The Lagos State Commissioner for Finance, Akinyemi Ashade, spoke with select journalists on the recently passed 2018 budget, the urgency for infrastructure renewal in the state, and the aggressive drive to boost internally generated revenue, among others. Chika Amanze-Nawchuku presents the excerpts:
Lagos State Government has just passed a budget of over one trillion Naira into law. This is certainly a first for any state in Nigeria. What informs this level of mega budgeting and what guarantee can you give that this budget will be fully implemented? Are you not being a little over-ambitious?
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When you examine the requirements of the state especially from the point of provision of social and physical infrastructure you will find that there is still a huge vacuum that needs to be filled. And this is despite what has been done over the years especially since 1999. Take a look at any area whatsoever, from roads to public housing to education to security and healthcare and education. There is still so much that needs to be done. And perhaps that is why you will see that His Excellency, Governor Akinwunmi Ambode is so anxious to turn things around and to do so in a systematic manner.
And as you would have obviously already witnessed, there is so much that is going on currently in Lagos in terms of infrastructural development. In fact, it is a full infrastructural renewal that is going on. The reconstruction and total redevelopment of Airport Road into a 10-lane expressway is underway and progressing very well. Oshodi is being completely overhauled into a modern transport interchange that will not only facilitate movement but also drive business and commerce and provide jobs for people. Like the Ajah and Abule-Egba flyovers, which Governor Ambode built in record time, the Pen Cinema bridge is also being aggressively worked on. The Pen Cinema bridge will help to provide relief to the millions of citizens who live in the Agege-Ogba-Oke-Ira areas of Lagos and their neighborhoods from the traffic congestion that has for decades been associated with the rapid expansion and population growth in that entire axis. His Excellency’s promise is to deliver that project this year.
You may have probably heard of the embedded power project as well. This is a unique power project and will deliver independently produced power to Lagosians. Target completion date is 2018 and this project will deliver regular electricity to Lagosians. Now, can you imagine how that singular project on electricity will impact the lives of Lagosians? By how much it will help to unleash the entrepreneurial energy of the people and drive the efficiency of businesses and make life more convenient for the people? And there are lots of other projects in Education, public housing, healthcare, security and other areas.
So you see, the budget is a reflection of the enormity of work that needs to be done by a responsive and responsible government.
But some people have complained that despite the huge annual budgets, development hardly seems to get to their immediate localities. Some say they contribute to grade their streets and repair their transformers and even provide their own water.
I think this question in a way provides some answer to your first question. The N1.046 trillion budget may be huge indeed, but it remains insufficient to really drive development in the optimal manner that the state deserves especially given the fact that we have for many decades considerably under-invested in infrastructure. What I’m saying here is that even for such a relatively huge budget, there are still limitations as to what it can achieve. That is why government has to be exceedingly painstaking in the overall budgeting process. The idea is to deliver the greatest good to the greatest number of people and ensuring that in as many ways as possible everyone enjoys the dividends of good governance. That is why you will find that all of the projects that are being implemented are those that will deliver the greatest impact to the highest number of people. This is not to say that we will not take projects everywhere. Ultimately, every ward, every street will benefit from one project or the other. Many of the projects I have mentioned are the big signature projects of this administration but there are lots of others. For instance, a BRT Lane will be constructed from Oshodi to Abule-Egba. There’s an 8 Kilometer regional road to connect VGC with Freedom Road in Lekki Phase One and alternative routes to connect Lekki-Epe Expressway from Oke-Ira in Etiosa Local Government. Also in this budget, housing projects in Ajara-Badagry, Igbogbo, Iponri, Gbagada, Omole Phase I, Igando and Sangotedo will be completed on a rent-to-own basis.
