ECONOMY 360: Key Fiscal Lessons for Osun State Governor Adeleke

When I saw a video of Governor Ademola Adeleke dancing in celebration of his victory at the Supreme Court days ago, three rather interesting pictures flashed through my mind. All three moments capture the (in) actions of the last three ex-governors of Osun (Olagunsoye Oyinlola, Rauf Aregbesola, Gboyega Oyetola), the task before incumbent Governor Adeleke himself, the urgent need to turn Osun’s economy around, and the fiscal sustainability of the state.

I’d highlight the moments, thus:

Scene 1: Shortly after Mr Aregbesola became governor, Osun state instituted a commission of enquiry to probe contracts and financial transactions executed under Mr Oyinlola, and a particular N18.38b loan obtained by the Oyinlola administration was of utmost concern. In one of the commission’s sittings in 2012, members of the governors’ cabinets were invited to explain why the loan was obtained and why it was bought back from UBA to First Bank by the then incumbent administration. What I found quite interesting was Mr Oyinlola’s position that his administration took the loan because the state was insolvent and that there was a need to develop the state’s infrastructure. But to address the infrastructural deficit in the state at the time, it was quite interesting to realise that the loan was channeled towards building—wait for it—6 stadia across the state.

A shocking priority, if you ask me.

Scene 2: In 2015, at the height of its fiscal nightmares, then Osun State Governor, Mr Aregbesola, announced that the state received only N55m from the Federation Account for the month of September, 2015. He said the money could not even settle the electricity bill of the government secretariat, adding that it was evidence that Nigeria was experiencing an economic meltdown.

Then in what appeared a rare moment of epiphany, Mr Aregbesola quipped: “We must at this point tell ourselves the truth; there is no money coming from the Federation Account, 34 million barrels of Nigeria’s crude oil are on the sea without buyers. Money coming from the Federation Account has reduced seriously and our hope of survival is in our hands, what our forefathers lived on was agriculture.”

An interesting realization at a most difficult period, if you ask me.

Scene 3: In the days leading to the last governorship election in the state, Mr Adeleke in one of his public interventions expressed concern about salaries and pension arrears and the endemic poverty in Osun—and indeed Nigeria—under Mr Oyetola. It didn’t matter that the then incumbent governor had quite a decent managerial record when it comes to the state’s finances, if appraised in the context of the situation he inherited from the Aregbesola government in which he also played a key role. Then in what was perhaps one of his most strategic moments of appealing to the electorate, Mr Adeleke quipped in Yoruba: “Ojoojumo ni mo ma n sunkun—I cry every day.” While that connected with the average poverty-ravaged voter, it placed a huge burden on the governor to wipe off the tears of his people, irrespective of the state of Osun’s finances.

A daunting task at a most troubling period, if you ask me.

So on Tuesday when the court gave its verdict and I saw the video of Governor Adeleke celebrating, I had to reflect on these three scenarios and what they mean for the fiscal sustainability of Osun state in the face of massive infrastructural needs, multidimensional (country-wide) poverty, inflationary pressure, asphyxiating debt, and shrinking revenues.

Shortly after he was sworn in as governor last year, Mr Adeleke revealed that his administration inherited a total debt of N407.32bn as of November 30, 2022, just three days after assumption of office. In a separate media statement, the Osun government also alleged that the immediate past administration of Mr Oyetola left a debt of N75.25 billion in salaries and pensions. The former governor in a swift response said his administration did not take any loan during his tenure and that it paid the sum of N97 billion from the debt inherited from the Aregbesola administration.

While I have little interest in the messy details of the politicized narratives around loans, what’s discerning to everyone is that the new governor has his work cut out for him in the face of a debt burden that leaves little or no headroom for him to address developmental issues. What’s more, FAAC allocation that provides succour is drying up. For instance, in March 2023, FAAC shared the sum of N714.63bn among the three tiers of government, a decrease of N8.05bn compared to the N722.68bn shared in February 2023. In the past few years, especially since the nation’s oil revenue slumped, FAAC allocation to states have continued to dry up even as peoples’ expectation rises.

What then are the alternatives to shore up revenue, drive growth and improve fiscal sustainability?

Provision of the enabling environment that can drive local productivity to ultimately encourage industrialization, expand the tax net and increase IGR remains fundamental. With a GDP of well over $7.28 billion (GDP figure circa 2010), Osun is still nevertheless positioned to tap into the potential of its largely agrarian communities to sustain growth. There is room to expand, and expand real big. More interestingly, from Ilesha through Ila, Gbongan, Iwo, Ife, Osogbo, Ede and Ejigbo, the state has perhaps the largest number of “urbanized towns” in Yorubaland, with potential for industrialization and SMEs growth if the right infrastructure and incentives are provided under the right atmosphere that could drive productivity, especially among the young people.

At 11.65% as of Q4 2020, Osun has the lowest unemployment rate in the country. But that doesn’t tell the full story: the figure might not be sacrosanct because the national average of 33% as at the fourth quarter (Q4) of 2020 has been updated by research organisations and experts. KPMG in a recent report said that it estimated that the rate has increased to 37.7per cent in 2022 and will rise further to 40.6 per cent in 2023. More ominous is the fact that a casual survey around Osun state—as in many parts of Nigeria, anyway—would show how young (unemployed) people move around idly and many others channel their energy into fraud, thuggery and other illicit activities. Yet, Osun State economy is largely based around agriculture, mainly of cocoa, cassava, millet, maize, potato and yam crops. But the large swathes of land across the state have been abandoned, also partly due to insecurity.

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Last month, I moved from Iwo through Ife-Odan, all the way to the border communities around Oyo-Ogbomoso road, and it was a most tortuous journey. The roads are bad and make it difficult for farmers to transport their produce to the markets. In the absence of adequate storage facilities, so many farm produce go to waste in communities across that route, as in other parts of the state. Nigeria suffers about 60 post-harvest losses annually in tomato production, while losses in fruits and vegetables are estimated at about 50 percent. It’s therefore no surprise that the state, like others, struggles to drive productivity, generate revenues, and add value to agricultural activities across its predominantly agrarian communities. Efforts must be geared towards improving security, supporting farmers with credit facilities, and expanding the road networks to ease logistics.

The Osun state government is implementing plans to domesticate Nigeria’s Startup Act 2023 and develop the State’s ICT and STI (Science, Technology & Innovation) policies. With the sheer number of tertiary institutions in the state (particularly OAU), the initiative is most fascinating and it would go a long way if implemented with the full participation of young energetic innovators. It’s a win-win for both the state and the people.

Tourism is also a driver of revenue and, quite expectedly, one hopes that the government would tap into it with potential available at Ada Golf Course, Erin-ijesha Water Falls, Osun-Osogbo Festivals and the likes. But as in many other areas, adequate maintenance of tourist sites, good road networks and other facilities are important to drive activities around these centres where increased activities could expand productivity, create additional layers of jobs, and expand sources of government revenues.

Despite the massive love he enjoys among Osun people, Governor Adeleke, partly because of his “Faaji-loving” public persona, came into office with rather low expectations. Many commentators believe he isn’t methodical enough to handle a fiscally sensitive state like Osun. Well, time will tell.

But in the meantime, one hopes that he avoids the pitfalls of the past: misplaced priority in making the right decisions; delayed reflection and planning until things get out of hand; and empty populism. That’s the only way he and Osun indigenes/residents won’t “cry every day” in the coming years.

May Governor Adeleke succeed and, hopefully—as his ‘Imole!’ slogan goes—illuminate Osun.