ICT improved Osun IGR to N700m monthly – Bolorunduro

Dr. Wale Bolorunduro is the Commissioner for Finance, Budget and Economic Planning in Osun State. He was a banker before his appointment and in this interview with Correspondent, Gbenga Faturoti, he speaks on budget performance both at the state and federal levels and the preparation of the government towards massive voluntary retirement of state public servants. Excerpts:

What implications will non-use of coins have on the Nigerian economy?

The Central Bank of Nigeria (CBN) would need to do a lot of campaign because there is apathy. It has become a cultural barrier as people don’t want to carry coins because of their weights. I am not sure that the CBN’s Governor is aware of the possibility and how difficult it is to get people to start carrying coins. So it is going to be difficult. So if there is a campaign, public awareness forum to tell people it is not derogatory to introduce it, that we need to do it and that it is cheaper to maintain, and so there may be change of mind to use of coins. I believe there would be some challenges if coins are introduced.

What is your assessment of the Nigerian economy and 2012 budget implementation? 

The first and second quarter reports that have been released by the Ministry of Finance and CBN show that the economy is growing about six close to seven per cent and that is significant if you look at that data considering the fact that the American economy and Euro have slowed down apart from China, so we may say that is remarkable. If we are doing seven per cent growth in GDP, it is good, but the fact is: Does it really translate? This is the question we should ask ourselves. With the national budget performance and the release of funds, we have a long way to go in term of government delivery of it promises at the federal level. In terms of what accrued to states from the Federation Account, I think basically there have been challenges in the sense that the allocation is delayed but it still comes. So that is impacting the states and if we look at the 2012 budget, the price of crude oil that we used as a benchmark in the budget was $72 against $75 in 2011, so the money accruing to the Federation Account for the sharing of the three-tier government is lower this year and because it is lower this year, the amount states are taking home is lower by an average of N400million compared to last year. Now apart from that, because the 2011 budget was used to pay states up till April this year, there was an over-payment which the Federal Government is deducting and paying back to the federation, so states are having reduction in revenue to the tune of N500milion and N600million compared to what they took last year. So I think that is the passion on the revenue of the states generally. So the ability of the states to manage their purse now depends on your buffer. What kind of saving did you have before? What is your level of internally generated revenue (IGR)? Also remember that when the minimum wage was done last year, the Federal Government tried to compile figures to help states but nothing came in 2012 budget to reduce the impact of that on the states. So these things are putting burden on states and their ability to provide social obligations. But fortunately for us in Osun State, in 2010 when Governor Rauf Aregbesola came, he started what is called a conservative approach to funding and he ensured we kept certain revenue especially extraordinary revenue. Extraordinary revenue is revenue you don’t get often like excess crude and so on. He makes sure that we keep a buffer and keeping that buffer, it helps us a lot in the sense that we now have something that places us at a position we can leverage and not only that, shows our creditors that we are capable of paying and that has helped us to be able to provide immediate needs for the state in terms of salaries and to also embark on some projects. So, that is how we have weathered the storm in addition to the fact that we have increased our IGR. With increase in IGR, we shall be able to keep going in providing the services to our people.

There is an allegation that the present administration in Osun State has mortgaged the future of the state through the N25billion credit line to refinance the N18.3billion loan obtained by the previous administration.As a financial expert, how do you view this and what is the rationale for the action?

