Y2012 Budget Presentation - Introduction

Nov 14, 2010 - Almost 1 (One) year ago when I presented the Y2011 Budget, I pointed out that it was our last budget for the term of 4 (four) years that started in 2007 as we were going into General Elections in year 2011.

I reiterated that the budgetary policy of alleviating poverty through infrastructural renewal for economic development would continue and that while we would deal with the emerging issues of workers welfare and the demand for increased wages, we would also be responding to the emerging challenges of accreditation in our tertiary institutions especially the State owned University.

In that budgetary presentation, I also stated very clearly that our focus would be to continue and complete as many on-going projects as we could, whilst starting only critical ones that we could fund, with the intention of leading our Party to victory at the general elections with great optimism that our performance score card would be good enough to secure a return for us.

Distinguished and eminent Lagosians, ladies and gentlemen, in spite of the very turbulent economic environment after a global recession in 2009-2010 and a very keenly contested election, I am happy to report that we have achieved quite a significant portion of the goals we set for ourselves in the 2011 Budget with almost 6 (Six) weeks still to go in year 2011.

Not only did we succeed at the general elections, your massive turn out at the polls which we acknowledge as a large endorsement of our service to you, helped us to inflict a decisive and crushing defeat on all opposition in an unprecedented victory that returned all elective offices in the State to the Action Congress of Nigeria.

You have reinforced that mandate by again returning all 57 (Fifty Seven) Local Government and Local Council Development Areas to the trust and care of the Action Congress of Nigeria.

I must once again, on behalf of our Party, thank all Lagosians, our Party faithfuls and of course the media for this huge vote of confidence.

The success of the budget plans and the manifestation of its implementation are evident across our State.

You will see them in the relative labour and industrial harmony in our State, as the first Government in Nigeria to start implementing the minimum wage in January 2011 even before the law was signed.

While this has come at a huge cost and requires a strategy re-appraisal to sustain it, which I will address later, it speaks to the commitment of Government to the welfare of its workers, and its proactive and methodical approach to solving problems before they get out of hand.

The implementation of our budgetary commitment to resolve the challenges of tertiary education will be seen in the rapid infrastructural development going on in Lagos State University.

The completion of the first block of classrooms for the University Staff School, the completion of the Law Library and School Auditorium, the completion of the Science Laboratory and the commencement of ICT Centre at the AdeniranOgunsanya College of Education, Ijanikin.

As I speak, more projects are going through tender with a view to very near time commencement, and we are currently exploring a proposal for the delivery of broadband internet connectivity to the entire campus to improve the capacity for learning and access to information.

Apart from the regular funding through subventions, I have in my capacity as Visitor to all our tertiary institutions given directives for the creation of a special fund to each school to fund special capital projects and continuous research.

The conditions for accessing this fund and rules of governance are being worked out and will be communicated after deliberations and approval at the State Executive Council.

I am already working on developing new international affiliations for our tertiary institutions so that we strengthen our capacity to train ourselves locally and stop importing education.

At the lower education level, we have approved the renovation and rehabilitation of 314 (Three Hundred and Fourteen) primary and secondary schools across the State, in Yaba, Ipaja, Alimosho, Ejigbo, Badagry, Lekki, Ikorodu, Aguda and Ojo areas to mention a few.

The successful implementation of the budget is also evident in the number of projects that have been completed and handed over such as the 2 million gallons per day mini water works in Ajegunle, Ikorodu, Badore and Ojokoro; the 12 classroom blocks each in Gbara Community Junior Secondary School, Gbara Community Senior Secondary School, Olowon Community Secondary School Ajah, AdeniranOgunsanyaStreet, Surulere, AdeniranOgunsanya Shopping Complex, the provision of 250 (Two Hundred and Fifty) Taxis, the Skill Acquisition Centre in Mushin, the house and clinic for physically challenged children in Owodo-Elede, Ketu, the Lagos Digital Mapping and Geographic Information System, the provision of 100 (One Hundred) new waste compactor trucks for refuse management and the provision of 60 (Sixty) high power motor cycles, 50 (Fifty)patrol vehicles, 10 (Ten) armored personnel carriers, 200 (Two Hundred) bullet proof vests to the Police for crime prevention and control, to mention but a few.

During the period under review, our Public Works Corporation lived up to its promise to address the problem of heavy tonnage and its wear and tear on our roads by rehabilitating 900 (Nine Hundred) roads, while construction works continue on critical roads like Eti-OsaLekkiEpe Expressway, the Badagry Expressway, the Lagos Light Rail Project and many other inner roads about which I will also speak.

