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De Moment of Truth

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"The traditional sources of state government revenue has been receipts from the Federal Accounts Allocation Committee (FAAC), Value Added Tax (VAT), Internally Generated Revenue (IGR) and the 13% Oil Mineral Derivation Share. Its debt stocks are broadly derived from foreign debts, domestic debts, CBN bailout funds and the Budget Support Facility arranged by the Federal Government". ~ Okey Ezeh

"The traditional sources of state government revenue has been receipts from the Federal Accounts Allocation Committee (FAAC), Value Added Tax (VAT), Internally Generated Revenue (IGR) and the 13% Oil Mineral Derivation Share. Its debt stocks are broadly derived from foreign debts, domestic debts, CBN bailout funds and the Budget Support Facility arranged by the Federal Government". ~ Okey Ezeh


Given adverse macro-economic conditions that have seen the tumbling of oil prices in recent months in the international market, disruption in Nigeria’s crude oil production and supply chain and the consequent drop of net FAAC allocations from the high of N62.8bn in 2013 to N39.5bn in 2015, Imo state has been particularly shepherded into a financial straitjacket given that its IGR figure in the same period dropped from N7.6bn in 2013 to N5.5bn in 2015 even while personnel and overhead costs continued to balloon.
There is paucity of requisite information that can be used to glean the current debt profile of Imo State but verifiable data exits that pinpoint the figure at N83.4bn as at the end of 2015 fiscal year when the state’s domestic debt was captured at N7174bn and external debt at $59.16m. Given that FAAC receipts for the 1st half of 2016 stood at N14.2b as against about N19.8bn in the 1st half of 2015 and factoring in total external debt figure of $60.22m for 2016, we can hazard a current debt stock estimate in the region of between N100bn at N110bn at best.
The financial outlook of the state as deduced from verifiable and reliable 2015 figures signpost major worries for the state and her people. Out of an average monthly revenue of about N3.2bn accruing from statutory allocations (N1.82bn), VAT (N727.22m), 13% Derivation Share (N172.35m), and IGR (N456.05m); an average monthly expenditure of N4.85bn (made up of N2.04bn personnel costs and N2.81bn overhead costs) soaks up all income and digs a monthly deficit hole of N1.68bn. This figure does not factor-in debt service costs conservatively projected at about N500m monthly. (N403m alone represents Irrevocable Standing Payment Order – ISPO – monthly deduction for 84 months which the state executed with the office of the Accountant General of the Federation in 2015 in connection with a N20bn bond draw-down).
A cursory analysis of the financial state of the entity known as Imo State will reveal that its resources have not been managed in an optimal and prudent fashion. The state is reeling from excessively bloated and avoidable overhead costs just as core resources are frittered away on a multiplicity of white elephant projects that have zero capacity to stimulate growth in the local economy or even engender gainful employment for its teeming citizens. On paper, the first tranche of bond proceeds drawn-down in 2009 was for the overhaul of the Imo Water Scheme, an ambitious project conceptualized in the hey days of the Mbakwe administration to deliver reticulated pipe-borne water to the vast majority of homes in the state. It was also to fund the Oguta Wonder Lake Resort and Conference Centre that its initiators touted as a mini-Disney Land capable of permanently stamping the state as preferred tourist destination with all the economic multiplier effects. The balance of the N18.5bn bond proceeds was to go to the rehabilitation of the state’s existing road infrastructure while birthing about 33 new roads including the trumpeted 150-kilometre stone-based, dual-carriage Imo Free Way designed to traverse 500 communities, 29 council areas and 39 markets in the state with commuters reaching the state capital in Owerri within 30 minutes from anywhere in the state. The bond money was later to be curiously re-routed to other purposes such as construction of 305 classroom blocks, 27 General Hospitals and construction of some road projects even after a significant percentage had been expended on original purpose projects and abandoned! Even then, a subsequent N20bn draw-down in 2015 was to tackle critical infrastructure and complete on-going projects with a diverse shopping list which included projects like the Imo Towers of 1,000 Housing Units targeted at high net worth individuals and Imo citizens in the Diaspora; the Ecumenical Centre known as Amarachi; the Magnificent Towers known as Akachi; the five star Crystal Hotel; Ultra-Modern shopping malls; Multilevel car parks; the Ultra-Modern Judiciary Headquarters and Princess Hotel, Okigwe, All these projects have, to general consternation, either remained on the drawing board or have left the state economy more ravaged than reflated.
In all of these landmark borrowings, no effort was made to redraw the industrial landscape of the state by re-jigging investments in the hugely vital agro-industrial sector where the state has major comparative advantage with the neglected Adapalm, Imo Rubber Estates and Avutu Poultry facilities. Instead, large scale asset stripping was systematically carried out under the guise of concession schemes that threw up “investors” and concessionaires of questionable pedigree. Adapalm went for N3.5bn to a certain Roche, Concorde Hotel and Oguta Lake Motel were flung to ABM Global for 20 years for undisclosed consideration; 18 General Hospitals were sold to Lantech Solutions while the Imo Transport Corporation was leased to Global Ginikana for a reported N250m even as the Avutu Poultry, Nsu Tiles Company, Umuna Bricks Factory, Egbema Power Plant, Inyishi Aluminium Extrusion Plant, Standard Shoe Factory and Imo Rubber Estates among other low-hanging investment fruits were left comatose.
