The fiscal recklessness of government officials accounts for a substantial proportion of Nigeria’s foreign debt.

In these first few years of post-military Nigeria, ethnic, political and economic crises have kept the Nigerian people from paying due attention to fiscal developments at the state and local government levels and how these affect their lives, hopes and expectations of the future.

Policy attention and anxiety have focused on the federal government; this is understandable. After all, the federal government makes the big decisions, sets the pace, and receives the lion’s share of revenues from the federation account and its fiscal problems are more pressing. In addition, it has to lead the fight against galloping inflation, crime, and cultism. For some strange reason, even though our interface with the federal government is very limited, most of us hold the view that we are affected more by decisions made in Abuja than decisions made in the 36 state capitals of our federation.

But we ignore the fiscal conduct of our sub-national governments at our peril. According to our constitution – flawed [as] we accept it is – state and local governments are important actors in the provision of services to the Nigerian people. The services that the constitution mandates states to provide are not unfunded mandates; the constitution provides funding for them. Each month, revenue accruing to the federation account is shared among the three tiers of government according to a formula. No matter how much we may quarrel over the revenue sharing formula, no formula is perfect, evidence shows that the 36 states have, since 1999, received considerable amounts of resources from the federation account to enable them provide essential services – health care, public health and sanitation, education – to improve the material conditions of our people.

Since 1999, the sum of N2346.317 billion has been disbursed to the states. Many of our governors control sums far in excess of what the chief executives of some of our nation’s most successful companies control. Consider for purposes of illustration, the following states: Lagos, Delta, Rivers, and Bayelsa. Since 1999, Lagos state has received N93 billion and Delta State the sum N195 billion naira while Rivers and Bayelsa received N156 billion and N133 billion respectively. (Delta, Rivers, and Bayelsa are admittedly outliers because of the 13% derivation but the average of N65 billion received by the states is an enormous amount of money, probably beyond the dreams of a number of African countries.)

In spite of receiving these substantial amounts from the federation account, our sub-national governments are unable or perhaps incapable of improving service provision. Where service is provided, it is often of depressingly poor quality. Typhoid has become a major killer because of the poor state of public health. Our health care systems remain poorly equipped and public hospitals remain mere “dispensing clinics” and the state’s response to the threat of HIV/AIDS remains tepid at best. No official figures of deaths and births are kept so we do not know how many of us are dying from vaccine preventable diseases. Primary and secondary schools are in disrepair and poverty is rife. More than 65% of us according to the federal office of statistics survive on less than $1 per day. For those with jobs, real income is declining at an increasing rate because of the galloping rate of inflation.

Where then has all the money gone? We do not know for sure but what we do know for sure is that the degree of fiscal misconduct at the sub-national level is very high. We know for sure that there is no budget preparation process and that there is no expenditure management system in most states. We also know that most states and local government councils do not have competitive tendering for public procurement and that their accounts have not been audited for years (as President Obasanjo rightly pointed out). There is no full budget disclosure just as there are no efforts to rationalize expenditures on public administration, manage debt, and reform local taxation and capital budgeting. We also know that most states have huge portfolios of off-budget activities. State and local government administration is as disorganized as Oshodi bus stop.

We also know that rather than improve service delivery to the people, the chief executive officers of our sub-national units have – for the most part – co-opted or privatized pieces of the state and public funds for their own purpose. In their thinking, their preferences best summarize our preferences. There is no public debate over public policy and none is invited. Dare raise your voice and you are branded a member of the opposition. Among them are many who could not afford, prior to their election “victory,” regular visits to physicians in Nigeria who now jet overseas every year for “annual medical checkup” while many of the people who elected them into office have no real access to health care because the hospitals and clinics in their domain are without funds or the resources to function effectively. Without compunction, they donate public money at functions and events as if the money belonged to them. A good example is the donation of N50 million by the Governor of Rivers State, Dr. Peter Odili, to a secondary school in Anambra State while many schools in his state are nothing but ramshackle shanties. The Rivers State, that once ultra peaceful state is now ravaged by banditry and gang wars largely as a consequence of government inattention to the needs of the people.

As a result of the fiscal recklessness of the governors, many state governments owe billions of naira in unpaid salaries and pensions and account for a substantial proportion of Nigeria’s foreign debt. Admittedly, part of the debt of states owes to the subsidies that state governments provide for education and health. But a state that manages its fiscal affairs well would know that unaffordable and poorly targeted subsidies reduce resources available for growth-promoting and poverty-reducing public spending on infrastructure and public goods and promote rent seeking behaviour among the polity.

The inability of state governments to deliver the minimum of what they are constitutionally mandated to deliver is resulting in a nationwide loss of social capital and collapse in social cohesion.

Fiscal misconduct by our sub-national governments contributes to the widespread mistrust of government by the Nigerian people. Logic would dictate that our people would march in the streets to protest. Instead of protest, people are opting out; erecting huge fences around their properties, entering into membership of questionable religious movements, engaging in risky behaviour – all indicators of a society that has lost its glue. And having lost hope in our governments and trust in the trustworthiness of our fellow citizens, we have become extremely cynical about government actions. We have surrendered. Yet it is our responsibility, the responsibility of each one of us, to check the incompetence and venality of our public officials, not just at the federal level but also at the sub-national levels. We cannot continue to be cynical because no successful country was built by cynics.

There has generally been a lack of debate in our country about the fiscal policies of state government. The [citizen] shareholders of a firm as big as any of our state governments [should] demand [such a debate].

Kasirim Nwuke, Daily Trust (Abuja), June 27, 2005