In Alimosho, we have completed a total of 23 (twenty three) roads of various kilometreswhile work is going on in 14 (fourteen) roads; in Agiliti, Tedi, Erikiti-Ajara work is going on, while Igbo-Elerin Road, Murtala Mohammed Way from Yaba to Iddo have now been fully completed; and plans are at an advanced stage to award Mile 12 to Ikorodu.

Our efforts to improve security at night saw to the completion of the street lighting of Eko Bridge to Costain and the section from Ijora toward Apapa, while Ikorodu Road street lighting has commenced.

I must mention that we suffered a set back of cable theft on the Eko Bridge-Ijora-Costain project which is being replaced and as I promised at the last 100 days speech, we have apprehended the culprits.

It will take too much time for me to discuss the details of the developmental projects going on in several parts of our State. It suffices to say that work is going on in every Local Government as proof of our commitment to the continued transformation and renewal of Lagos.

However, what is most instructive in all of these have been your contributions and your invaluable trust. You are the ones who have made the progress possible.

While our State has been receiving an average monthly income of N6-7 Billion from the Federation Account, and some States in the oil rich regions without our size of population are getting as much as N20-30 Billion per month, we have looked inwards, without oil derivation and taken our destiny in our hands to use the collective taxes we contribute to build the Lagos of our dreams.

Self-sufficiency through tax compliance has certainly proven more reliable than depending on oil revenues which are proving increasingly unstable, as the key to building our prosperity. This, ladies and gentlemen, we must continue and improve upon.

Our State has become better for it. We are receiving global attention and attracting international interest for what the people of Lagos have done with their taxes.

In major international media, the curiosity about Lagos and investment interest is to learn how Lagos is surviving on taxes and reducing dependence on oil.

I could only respond by acknowledging the tremendous goodwill and support you have given to our Government and it is that support and your most invaluable trust that I now seek more of today, so that we can improve our service delivery to you.

At this moment, the implementation of the minimum wage is costing your Government about N2 Billion extra every month.

We have grown in our work force in order to respond to the demand for jobs and the need to service a growing population. We are at a stage when we cannot afford to employ more, even as we remain committed not to lay off workers as the private sector has done.

But N2 Billion extra every month, means that we are annually short of about N24 Billion which we could have used to provide more water, schools, hospitals, drugs, roads, security and many other social services.

The politically motivated resistance to the commencement of toll collection on the Eti-Osa, Lekki-Epe Expressway means that your Government had to part with N4 Billion for year 2011 which could have been used to provide more schools, inner roads, hospitals and social needs in Eti-Osa, Ibeju-Lekki and Epe areas.

This decision was sensible and necessary in order to maintain much needed and growing investor confidence in the Lagos economy, in order to maintain our credit rating and reduce our credit risk. It was critical to maintaining the stream of emerging investments required to create business opportunity and jobs for young people.

Regrettably however, our financial realities cannot sustain such funding to the detriment of other developments that are crying out for funding in other parts of the State.

It is undeniable that Property values have risen in that area because of the road work on Eti-Osa-Lekki-EpeExpressway; we have also recently completed the Falomo ramp. It is only fair that the investors begin to collect their toll.

I accordingly lift the suspension on toll collection and leave the concessionaire to announce the date for commencement of tolling.

Let me re-call your attention to the economic and financial realities that prevailed in December 2007 when I presented the first full budget of my tenure as your newly elected Governor, in the same way that I now present our first full budget for this new term.

In 2007, the exchange rate was N125.00 to United States $1, today it is N162.00 to US$.

In 2007, the local bank lending rate hovered around 17%, today it is an average of 19%.

In 2007, cement cost N1,450.00 per bag; bitumen for road construction was N75,000.00 per ton; diesel sold at N120.00per liter.

Today cement costsN1,800.00; bitumen costsN158,000.00 per ton; diesel now sells at N150.00.

The truth therefore is that we need to find more money to bridge this gap, if we are to keep people at work, secure our State, build the houses we promised, implement the programme for construction of inner roads and keep the Lagos economy on the path of sustained growth.

As the leader of Government, I have already began to lead the crusade to cut costs.

We also plan to strategically reduce our budget deficit towards 2015 and keep a vibrant economy.

This is possible, but it will not be easy. We must all sacrifice in order to benefit.