What does this state of affairs portend for present and future generations of Ndimo?
Imo is a highly populated state with over 60% of its approximate 4.8m citizens falling within the ages of 18 and 36 years. The state is very highly leveraged and does not have the wherewithal to raise new loans to support activities of government. Even if there were to be any room to create more debt stock, most creditors would balk at such prospect. The clear options for a vibrant Imo with sustainable development outlook would be the enthronement of an accountable, value-for-money, knowledge-driven, global-best practices compliant administration that lays high premium on low cost overheads and revenue maximization. It is laughable that Imo still struggles with IGR of below N500m a month (as at 2015) at which period her neighbors, mostly non-oil producing states but with similar demographics, were coasting home with figures like N1.12bn (Abia), N1.23bn (Anambra), N919.37m (Ebonyi) and Enugu (N1.51bn). Revenue collection in the state has been as chaotic as it has lacked transparency as a horde of private task masters of doubtful distinction are more often than not entrusted with this critical matter of public trust. The issue of horrendous overheads is another matter. Government is still run as a merry-go-round where all manner of jesters and charlatans with filial connections are readily availed opportunities for rent-seeking and collection at the expense of the long-suffering tax payers. Coteries of fawning hangers-on and long vehicular convoys often herald the appearance of officers of the state just as frivolity is elevated to a state policy with the random declaration of days of extra holidays anytime the Yuletide period approaches when in fact the bureaucracy should be opening up and facilitating the injection of more transactional inflows into her coffers from returnee kith and kin especially from the diaspora.
In all of this the biggest time-bomb that needs to be swiftly defused in the state is the unemployment time-bomb. Imo has well over 800,000 youths both living in the state and outside of it who wake up every morning with nowhere to go to and nothing to productively and meaningfully engage them. This number is more than the total population of Malta and Barbados put together! Yet it is a state blessed with vast arable farmland, solid and oil mineral resources, untapped tourist potentials and perhaps, most importantly, a young, resourceful, educated and intelligent population. The Chinese economic miracle was initially wrought using the State Capitalist Model. In this approach, the state leads the way in job creation until there is enough economic activity in the state for the private sector to properly take off. The challenge is that since most state governments are heavily indebted and therefore unable to increase civil service employment, without reducing individual civil service remuneration. The key policy thrust of a state like Imo should be to create jobs through State Capitalism which means that the states acts as an investor by creating new State-Owned Enterprises (SOEs) that operate according to private sector mechanisms, are based on sound business plans and are entirely independent of government. The key consideration here is that the SOEs would not only serve government, but also generate income from rendering services to the private sector, which would eventually lead them to becoming self-sufficient.
As private sector for-profit entities, SOEs as conceptualized are able to enter into technical partnerships with investors for knowledge transfer and access to non-state funding, and would therefore be better positioned to render efficient and effective services to both government and the private sector. This economic model if and when properly implemented has the proven capacity of creating 300,000 private sector jobs within the first two years of initiation. There are still other blueprints that border on large scale Entrepreneurship Training Programmes and Agro-Industrial, Creative and Tech Industries (Entertainment, Dance, Music, Film, Advertising, Graphic Design, Arts, Social Media, Software/App Development, E-Commerce etc.) Initiatives that can combine to permanently keep the unemployment wolf away from Imo’s door without mortgaging generations unborn with unpayable debt stocks.
It does not require any clairvoyance to know that the days of easy money derivable from a mono-product economy are gone for good. Advances in science and technology have continually diversified energy sources in such a way as to put at the world’s disposal more environmentally friendly alternative energy sources. Cutting edge battery technology, shale oil and a myriad of alternative fuel technology coupled with hydro-carbon fuel over-production with the attendant glut created in the oil market have put paid to any meaningful rebound of oil prices in the future.
What Imo and those who run her affairs must do now is to embrace a high degree of accountability and transparency, develop ingenious and workable economic policies anchored on global best practices, make drastic cuts especially on overheads/recurrent expenditure and aggressively expand internally generated revenue in a responsible and sustainable manner. That is the only way to secure the future for generations of Ndimo unborn.
OKEY EZEH is a CEO of Savvycorp Limited, a Victoria Island, Lagos-based investment and management advisory and architect of the Imo Marshal Plan (a comprehensive developmental blueprint designed to reposition Imo as the 4th largest state economy in Nigeria by 2023).
First published in July, 2016

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