Osun State: Dealing With Uncertainties By Oyedeji kayode

“Wisely and slow, they stumble they that run fast” Romeo & Juliet, Act 2,Scene3.

Osun State is enveloped in a cloud of uncertainties. Osun is in a fix. Salaries have not been paid. The State is heavily geared. To many, especially the political opponents of the Governor, Ogbeni Rauf Aregbesola, it is an opportunity to make a mince meat of a man who is gradually assuming the position of a political god in the State. It is an opportunity to demystify him.

Unfortunately for them, the problem is not really about the Governor. It may have something to do with his development approach and style, but it is certainly beyond that. The problem in Osun is more about the state’s endangered economy, the unrealistic and inordinate interest of the civil service and a flawed federalism. The sad development in Osun provides an auspicious time to for a genuine and honest re-appraisal of the viability of our states. The precarious situation in Osun calls for a frank but non-partisan dialogue on how create a sustainable agenda and approach that strike a balance between workers reward and remuneration on one side and general development of the State on the other.

All hope is not lost. Osun must explore different options to get out of the current gridlock and create an enduring development template. In pursuit of these, all parties must be willing to make sacrifices and concessions. Workers must brace up for a very challenging era. The Governor and his team must explore new strategies in its debt management and undertake comprehensive financial re-engineering whilst cost of doing government business in Osun is reduced considerably.

For the records, this is not the first time Osun State will be confronted with perilous circumstances like this. Under Governor Bisi Akande, between 1999 and 2003, upon the introduction of a new minimum wage, the State was met head-on with the dilemma of choosing between two difficult options – devoting its resources to the development of infrastructure and reducing commitment for wages and salaries or simply devoting almost all its resources to maintaining a bogus and happy workforce.

Not one to flirt with frivolities, seek cheap political gains or shy from taking hard decisions, Gov. Akande settled for the former and paid dearly for his choice. The political hullabaloo that followed led to his removal through a controversial election in 2003. Akande, rather than a flawed fiscal system became the target and the victim. His good works and sacrifices were ignored. His removal marked a sad and tragic end to the search for a viable development template for the State.

The story of Akande’s era was documented in a piece titled “Gov. Akande, Nigerian workers and Fiscal Federalism – http://nigeriaworld.com/articles/2003/mar/131.html. Having benefitted from Akande’s travails, his successor simply made effort to titivate and expand the organised labour with little to show in terms of physical development, in spite of the fact that oil revenue, and by extension state allocation, had improved considerably.

It was that expanded, bloated labour structure and a new and unrealistic minimum wage that Gov. Aregbesola inherited from his predecessor at a time the state infrastructure had become decrepit. Aregbesola was determined to develop the State. In his unrelenting bid to resuscitate infrastructure, he sought for funding wherever he could get, invariably leading to a massive accumulation of loans and advances. Unfortunately, his development programme was based largely on the expectation of medium to long term relative stability in prices of crude oil.

Under his watch, Osun State experienced more development than in the eight years of his predecessor. And Aregbesola was poised to do more until the reality of the incompatibility of dwindling federal revenue with soaring wage bill caught up with him.

The attempt to present Aregbesola as a callous man who deliberately denied workers their entitlement is funny. The Aregbesola we know, elected and re-elected as Governor of Osun is humane, kind with passion to quickly transform the State. However while Governor Aregbesola and his Deputy can easily be seen to be truly unpresumptuous; same cannot be said about several members of his government, some with mouth-watering investments in the State that cannot be traced to any independent source.

The Governor’s scale of preference, before the crisis, many have argued did not reflect good planning. It will be difficult for instance for the government of Ogbeni Aregbesola to justify the provision of school uniform for all students in Osun. Such gesture should have been limited strictly to indigent students and undertaken by the State’s development partners, NGO and charitable organisations.

The Governor has explained in details (http://nigeriapoliticsonline.com/understanding-the-mathematics-of-osun-revenues/) the mathematics of the State revenue in the last four years. His sincerity and Spartan lifestyle have been his saving grace. Aregbesola still enjoys the sympathy and love of his people, but for how long if the state of uncertainty remains unabated?

Osun State has a burden of huge wage bill to bear, enormous obligations for her huge indebtedness meet and development aspirations and electoral promises that must be fulfilled. So far, the much needed development template for Osun remains elusive. The development template currently being implemented in Osun is not sustainable without colossal allocation from Nigeria’s oil driven Federation Account.

How can Osun proceed from its current terrifying state? Salaries have not been paid for months. The rapid development experienced in the last four years has been stalled. Those who see the current wave of uncertainty in Osun as a problem of Aregbesola are short-sighted. The problem is about the people, about the economy of the State. The task now for all stakeholders is to come together, shed the toga of political partisanship and fashion a development template for Osun and other non-oil producing state. All parties must be willing to make sacrifices and concessions.

There is a clear disconnect between the fundamentals of the economy of the State and the development formula adopted by the government. That allocation from the federation account is still too central to the viability of the State may indicate that not much progress has been made in developing the economy of the Osun.

The government in Osun cannot afford to establish its development expectations on revenue from the federation account. Like most ambitious and aggressive individuals in private and public sectors, Gov. Aregbesola appears to be guilty of “reckless optimism” in his economic planning. The impression is easily given that Osun government lost focus in its bid to radically develop agriculture in the State. The momentum with which rural roads were re-built, farmlands allocated and people mobilised to return to the farm could not be sustained, and as a result, the vision could not be realised.

