “Regulation of State borrowing must take into account their larger responsibility to the whole society and the population they serve. The regulation must also be determined by their State Legislature during the process of appropriation and not by the National Assembly”, pointing out that elected representatives at the Federal level are not representing the Federal Government but constituencies of various states that form the Federation.
Governor Fashola said the representatives should, therefore, make laws that promote the development of the states which, according to him, “are the federating units because the Federal Government exists to carry out development objectives of the Federation in areas of common convenience only”.
He described as dangerous the recommendation to the National Assembly to reduce the borrowing power of states to 20 percent of what they earn from the Federation Account advising the Assembly to decline such a recommendation because, according to him, “First of all, the budget of each is peculiar to its developmental aspirations and it is a matter upon which the elected representatives of that state in the Legislative arm have made pronouncements by enacting appropriation laws”.
“They have seen the cash flow, they have seen the projections, they have seen the deficits and provisions and therefore it is anomalous to expect the National Assembly of the Federation to begin to make legislation encroaching upon the powers of each state to determine what its borrowing limits should be”, the Governor said.
Governor Fashola said instead of making laws that would inhibit the development of the states, “it is perhaps necessary to ask us to interrogate all those places where there are lapses and see how we can tighten up and ensure that citizens get value for their money”, adding, “But that smoking gun attitude that everybody is a thief must change”.
Advising against curtailing governments in their ability to raise public fund in a very reliable and credible way especially when they show their income strength and the ability to pay adding, “We want more of what we are already having where private corporations begin to build roads, begin to donate boreholes, hospitals and clinics, which is really the business of government. That is the danger that is inherent in all of that”.
Governor Fashola cited the time in 2002 when the Government of Lagos State raised N25 billion bond and drew down N15 billion and people shouted that the future of a generation had been mortgaged adding, “It was with that money that the infrastructure of Oregun, Awolowo Onikan and all of that, the Millennium schools were built”.
“At that time, those of us out of government believed that our future had been mortgaged but it was when I got into government that I found out that the debts were being serviced and by the time I became Governor, we paid up the balance”, the Governor explained.
Making further case for freedom of states to raise public funds for development, Governor Fashola said the money the State Government raised was well utilized on such projects as Eko Education Project adding, “It is part of that foreign loan that goes to fund Mile 12 to Ikorodu Town; out of that foreign loan is the BRT you see today” adding, “now is it not money well spent?”