If the South West budget were to be shared

Budgets are key indicators of citizen welfare if efficiently implemented. So as part of our analysis of the economies of the states of the federation including Abuja, one key indicator we have looked at is their expenditure plans for 2013. This has been examined across states as well as on regional basis.

In this excerpt from the forthcoming publication, we look at the expenditure plans of the South West states per household and per head with data taken from the publication. Though the budget is not physically distributed per head to the citizens, globally per head and per household analysis of budgets could be a good indicator of the standards of living of inhabitants in a state, especially if you are measuring economic output. For expenditure, per capita analysis could be a good indicator of tax burden where the state’s revenue comes mainly from taxes.

In Nigeria, this is not the case, because for most states, revenue comes from statutory distribution from the federation account rather than from internal taxes. What this means is that high expenditure plans per head is more of an indicator of states’ capacity to provide governance services, like development of infrastructure and welfare, than an indication of tax burden.

Our analysis shows that Lagos State has the highest proposed budget in the South-West in 2013 – N499.91 billion. The state budget is made up of 54 per cent capital and 46 per cent recurrent. Ogun State government has the next highest budget in the region – N215 billion. Lagos State’s budget comes to an average of N54,765 per head. Ogun State, with the second highest budget in the region, has a marginally higher budget per head of N57,316. The average budget per head in the South-West is N47,091.79. The higher the budget per person, the more headroom that government has to introduce some welfare policies without having to sacrifice the development of critical infrastructure.

Lower budget per head also means that the government needs to work to expand its revenue generation capacity to deliver on its development needs. This indicator can also be used to measure how much headroom a state has to borrow from the capital markets. The higher the budget per person and household, the higher the capacity of the state to seek borrowed funds from the capital market as interest payments may be easier to absorb without significant impact on the welfare of citizens of the state.

Ogun State, for example, has the highest budget per person and per household. We believe this gives the state better headroom to pursue development initiatives than its neighbouring states. In the long run, this could have significant impact on economic growth rate in Ogun State ahead of neighbouring states in the South-West.

A simpler way to look at per capita budget analysis is to ask: if the budget of the South West states were to be shared among the indigenes of each of the states, which state will have the richest indigenes? The bar chart below shows that Ogun State will have the richest citizens, followed by Lagos State, and then State of Osun. Oyo State indigenes would be the poorest. They would have less than half what the citizens of Ogun State will have to spend, having the lowest budget per head in the South West. On the average, the Oyo State indigene will have just N78 per day to spend compared to N157 per day that will be available for the indigene of Ogun State if their respective state budgets were to be shared. For Fast Moving Consumer Goods companies (FCMGs), this analysis could have implications on which markets they target and their pricing strategies in those markets.

For states with low budget per head, there will be need to device strategies to boost revenues or else they will have to struggle with providing the necessary infrastructure needed for their state economies to thrive even after discounting for inefficiencies that may arise in the budget implementation process.

Our analysis cuts across the 36 states, using several indicators to look at the strength of the economies of different states across the federation including estimated economic output figures for each of the states.

The chart below shows the average budget per person for states in the South-West.

Note: If you want analysis or data on any company or any particular sector of the Nigerian economy or industry or have any other queries that BusinessDay Research Unit can help you with, kindly send a mail to research@s19080.p615.sites.pressdns.com/en or call 08185193932. We can also help you with your confidential market surveys and competition analysis at a cost. 

Editor, BusinessDay Research Unit

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