Apart from these, there’s also the issue of social infrastructure, which we must also bear in mind. This year, for instance, we are making a provision of N126 billion for Education which essentially represents 12 percent of the overall budget. Now, this is a record as I do not know any other state that is devoting as much to education. But then it speaks to the sophistication of the thinking of Governor Ambode. He is driving an aggressive infrastructure renewal across the state in order to deliver a Lagos of the future. But what is the future without Education? What is the future if our children are not availed quality education to keep them apace with their counterparts elsewhere in the world? So education is being taken very seriously and this affects all our children. Another key area is healthcare to which N92b or roughly 9 percent of the budget is being devoted. So provision of social infrastructure is an area into which the government is investing heavily and which impacts the lives of all of us, much more than we probably realize.
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What about the size of government? There is a general view that government size is too large which is why government always tends to devote so much to recurrent expenditure which is really about paying salaries of people in government while capital expenditure suffers.
Let me talk about the capital expenditure to recurrent expenditure ratio and assure you that in Lagos state, it is a very healthy one. In fact in the 2018 budget, the ratio is two to one. 67 percent of the budget is going to capital expenditure while 33 percent goes to recurrent expenditure. And that’s a very realistic and healthy ratio. So we are devoting far more to capital expenditure than to recurrent here in Lagos. This is not to downplay the importance of recurrent expenditure, which also has a critical role to play in the economic value chain. Governance as you know, still must be carried out by functionaries at different levels. However, we continue to watch the government headcount very keenly but more importantly, Governor Ambode will always emphasize efficiency. It’s not just about the headcount, it is also about how much the government is empowering its own people to deliver at their best, how much it is providing them with training, tools and facilities to operate the machinery of government efficiently.
This brings me to the key question of funding this budget of N1 trillion. How do you plan to fund this overly ambitious budget?
Well, you are right to call it an ambitious budget. But I’m sure that the scenario I have painted in our discussion so far, justifies why it needs to be ambitious if it is to truly deliver a better tomorrow to us and our children.
To fund the budget, we are looking primarily at internally generated revenue. As you very well know, dating back to the days of Asiwaju Bola Ahmed Tinubu, IGR has been a mainstay of our local economy in Lagos and that has been very critical to the progress we have continued to make as a state and set us apart from all other states in Nigeria.
But people are beginning to complain about your taxes. In fact, some people say you are over-taxing…
I very much appreciate where all of this is coming from, especially against the backdrop of the current economic situation. None of us, no matter how wealthy, is immune to the current economic situation. Even if you are, you must have friends, and relatives who are affected. But I assure you that everything we are doing is based on a fundamental premise which is not to burden any citizen with more than what he can conveniently shoulder. That is the explicit instruction of His Excellency, Governor Ambode. That is why you will find that in every instance, we have incorporated a feedback mechanism so that any citizen who legitimately believes that what he’s being charged may be excessive has a right to seek clarification and even appeal.
What has happened in the recent past is that government has made an effort to enhance the efficiency of the tax regime in the state as part of the overall reforms in the financial management of the state. You may probably have heard the LIRS frequently complain that the tax burden in the state is shouldered by a small fraction of people. Many people who ought to pay tax do not pay. And this creates a problem for everyone. You may have read press reports of the Speaker of the Lagos House of Assembly lamenting recently that of the more than 2million taxable properties in Lagos, only about 300,000 were actually paying Land Use Charge. In fact, this was one of the motivations for the review and repeal of the old Land Use Charge Law.
So what has happened basically, has been an attempt to redress this. For instance, there are taxes or levies that had over the years become obsolete. If you were paying a tax or levy of N50 in 2001 for instance, that may have been quite significant at that time, but certainly much less significant in 2018. So on one hand, some of these taxes and levies had become obsolete.
On the other hand, there was also the question of the inefficiency in the collection process. This is an area which we are aggressively striving to ramp up. For Land Use Charge, for instance we are enhancing the enumeration of properties across the state. We are doing this physically but also supporting it with the use of GPS technology.
But the complaint is that the Land Use Charge has gone up astronomically. Quite a few people have complained bitterly that the new rates under the land use charge regime may have negative impact on future property development in the state because of the land use charge rate.
When the old Land Use Charge law was repealed by the Lagos State House of Assembly recently, one of the complaints the Assembly had was that there was a bit of opacity in that whole regime. So for instance you could be paying far more than someone living in a much bigger house on the same street because the method of calculation of Land Use Charge tended to be very subjective.