Osun needs to strengthen its income earning capability in agriculture in the immediate. Before government can earn substantial income from agriculture by way of rate on produce and tax on income, it must follow through the production chain from the beginning to the end.

Any break in the cycle of agriculture will result into waste and loss of potential revenue. Agriculture can-not yield the desired revenue to government if done in piece meal.
One of the things the government in Osun could not do in the last four years was to pragmatically use agriculture to expand social safety net in the State. For instance, members of “Oyes” Scheme taken into the already bloated civil service should have been conscripted into an organised, self-sustaining agricultural development scheme, rather than being placed on the State’s payroll. Osun must go back to the drawing board, determine areas of comparative advantage and deplore its resources and energy towards their re-development.

Osun is a victim of macro-economic instability and fiscal incoherence. The current pattern of development in Osun requires a lot of re-think. For instance, a lot would have been saved if some projects like the provision of school uniforms, the Olukoju Park in Gbongan were avoided. However, in spite of this, the State must undertake creative financial re-engineering.

In view of the State’s current weak earnings, the State is technically shut out of the loan and bond markets. But it can re-negotiate, restructure and re-finance its loans portfolio. The State can re-negotiate all existing medium term indebtedness to allow for greater tenor, reduce interest rate and amount payable or deductible monthly. Government should also explore the option of securitising part of its debt and sell to interested investors.

Now that a friendly and a more serious government now exists at the Federal level, it is expected that Osun will muster all political will to collect all its outstanding payment on federal roads built in the State and other pending payments. That will provide considerable immediate succour.

It is safe to assume that federal authorities must pick interest in the challenges faced by federating units. Dealing with cash crunch at the State level may require some extra-ordinary efforts. Abandoning states that have almost become insolvent may invariably hinder the attainment of basic macro-economic objectives of the federal government.

The Buhari administration should consider giving all States a life-line similar to what The Central Bank of Nigeria (CBN) gave to ailing banks after the last economic meltdown. The intervention may come by way of the CBN buying bonds of very long tenor, of approximately half a decade, from states to inject fresh funds and ease liquidity squeeze.

Another option is for government to amend the law establishing Asset Management Company of Nigeria (AMCON) to provide a window for it to warehouse debts of ailing states and work out long term payment options for them. The intervention can also come by way of direct bail-out, similar to the arrangement made by the previous government for several ailing sectors of the economy. It can be recalled that the textile, aviation and entertainment industries were offered intervention funds running into several billions of Naira by the Jonathan administration.

Osun on its own must put in place a medium-term programme to reduce its budget deficit and achieve a balanced budget. This can be achieved by working hard to ensure that its internally generated revenue is higher than its payroll size. Osun and other states must look inward and restructure their workforce.

However in the interim, the cost of salaries and wages in Osun must come down by not less than a quarter. The organised labour in Osun must be ready to make extensive sacrifice. Of more importance is the need for the State to use its current workforce to undertake it’s infrastructural development. Much of the on-going works in Osun would have come a lot cheaper if they were undertaken under a “Direct Labour” Scheme. The civil service must be allowed or made to work to justify its pay.

Nigeria runs a fundamentally defective federal structure. Centralised pay structure by way of minimum wage is clearly a threat to development and fiscal cohesion of Nigeria. A fate Osun Workers must accept is that, in the face of current dwindling revenue, Osun is incapable of sustaining its current wage bill.

Workers must also accept the reality that investing all of a State’s revenue on payment of salaries or on current expenditure is detrimental to the economy of all and sundry. Such practices naturally inhibit development, limit opportunities and increase dependency ratio in the economy. The naked and unpalatable truth is osun will remain prostrate as long as workers productivity remains lower than workers earnings.

The organised labour has become selfish, driven largely more by the greed of worker more than public good. They have succeeded in concealing their inefficiency, greed and graft in the excesses and malevolence of the political system. The concepts of Minimum wage and the aberration that now compliments it in Nigeria called “parity pay” must be properly conceptualised. Raising earnings above the level of productivity in the public sector is a threat to economic growth and development as well as disincentive to tax payers outside the public sector.

The concept of minimum wage is being debased and abused in Nigeria. Nigeria must fashion a Minimum wage regime that is peculiar to the nature of our federalism. A decentralised Minimum wage that reflects each state’s capacity to pay should be introduced. Why should a teacher in Oriade Local Government in Osun State earn the same salary with a teacher in Victoria Island, Lagos or Asokoro, Abuja?

It is inconceivable that a State that sits on the largest deposit of gold in Nigeria is almost insolvent as a result of Nigeria’s flawed federal structure. The political change recorded recently in Nigeria can only translate to macro-economic gains if all States are allowed greater access to resources within their jurisdictions. Gov. Aregbe should urgently engage the federal government on how to harness the opportunity of gold mining in the State.

The State may decide to obtain a mining license from the Federal Government and give to a concessionaire to operate on its behalf as against the current practice that involves shylocks and saboteurs feeding fat on the State’s precious recourses.

Oyedeji Kayode is an Economist and Policy Analyst.

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