Osinbajo to States: Think, plan like countries to succeed financially

Vice President Yemi Osinbajo has stressed that the only way states can be financially viable is for them to think and plan like countries as he observed that states and countries have similar problems.

Speaking at the Leadership Newspapers Awards in Abuja on Thursday, he said they did not have to wait for the much touted restructuring to be in place before they can take their destinies into their own hands.

The Vice President drew inference from the foresight and dexterity of late Premier of Western Region, Chief Obafemi Awolowo, in managing resources which he said led to his successful financing of free education and the implementation of major projects.

He said: “So how were Awo’s phenomenal achievements possible? There was no oil revenue, no Federal revenue. In fact, the Western Region government gave revenue to the federal government.
How did they achieve financial viability? Mostly it was taxes and revenues from Agriculture, especially cocoa, and some from mineral resources.

“Free education, which was audaciously launched by that Government, was directly on the back of income taxes, a capitation or poll tax was imposed by the Western Region Government mainly to fund free education, despite much opposition and protests. But with Military rule from 1967, and oil money, every one forgot about taxes. The Federal Government gave everyone an allocation.

“So today, the States in the old Western Region, aside from Lagos, do not earn enough in taxes or anything else to pay salaries, let alone do major capital projects. Without federal allocation most cannot survive. Indeed, the problem of the States is the same as that of the Federal Government; a complete reliance on a source of revenue that is extractive, and so requires no creativity or productivity whatsoever.

“Most resource-rich nations and sub-nationals in the developing world end up being poor and financially unviable because making easy revenues from the extraction of resources is habit-forming; a habit of easy money without effort, few jobs are created because there is no value added. So Japan, Singapore and South Korea with no significant natural resources are some of the most successful economies, because they create enough jobs for most of their population.

“Why is that so? Because financial viability is based on innovation and productivity; productivity means adding value, not necessarily possessing the resources, but adding value to whatever resources, even if you have to import the resources.

“So the consumers of crude oil, like those countries I’ve mentioned, earn more than producers of oil, because they add value to the crude oil they import by processing it and converting it to petrochemicals in some cases, often selling these improved products to the oil producers at more profit.”

Osinbajo said he drew his examples from the experiences of Nation States to illustrate the problems of the unviability of States, because “I think a lot of the answers to the challenge of creating financially viable state governments are the same as the problems of creating a financially viable countries or Nation State.”

He therefore added: “So the prescriptions would always be similar. Many of the same principles that work for a national government will also work for a subnational government.”

The Vice President affirmed that the conversation about creating financially viable states should therefore be viewed through the lens of the medium to the long term.

He noted that there will always be the temptation to prioritize raising Internally Generated Revenue (IGR) at all costs, noting: “If this is done in a manner that stifles today’s entrepreneurs and investors, then clearly there will be a great price to pay down the line.

“So, it is clear that Governors have to think beyond four or eight year cycles. There must be a commitment to laying a foundation that our successors will build on, and for successors to be ready to build on foundations laid.”

Speaking further, Osinbajo said one of the challenges with governance in Nigeria today is that penchant for dismantling or dismissing everything inherited.

According to him, President Muhammadu Buhari has insisted that his administration must ensure the completion of projects started, but abandoned or uncompleted by previous governments before starting new ones.

He said further: “Our problem, of course, in our country, is not in new ideas or starting projects, it is the lack of rigour and discipline to complete projects and to maintain them.

“One of the reasons why Lagos State is possibly the most successful subnational economy is the continuity in the implementation of a plan.

“Each governor in Lagos has followed the plan in financial reform, in land reform, laid out by the Tinubu administration, so also in infrastructure development. The BRT was started in 2005 or so. Then Governor Fashola completed and improved upon it, (Governor) Ambode finished off the Ikorodu one and has continued to expand the BRT. The rail project, which was largely begun by Fashola, is being completed by Ambode. The way of progress is by trying to follow through a plan and completing what has been started.”

Among the personalities honoured with awards at the ceremony were three state governors including Nyesom Wike (Rivers), Akinwunmi Ambode (Lagos) and Seriake Dickson (Bayelsa).

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