We cannot cut personnel costs such as wages and allowances or pension contributions and gratuity; but we have reduced overhead costs, trimming the number of trainings, travel costs, managing the procurement of generators and vehicles to reduce diesel and petrol costs but even these can only go that far, because we need to keep the Police, LASTMA, and Waste Management trucks on the road daily to manage security, traffic and waste collection.

We have commissioned a 10 mega watt IPP on Lagos Island which now services the State House Marina, General Hospital Lagos, Island Maternity Lagos, the Lagos High Court and Igbosere Magistrate Court in consequence of which these facilities now enjoy 24 hour electricity for less; because our costsfor powering these facilities outside of PHCN have reduced by about 40%.

When I announced these necessary cost cutting measures including the stoppage of new television sets and DSTV subscription in offices, one newspaper headline screamed on its front page "Fashola introduces austerity measures in Lagos".

Distinguished ladies and gentlemen, this to me is the hallmark of sensitive and responsible governance that puts the people and service delivery first. This is why you chose the Action Congress of Nigeria ahead of all other parties.

Today, I lay before you, in the spirit of our democratic practice, the choices open to us, if we are to continue to progress.

We plan to build more houses, build Mile 12 – Ikorodu Road, build OdoIyaAlaro waste water treatment plant, Adiyan Phase II Water Works, several kilometers of inner roads in Aguda, Ijeshatedo, Mushin, Agege, Ikorodu Town, Eti-Osa, Somolu, OrileIganmu, Alimosho, Victoria Island, Ikoyi, Apapa and many other parts of Lagos.

These plans can only come to life with funding. We are borrowing within our statutory approvals to fund some of these projects, but loans, must be paid if we are to remain credit worthy.

We therefore need to earn every income due to our State and put these resources to work, in the most efficient manner.

One of the decisions that I have approved is the recommendation to stop granting waivers to those who seek to acquire land. We lose too much man hours processing requests for waivers for land and also lose revenues that the State would have earned.

The truth is that we have not reviewed the cost of our land since 2008 and we will retain these costs to make them affordable.

However, we cannot continue to subsidize the upper income class to the detriment of the lower income class. All over the world today, the privileged class is leading the sacrifice for change to secure their economies from collapse.

It is not because they are charitable. It is because they realize that their wealth depends on the existence and survival of the lower income group to earn a living to patronize the services that their companies provide and buy the goods they manufacture.

This is the kind of equitable wealth redistribution that your Government is recommending to reduce the income gap between the rich and the poor.

Unfortunately, but necessarily, we must implement a review in the annual property rates under the Land Use Charge.

The reasons are simple. The massive infrastructural renewal in Yaba, Apapa, Ikoyi, Victoria Island, Lekki, Iba, Surulere, Mushin and other parts of Lagos has increased the property values and rental income to property owners in this State.

The rate of the Land Use Charge has remained unchanged since 2002 and although it was agreed that the rate will be increased in 2009, but at the peak of the global financial crises, we refrained from doing so until now.

So for 9 (Nine) years we have kept the same rate of Land Use Charge without review even though all the variables of the economy, inflation, interest, and exchange rates have increased.

I must now necessarily announce an increase of 0.05% in the rate of Land Use Charge effective from 1st January 2012.

Although the revenues we expect from this increase will not be sufficient to meet all our costs, it will be useful and necessary if we must continue to fund the new minimum wage, security, education, healthcare, housing, waste management and inner city and neighborhood road repairs and construction without depending on the diminishing and at best unstable oil prices.

As we exercise these choices, we are mindful of the genuine aspirations and desires of our citizens to own their houses and transact businesses with their properties.

In order to continue to stimulate and facilitate this critical economic exchange, I have also approved the recommendation to reduce the rate of Governor's Consent by 2%.

Although the rates for Stamp Duties and Registration remain the same, the gross costs for perfecting title now stands reduced from a total of 15% to a total of 13%.

And we have also pegged the total cost of mortgages for residential purposes only to a gross sum of 1% of the value of the property.

Similarly, in respect of the regularization of title to Government land, which some of our citizens built on without prior allocation or approval, I have approved the reduction of regularization costs as follows:

a. The removal of the E-Transaction fee, which is 10% of the assessment; and

b. The reduction of the penal fee from 100% to 50%.

This policy will be in effect only for the Year 2012, as we will no longer look kindly to encroachment of Government land.