That was why the House of Assembly decided that in making the new law there would need to be some standardisation. That was why they decided that going forward, properties would be valued at market rate. As you know, market rate is very much standardized and if you use the services of a professional valuer you will find that these professionals do actually provide very accurate valuation of properties based on market rates.
So using market value in property valuation is helping to eliminate some of the opacity that used to be associated with the Land Use Charge regime. It is also helping to ensure that obsolete rates are brought fairly up-to-date.
Another thing it also does is that now, you do not necessarily need to wait to receive your annual demand notice before you pay your Land Use Charge. If you wish, you can value your property with the help of a professional valuer and calculate the value of Land Use Charge yourself and then go ahead to make payment.
But the market rate approach for determining Land Use Charge has also led to very steep increases in Land Use Charge. Some people have said that they got increases of over 200%. Is this increase not too high?
First, I think that the use of percentages can be very misleading. Someone who has been paying say N1,500 since 2006 and who is now requested to pay N5,000 today, 12 years later, may say it’s a 300% increase but you and I know what the value of N1,500 was 12 years ago versus what it is today.
But more importantly, I want to say that the State Government has been very encouraged by the responses so far to the Land Use Charge. The officials started distributing the demand notices just a few weeks ago and so far the responses have been very good. Very many property owners have proceeded to make payments. And we would continue to encourage property owners and those who have up to 10-year leases on properties to go ahead and pay as soon as possible because in doing so, you benefit from an additional 15% relief on the Land Use Charge, which is one of the additional reliefs in the new Land Use Charge regime.
What do you mean by “reliefs” are you talking about discount? Is the Land Use Charge discounted?
By relief, I am referring to the several buffers that the law has put in place in order to reduce the amount that is eventually paid. So even though properties are valued at market rate, in calculating the Land Use Charge rate to be paid, a general relief of 40% is applied. And then of course, if payment is made promptly there is an additional 15% relief. So in essence, one is paying just about 45% of the chargeable rate if one pays in good time.
Apart from this, retirees who are aged 70 years and above and live in their own houses are exempted. They do not pay any Land Use Charge. The same applies to properties that are used for religious and not-for-profit activities. They are also exempted. There are categories of exemptions and reliefs for the physically challenged as well.
And as I said earlier, the majority of property owners have gone ahead to make payments.
But this is not to say that all those who are complaining about the new Land Use Charge regime have no case. This is a system that is man-made, so it is not necessarily perfect. This is why we have a Help Desk office at the Ministry of Finance, specifically dedicated to handling such complaints. And I encourage every citizen with a legitimate complaint to please contact the Land Use Charge Help Desk. The Help Desk is very accessible and can be reached by phone and email. All the contact details of the Help Desk are on the demand notices. Any property owner disputing his bill may simply contact the Help Desk to resolve these issues. The Help Desk is manned by trained professionals, human beings like you and I, who live in the same Lagos, so they empathise. I assure you that once a legitimate case is established, then of course, a remedy will be instituted promptly.
As I said earlier and I must continue to re-emphasize this: the new law was not designed to punish anyone. The sole objective was to make it more realistic and functional. Where any property owner may feel that the computation of his bill is wrong, please feel free to contact the Help Desk of the Land Use Charge office.
So you are looking at funding the N1.04 trillion budget using IGR basically?
Well, IGR alone will not be able to completely fund this. In terms of IGR and what we receive from the centre we project that the state will receive about N897billion. The balance will have to be funded through budget deficit financing. So you can see that in the face of the developmental challenge that we are confronted with, we all have to be extremely committed and creative to generate the funding to surmount this. We will need to make sacrifices from time-to-time, and thankfully, Governor Ambode is clearly demonstrating that these sacrifices are not in vain. His commitment to infrastructure renewal across the entire state is very palpable and the evidence is there for all to see.
I will continue to appeal for cooperation and understanding from my fellow Lagosians in this journey towards building a mega city of the future; a city that our children will be very proud of.