We have explained this to journalists and we need you people to get the message across to the people. It is cynical and on the opposition. It is like you causing problem and pointing accusing finger to the other person. We don’t even need to borrow if not for the fact that previous administration had borrowed N18.3billion which is the genesis of financial re-engineering and repair that we must do. We have to do financial repair of the “knocked tokunbo engine” that was passed on to us. When we came in, there was N18.3billion staring at us and we were paying N620million every month which is more that 30 per cent of our revenue. The regulatory position of any sub-national is that your repayment must not be more than 30 per cent. That is global international standard. It means if you were paying above 30 per cent of your revenue as monthly repayment, you handed over such loan to the next government. If the court had not sacked that illegal administration of Oyinlola, they would have had less than one year to go. So they would have paid only N4billion if they were paying, but  what happened in a situation where they were not able to pay because they were borrowing N1billion every month to pay salaries that were inherited? We inherited debt of N18.3billion; we inherited a government treasury that could not fulfil social obligations and salaries. Why are people asking us: where is the money? Where did you get the money you are now using to do all these projects? But the engine had completely knocked. They thought we would not be able to do anything about it, so the bankers offered us a credit line. You know you already owed N18.3billion; you have some other loan obligations that are falling along, our total loan then was N21billion. So the First Bank offered us a credit line, when you have a line and you have not taken it, it is not a loan. So we had N25billion line, but we only took N8.6billion to repair that damage, what we did was that we paid down the N18.3billion loan Oyinlola took to N8.6billion. So we owed the bank N8.6billion only, out of the N25billion credit line, we now drew N8.6billion which was what we owed. So we did not owe N25billion. It is relay race. The person that started the race did so poorly and handed the baton over to the next person. That person would have to run fast with more energy to take it to the third person, so the N18.3billion the PDP took was short enough to poorly manage, so we had to extend it by selling it to the lender that could give us five, six years money which was that N25billion credit line they took. So we don’t have any N25billion loan. It is N8.6billion and this is what we are repairing into a bond, so the bond is longer, the interest rate is fixed and it will make it easy for the state government to pay. So it is like a race. So if there is any problem in the economy, I don’t get affected. So that is what we are doing. It is re-engineering; we don’t have N25billion and then N30billion. No. What we have is N8.6billion and that N8.6billion will snowball into the bond. So the N30billion bond that I am going to take would to me be like N30billion minus N8.6billion. So the N22bilion would now be available for us to do projects.

Osun State has been turned into a construction site with contractors mandated to finance various projects and to be repaid based on performance. What magic will the current administration adopt to settle all these financial obligations?

You see like I told you, we saved funds and it has seriously helped. For the Gbongan-Orile-Owu Road, we mobilised the contractor from our conservation funds. We also mobilised the contractor handling Osogbo- Kwara boundary Road and we are doing Ilesa and Osogbo township roads and others from our own funds. Now we have contractor finance. It comes from your capability and credibility that we are credit-worthy to strength the repayment and not only that, to also bring in bankers to assure contractors that if they bring in their promisory notes, they would pay them and look forward to the bank to pay them later. What we are trying to do is to build the infrastructure, unfortunately in economics, you must build the infrastructure first before revenue comes in. So that is what we are doing, we are creating even opportunity for the financing, to also participate as a contractor and stop using our own savings, stop or defer the payment system using our credibility and the credibility of the governor. I also talk about creating opportunities for banks and contractors to participate in the economy of Osun. So those are the things that we need to do first. At the same time, we talked about the efforts we are making to our IGR. So I don’t think there is a problem in what we are doing. We know what we are doing and we know how we are going to fulfil it. We are not just building and if we want to do that, we would have done it at the same time, but we are just facing it and prioritising it and our account is well-managed.

What is the state of IGR?

Our IGR is above N600million because there was a month we came close to N700million. So it is between N600m and N700m monthly. But I think we should look at where we are coming from, we should look at what we are doing. The governor recently got ICT Governor of the Year. One of the things he was able to do to IGR was the use of ICT to automate the process of collections. Rather than people paying to clearing clerks, who take it, who bank it and who take it to the bank, everybody pays straight to the bank. And not only paying to the bank, there is also a system of summing up the total money accruing to the state. We can as well check who has paid and who has not paid. So in the long run, we have the payers’ history and their records of history to the system. When they are fallen in terms of payment, you know, and not only that the system generates an automated revenue receipt and once you have this automated revenue receipt, it is evident that you can take services, that you have performed your civil obligations and then you are entitled to the services. So it is foolproof and confirmed. Those are the ICT improvement that we have brought into it. By so doing, we have blocked the leakages. We have not blocked all the leakages, I must confess, we are improving and we want to improve on blockages. If we attain say 80 per cent of blockages, you will see an improvement. If the state has the IGR covering up to 50 per cent of salaries, we get independence from Federal Allocation. So that is the strategy in the short run.

