Not many nations within the African continent can boast of the feat Lagos state has attained over the past decade. The state rivals economies of nations as it ranks the top 10 of the largest African economies. The success of the state is, however, punctuated by high poverty levels and a range of infrastructural deficits. The onus thus falls on the state to make do with its available resources towards meeting all the needs of the state and this is what the Ministry of economic planning and budget (MEPB) as headed by Commissioner, Sam Egube, seeks to attain with the state’s financial resources. Given the ongoing pandemic, the job of the state in mitigating the far-reaching effect on businesses and individuals alike has been further heightened.
The recently released financials for Q1 2020 reveal an actual revenue for the quarter of ₦282.6 billion, a figure 101% higher than the actual revenue of 2019 which stood at ₦140.7 billion and 6% higher than the budget for 2020 which stood at ₦267.8 billion. The revenue for the quarter consists of ₦100.3 billion on internally generated revenue, ₦141 billion on capital receipts, and ₦41.2 from federal transfers.
Capital expenditure for the quarter was N72.1 billion, 11% higher than the actual of 2019 which stood at ₦65 billion and 54% less than the budget for 2020 which was set at ₦177.8 billion – a deficit attributed to economic changes resulting from the Covid-19 pandemic. In the following abridged transcript, Mr. Egube, offers insights into the performance of the budget and speaks extensively about the implication of the pandemic on industries within the state and new mechanisms to be employed by the state government.
Let’s start with a brief overview of the quarter 1 financials. How do you rate the overall performance?
The first quarter is typically a very slow one. The budget performed at 51% and that is understandable because the later part of March experienced the Covid-19 pandemic and subsequently the lockdown. So a lot of the transactions that were ready to go into execution were not able to go. We achieved and surpassed our target for 2020 Q1.
This is good as it just shows that some of the performance-enhancing mechanisms that we have put in place are working. We will continue to put pressure on those performance metrics and we do this through the peer reviews we have on our revenue which the governor himself sits in. The goal is to ensure that revenue is being driven so that we’ll have what we need to have to spend on both recurrent and capital expenditure.
The report disclosed that the Covid-19 pandemic will affect the resources of IGR – and expectedly so, which is why it is also surprising that the state was able to outperform despite the fact that a number of key industries have slowed down during this period. What is the state’s stance on this?
Yes, we expect the full implication of the Covid-19 slowdown to begin to show up in the second quarter. The latter part of Q1 is where you would see the beginning of the Covid-19 lockdown. So, we’re expecting a shakedown. We’ve done our own models also within the state to see how badly hit the Covid-19 pandemic will have hit us. It’s a global phenomenon. It’s not something the world has gone through and it’s not something that is completely understood yet.
But for an import-dependent country like us, our supply chain is going to be deeply affected as our production also will slow down. A slowdown of production across the world also means reduced energy demand and that begins to put pressure on our crude oil sales. What you then begin to see is that prices begin to topple down from our expected benchmark of ₦57/ barrel.
All of these slowdowns are going to cause the GDP of the state and of the nation to shrink. We have taken a more optimistic positioning to say it will shrink by 3%. 3% means a ₦2.3 trillion loss in output by the entire state. Unemployment go up as companies not producing will either begin to contemplate paying less than the salaries they ought to pay or actually lay off workers. With this happening, IGR will reduce and it is going to lead to an increased physical deficit that will force a re-order, a reevaluation, or a reprioritization of the budget. We need to spend on what will bring the greatest impact on the economy especially because resources are thinning out.