‘Why states must be funded by capital market’
If government must build roads, schools, hospitals that impact the lives of people, there is the need for a reliable source of long-term funding structure that is appropriate for the major investment.
Hence, the need for states governments to be funded by the capital market.
Group Chief Executive Officer, United Capital Plc, Oluwatoyin Sanni, said state governments should be funded from capital market, as opposed to dole outs and handouts by the federal government.
Sanni said the reality as at today with the states;, bailout funds they have had, but are still calling for more, is that everybody has maxed up the limit, stating that Lagos is raising debt capital from the market.
She disclosed this at the launch of the National and Sub National Competitiveness Report, released by National Competitiveness Council of Nigeria (NCCN) in Lagos.
In the report, NCCN ranked Lagos State top among the 36 states and the Federal Capital Territory, in its first ever Sub-National Index.
Lagos was closely followed by Delta, Rivers, Niger, Enugu, Edo, Jigawa and Abia states, respectively.
The index covered four key areas, which included human capital, infrastructure, economy and institutions.
She argued that state governments should be funded by capital market, because by borrowing from the capital market, there are structures around that borrowing, which allow for accountability and transparency.
In her words: “Unfortunately, we have state governments pressuring the federal government on dole out funds and hand out, if state government is going to build roads, schools, hospitals, impacting the lives of people, there is need for reliable source of long-term funding structure that is appropriate for the major investment it is making and be transparent. This is an area where we need to clearly have a shift.”
According to her, “Lagos state is the only Nigerian state that is qualified to raise capital on the debt capital market applying the provisions that we have within our laws. We have a provision in the investments and Securities Act that limits the ability of a state government to raise capital from the capital market.”
According to the report, all the states performed strongly in at least one of the four broad themes and 23 indicators.
The Chief Executive Officer, NCCN, Chika Mordi, explained that the index aims to present a significant platform for research and discussion.
Mordi pointed out that a couple of northern states were quite strong in the areas of infrastructure.
“In aggregate, Nigeria remains challenged in its competitiveness,” the NCCN boss stressed.
Meanwhile, data collection for the index was done by NCCN in collaboration with the National Bureau of Statistics, and private surveying agencies. They conducted a household survey across all 36 states and the FCT, resulting in a sample of 8,147 households.
They also conducted a business climate survey, collecting information from 2000 private business establishments chosen at random, and using probability proportional to size (PPS) within each sector. Out of this number, 1,820 businesses responded to the survey, representing a 91 per cent response rate.
In his remarks, former Cross River State Governor, Donald Duke, said political leaders across the country were more interested in politics than governance.
“And if you don’t get the economics right, then governance cannot work,” he said. “You cannot be competitive when you are not productive. The first thing is how do we get productive?”
“This country, for instance, has to grow at about 15 per cent annually, not in Lagos, but nationally, for the next ten years, to absorb the numbers that are out of the economy.
“So what we are doing is to run a goodwill economy; 85 percent of the economy is depending on the goodwill of the 15 percent.”
Duke advocated a policy he described as SHIT (Skills, Health, Infrastructure and Technology).
The reality, Duke noted, is that the government of the day is more interested in politics than economics.
Duke also criticised the way states in Nigeria have been set up, explaining that the units see themselves as political entities, but not as economic entities.
“And if you don’t get the economics right, then governance cannot work,” he said. “You cannot be competitive when you are not productive,” he said.
Chairman, Ford Foundation, Innocent Chukwuma, said Nigeria is the only federation where more assignment are found on the concurrent list, which is not supposed to as regards to other economies, stating that there is a lot of suspicion on the Nigerian federation.
He said people who are agitating for restructuring should come together to tackle challenges bedevilling the economy.
Chukwuma said states must begin to look inward, adding that States that are ready to grow should set up framework to ease remittances on taxes, revenues and dues.
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