This is a candid response to the views of Dr. Philips Nto, a former commissioner for finance and economic planning in Abia State, on the state’s 2024 budget. Dr. Nto had lauded the budget as realistic and capable of boosting the economy, especially through its high allocation to capital expenditures. It is also his opinion that borrowing is not a bad idea, as long as the borrowed funds are invested in productive projects.
Nonetheless, Prince Ike Okorafor, who holds a strong commitment to promoting good governance in Abia State, has some reservations and critiques regarding Dr. Ntos assertions, based on the available data.
Okorafor pointed out that the budget of N567.2 billion represents a staggering increase of 353 percent compared to the 2020 budget of N160.5 billion. This raises questions about the feasibility and credibility of the budget, especially in the context of the COVID-19 pandemic and its impact on the state’s revenue sources. The SFTAS report indicates that, the state’s total revenue in 2020 was only N66.8 billion, which means that the 2024 budget is more than eight times the actual revenue of the previous year. How realistic is it to expect such a drastic increase in revenue within four years?
Okorafor maintained that the budget deficit of N401 billion, which is equivalent to 71% of the total budget, is very high and unsustainable. The government intends to obtain borrowings of N385 billion, equivalent to 96% of the deficit, from both foreign and domestic sources. This will increase the state’s debt burden significantly and expose it to the risks of exchange rate fluctuations, debt servicing costs, and crowding out of private sector investment. He further noted that the state’s total public debt stood at N97.3 billion at the end of 2019 and was projected to increase to N295.8 billion by 2029, according to the Debt Management Department report. However, with the proposed borrowing plan, the state’s debt stock will exceed this projection by 2024. The report further reveals that the debt to revenue ratio of the state was 145.7% in 2019, exceeding the 50% threshold recommended by the Fiscal Responsibility Act. This means that the state is already spending more than its income on debt servicing, leaving little room for other developmental expenditures.
Okorafor also said that the allocation of 84% of the budget to capital expenditure, while commendable in principle, may not be sufficient to guarantee the desired economic outcomes. Capital expenditure is only one of the factors that influence economic growth and development. Other factors include the quality and efficiency of public spending, the enabling environment for private sector participation, the governance, and accountability of public institutions, and the human capital development of the citizens. According to the World Bank’s Doing Business report, Abia State ranked 35th out of 36 states and the FCT in the ease of doing business in Nigeria in 2018, indicating a poor business climate that discourages investment and entrepreneurship. The state also scored poorly on the Human Development Index, ranking 28th out of 37 states and the FCT in 2018, with a value of 0.644. This reflects the low levels of education, health, and living standards of the people. Therefore, unless the government addresses these structural and institutional challenges, the capital expenditure may not translate into meaningful and inclusive growth for the state.
In conclusion, while Dr.Nto presents a positive and optimistic view of the Abia State 2024 budget, there are some valid reasons to be skeptical and critical of its assumptions, projections, and implications. Okorafor maintained that the budget appears to be unrealistic, unsustainable, and insufficient to address the underlying economic and social problems of the state. Therefore, he urges the people of Abia State not give the administration the benefit of the doubt, but rather demand more transparency, accountability, and prudence in the management of public finances.
