Between now and 2025, the Ogun State Government plans to invest a total of N392.7 billion in infrastructure as part of its strategy to improve the state’s economic standing and position it as a leader among its contemporaries.
The spending envelope, which represents 26% of the state’s planned total expenditure outlay for the period, which is estimated to be N1.5 trillion, is included in the Medium Term Expenditure Framework (MTEF).
As the state’s economy shifts from manufacturing to services, the government has set education and health as two of its top priorities, allocating 14.3 and 11% of the total budget, respectively.
Chief Economic Adviser/Commissioner for Finance Dapo Okubadejo stated during the 2022 budget breakdown session that the government recognized the value of connecting the state with Lagos as a crucial step to enter the Lagos investment market.
The state’s overall projected expenditure for this year is N472.2 trillion, which is around 4.7% more than the budget from the previous year. However, the commissioner claimed that rather than the amount of money spent, the government places more emphasis on impact and performance.
He forecasts that 2022’s budget performance will be better than 2021’s, which was above 70%, and notes: “the audit of last year’s budget is not ready. But I expect it to be better than that of 2021 because we have progressively improved over the years.”
He views efficiency and performance as motivating private sector participants to take advantage of investment possibilities rather than preserving a large government. He claimed that the government has implemented several legal frameworks, such as the Public Private Partnership (PPP) and the Office of PPP, in acknowledgement of this, to make it simpler for investors looking for business possibilities in the state.
Regarding the state’s debt, he pointed out that equity is frequently a costlier funding choice for an organization that uses a strategic debt management plan. He pointed out that several of the current administration’s initiatives that were funded with concessionary debts a few years ago would cost twice as much if they were put off until now out of concern for debt.
The state’s debt was N241 billion as of September. But Okubadejo contended that, taking into account the state’s capacity, revenue potential, debt situation, and opportunity cost of not borrowing, among other factors, the debt stock is not a huge concern. He rejected the idea that sub-national debt should be viewed generally, arguing that each state should be judged according to its unique characteristics and capacity to pay.
Additionally, he stated that the debt was approximately N141 billion when the administration took office, with the foreign component being $121 million, despite the fact that the state’s balance sheet did not include outstanding pensions and gratuities due to the limitations of the cash accounting system in use.
Realistically speaking, he continued, the administration had inherited a debt of more than N200 billion. Still, because of the initiatives carried out with borrowed money, the state has garnered a lot of value in terms of property appropriation.
“The sustainability analysis confirms the State Government’s ability to sustain its current spending, tax and other policies in the medium term without threat to the state’s solvency or default on some of its liabilities or proposed expenditure,” he said.
Olaolu Olabimtan, Okubadejo’s deputy in charge of budget and planning, informed the media that debt sustainability indicators are significantly higher than what is considered acceptable. For instance, he pointed out that the debt service to revenue ratio is only 12%, well below the guideline of 30%.
He claims that the state has put in place a medium-term income strategy that enables it to precisely match its revenue potentials with the infrastructure needed to achieve its main objectives.
According to Olabimtan, completing ongoing projects, generating more money, and improving the state’s capacity to create jobs are among the budget’s top priorities.
A little over 57% of the budget for 2023 will be spent on capital projects, while 43% will be used for ongoing expenses. Internally generated income (IGR), which the Commissioner for Budget and National Planning stated made more sense given the uncertainty surrounding the stability of the Federation Account, is anticipated to provide around 44.5% of the funds.
27.2 percent of funds come from capital receipts, while 19.48 percent will come from revenues allocated by the Federation Account Allocation Committee (FAAC). The approved budget’s fiscal deficit is also lower than the administration’s benchmark of 3%, coming in at just 2%.
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