Is it true that the state government is planning to introduce heavy tax in the state?

I don’t like to say this because severally, we have said it before. We don’t believe you should just jump on people without being responsible. Government requires doing certain things. One of the schools of thought says that one of the roles of government is to provide support for the less-privileged and the entrepreneurs that need assistance, the poor that cannot afford schools and providing shelter and so on. Aregbesola has been able to improve the standard of living and empower people so that they can as well afford to pay taxes. That is what we are doing now. We are impressed that people have benefitted from the poultry scheme on their own and they are willing to pay tax from their profit. So we believe that if we can ask people to fulfil their civic responsibility, it will be without stress. If you look at it, is there anybody in Osun State that will say he has not benefitted? If you say you have not, it means you don’t have a child in school. It means your house is not near a river that has been dredged. It also means you are not a driver that we have supported with a new vehicle. Or you don’t have an unemployed graduate in your family that we have employed, it means you don’t have an elderly that is helpless that has been taken on our ‘O’ Elderly. Or it means you don’t have a farmer in your family that has benefitted from taking land and micro credit. So you can look at it and there is no way you can say you have not benefitted as citizen of Osun. It is after that that it is proper for government to ask you to pay tax. Our informal sector which is Okada riders (motorcycle taxi operators), taxi drivers, hair dressers and others would be appropriately consulted and assessed. So they would be part of that decision. We are not just going to jump on them. It is going to be on the economic reality of the state.

What is the state of performance and implementation of this year’s budget in the state?

The budget is performing very well. We are making sure that efforts are yielding results because in terms of revenue, we have done above average and in terms of our expenditure, we have done above 50 per cent also. Compared to the national average, even compared to Lagos or other states in the Southwest, we have made remarkable achievements.

Following the introduction of contributory pension scheme in the state, a large number of civil servants have signified  plans to opt out of the system. How prepared is the state government to settle the retirement benefits and their replacement?

We need to make this very clear that the FG introduced a pension scheme called ‘contributory pension’ in 2004 and said that once it began, you could either join or leave after three years. Since when it started, Osun joined in January 2010. So by 2012, ‘compulsory’ means they must leave. The state did not join the scheme under this administration, it joined under Oyinlola and labour leaders and employees agreed that they would either join or they would leave. It has nothing to do with us. Now the issues is this, it means we would be paying pension, their pension is like their salaries, so the impact on the cash flow is the same when they exit but where it is going to hit us is when they would want to collect their gratuity. We believe that these are citizens of Osun. And they are going to retire into Osun. It is their entitlement and we must pay them. We are already planning and we are already providing for it and I believe we would be able to pay them. I believe you are aware that there was 142 per cent pension arrears which we have taken upon ourselves to pay. We give respect to the citizens of the state and we are in the process of ensuring that we don’t pay ghost pensioners. We run the system, we would use our data matrix because we did biometric of the pensioners so we are using that biometric to pay the funding of the pensioners. We have started the process, we would pay 15 per cent first and we would pay others on monthly basis. I think in the same manner, we would take the responsibility of the gratuity of those people that are leaving. In terms of replacement, efforts are being made to begin employment to replace them and I am very sure that we would have fresh blood.

On the implication on the state of finance, yes there would be, but the people that are coming in are not coming in at the same level. They are going to learn and not everybody is leaving. So there would be impact but it is not going to be too significant.

Is there any assurance for the people of the state?

My words of encouragement to the people of Osun is that they are privileged to have Aregbesola who is working day and night, he hardly sleeps, I now know why he said anybody that is above 55years would not be in his cabinet. We are working hard to ensure that we improve the quality of life in Osun. Osun was not the same with what we experienced in those days. We noticed the commercial activities in Osogbo have collapsed; now we are re-activating them. So the people of Osun should thank God for this opportunity to the glory of Osun and that is what the governor is working on. The administration will bring lots of opportunity to the state both in terms of commerce and culture which is the mainstay of the economy of the state. The on-going construction works across the state are creating jobs for people and that is why we are mindful of the domestic economy of Osun and the citizens of the state.