Of course we are reviewing the costs and processes of obtaining building permit with a view to possible reduction of costs and expeditious processing of approvals in certain areas of the State to act as additional stimulus for real estate development and economic growth and increased job opportunities in the State.

Quite apart from the foregoing, we are all aware of the huge global environmental challenges that nations across the world now face.

We have taken too much from our environment that it is now seemingly exacting a revenge. Rich and poor nations suffer alike without discrimination.

On July 10 this year, we got our share of unusual and violent weather, when our State was subjected to a most unusual storm that produced rainfall that lasted about 16 hours.

It delivered 340mm of rain in only one day. This is about half of the 700mm of rainfall in Holland for one year.

The uninformed and some cynics quickly rose to condemn us. Some claimed that there was no drainage in Lagos. Some political jobbers subjected themselves to public ridicule and odium when they called for my resignation.

But when the rain which started at 6am ended 10pm, the water began to recede. By 7am on Monday morning, transportation services and business were up and running.

The clean-up commenced in earnest, displaced people were attended to even though sadly and painfully some lives had been lost by those who lived close to the rivers and canal banks and who remained there inspite of our warnings and appeals 3 months before the event.

We are saddened by the avoidable loss of lives and pray for repose of the souls of the dead while we extend condolences to the bereaved, and the victims of the tragedy.

But the questionto ask is where did all the flood water go, if it is true as they claim that there is no drainage in Lagos?

The truth is that there is a reliable drainage system in Lagos, but like everything in a State with a growing population, there is need to increase and improve on it, to cope with the demands of an increasing population and new emerging settlements.

We must come to terms with the fact that global warming and consequent flooding have become a reality of modern human life, especially for people who are surrounded by water like those of us in Lagos.

New York State and city, inspite of its relative advanced infrastructure suffered a similar storm and rainfall popularly called Irene for 10 hours and it left in its wake death and destruction. Transport services did not return until over 24 hours after.

Taiwan and China were also afflicted by a storm called Nanmadol that destroyed lives and property around the same time as Ibadan in South West Nigeria was sadly visited. Even after suffering a devastating tsunami early in the year, Japan was again visited by a deadly typhoon calledTalasthat sadly damaged property and claimed lives.

In September of 2011, 132 (One Hundred and Thirty Two) lives were lost to flooding in Pakistan, 9 (Nine) people died in flood that hit Accra in October, while 365 (Three Hundred and Sixty Five) people were killed in Bangkok floods in Thailand and the devastation to lives and property is still under evaluation in the floods that took over almost one-third of the Philippines in October 2011.

The floods that took over Thailand since August have not receded, and only last week many parts of Italy were severely flooded.

We are building more drains and expanding existing ones in Arigbanla in Agege, in Somolu, Orile, Alaka, BabsAnimashaun, Itire to Ilasamaja and other parts of Lagos.

In Lekki area we are building 11 (eleven) new concrete storm channels and expanding existing ones in Ikoyi. We have completed the famous Idi Araba Canal which explains why there was no major devastation in this once popular flood prone area of Lagos.

This shows that if we have the resources we can solve the problems.

Property owners will be the better for it. They will benefit enormously as we build more drains that will protect their wealth and property assets, from the threat of flood, caused by global warming.

Let me state for the avoidance of doubt that our prosperity depends on getting more employed people to pay their taxes and contribute to our commonwealth. Voluntary compliance will be of great assistance to us.

This is therefore not about increasing taxes but about ensuring that any eligible tax payer contributes; because benefits from the public service will increasingly be dependent on our tax compliance status.

Let me also publicly implore our tax administrators, collectors and operators to demonstrate the highest level of civility and courtesy in the administration of our tax laws and policies.

We will also continue to pursue public private partnerships as viable means of getting private sector funding to work in the public sector.

We see the future for jobs in a knowledge based economy,with a rich mixture of public and private partnerships.

We also see enormous possibilities in the development of the housing sector and tourism which requires significant investment and pro-active policies before the benefits can mature.

We are convinced of the possibilities if the attitude is right and enabling.

Ladies and gentlemen, my review of the performance of Year 2011 Budget and the current economic realities will be incomplete if I do not report that inspite of the difficult environment in which we now operate, our budget performance at the end of the third quarter was 66% which was an improvement over the second quarter performance of 57%.

This improvement was as a result of some of the policies and cost-cutting creative measures we have deployed and they demonstrate very clearly that the only thing that stands in our way and a higher budgetary performance is the availability of funds.

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