The Kano Budget-2012

7/31/2019 The Kano Budget-2012

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Kano State Budget of Economic Restoration and Development 2012

Kano State Government Budget 2012

Budget of Economic Restoration and Development

Background- The Kano economy:

Nigerias second largest non-oil sub-national economy has suffered de-industrialization

and steady decline with loss of competitiveness within the national economy. Industrial

production and sustained private sector growth have been constrained by high

production costs, cumbersome regulatory environment, general insecurity and

occasional communal strife. Today, approximately 70% of the States medium and

large-scale manufacturing establishments are non-operational, while the rest operate

at less than 40% capacity1. This has resulted in high rates of unemployment, depressed

incomes and low rates of economic growth. The unemployment rate, at nearly 26%2

, issignificantly above the national average. Youth unemployment [estimated at 67%!]3 is

endemic- leading to youth restiveness and negative social attitudes and practices, such

as indolence, street begging and indiscipline. Access to basic services-education, health

and water supply-is severely constrained and the poverty situation is particularly

worrisome with nearly 8 of the States 12 million people living below the poverty line. 4

It is the view of many analysts that Kano has fallen from grace to grass.

Determined to pursue policies and programmes that will transform our State

economically, socially and politically5

, HE the Governor presented the 2012 Budget ofEconomic Restoration and Development to the Kano State House of Assembly for

appropriation. Budget 2012 is intended to lay a solid, credible foundation for the

sustainable economic growth and development of Kano State and ultimately,

RESTORING the leadership position of the state in all sectors particularly

COMMERCE, INDUSTRY, EDUCATION, AGRICULTURE AND INFRASTRUCTURE6. It is as

much about the future as it is about the past: implicitly, the budget is viewed by the

administration as one of continuity and consolidation and is intended to build on

the projects, programmes and achievements of his administration from 1999-20037.

1Unpublished report of the Manufacturers Association of Nigeria, Sharada and Bompai Branches

2 NBS: Manpower Stock and Employment Survey 20103Daily Trust Newspaper Tuesday 7 2012 quoting the CBN Governor4

Poverty Incidence was approx 61 [2004]. New figures are: Relative 72.5, $ per day 66 and Absolute 65.6. See NBSNigeria Poverty Profile5 Budget Speech by the Governor6 Budget speech by the governor7 The Governor devoted the first part of the budget presentation to the SHoA to review of theactivities of his administration in 1999-2003.

1 Budget Analysis commissioned by CDD. July 2012


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Table 1.0 Summary of 2012 BudgetItem 2012 appropriation 2011 appropriation Variance

Budget 221.6 124.4 [revised]66.85 [actual]

78%

recurrent 72.15 58.9 23%

capital149.47 65.5 127.9%

The budget is composed of a recurrent expenditure of N72.15 billion and capital

expenditure of N149.47 billion representing, respectively 33% and 67% of total

estimates. It is thus overwhelmingly developmental with an attractive capital-budget

ratio of 2:1-which, in the words of the Governor, underscores [our] desire to

emphasize capital development with a view to restore our lost economic glory and

to put Kano back on the path to prosperity.. The capital budget exceeds the 2011estimates of capital expenditure by N84 billion or 127.9% It is similarly in excess of the

combined capital spending in 7 budget years- 2003-2009 [approx N129 b] by N20.b or

115.5%! The major beneficiaries are Land and Physical Planning [45.2%], Works and

Housing [11.0%], Education [8.8%], Budget and Planning [6.3%] and Agriculture [5.9%].

[see fig 2]



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In contrast, the increase in recurrent expenditure and its components is modest:

Recurrent expenditure exceeds 2011 estimates by N13.6b or 23%, overhead costs are

only N5b or 26% more while the wage bill is increased by N6.7b or 18%. With close to

50,000 employees in the service of the State, personnel costs remain a key issue,

consuming 20% of total budget and nearly 60% of recurrent expenditure. In this fiscal

year, it is estimated that the State requires N3.6b monthly to pay its workers-although

IGR is less than N1.5 billion per month.

The main recurrent cost centers are the Govt. house/Deputy Govs office, office ofSSG, OHoS, SHoA which together are responsible for 23% of total recurrent expenditure

and 41% of total overhead costs! Others are Education 30.8%, Health 15% and Finance6.2%.



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To finance these, the State Government forecasts total revenue [including grants andloans] of approximately N221.6-matching therefore planned expenditure. Significant

contributions are expected from the Federation Account-including VAT [N72.44 billion



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and IGR [N46.4 b or approximately 21%]. The bulk [approx 62%] of the budget will be

financed with recurrent revenues which are projected to increase by nearly N33 billion

or 31% over 2011. IGR is a key component of recurrent revenues and is envisaged to

increase by 164% relative to 2011.

Table 2: Kano State Government: Sources of Funding Budget 2012

Item A

mount

% of revenue

Revenue Sources Amount % share in total revenue

Federation Account Plus VAT N72,438,611,427 32.7%

Internally Generated Revenue N46,360,422,861 20.9%

Other Receipts N19,698,000,000 8.9%

Total Recurrent Revenue N138,497,034,288 62.5%

Treasury Opening Balance N20,500,000,000 9.2%

Loans and Grants N57,766,715,827 26.1%

Miscellaneous N5,355,581,000 2.2%

Total capital Receipts N83,622,296,827 37.5%

Total Revenue N221,619,331,115 100%

The state makes one other generous assumption with regards to revenue:

Capital receipts [made up of largely of grants and loans will go up by N65b [or

360%!] from N18b in 2011 to approximately N84b in 2012. Specifically, it is envisaged

that grants-to the tune of N50 billion-will be the third largest contributor [22.5%] tobudget finance-after the Federation Account and IGR. It is similarly envisaged that

Loans to the tune of N8 billion or approx 4% of revenue will be accessed this fiscal

year. It is unclear why the two revenue sources suddenly assume prominence this fiscal

year or where the grants and loans are coming from. The States aversion to external

loan is well known: indeed, while signing the budget bill, the governor did emphasize

that government will not borrow a Kobo to implement its budget!



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One highly impressive feature of budget 2012 is that 9% of total revenue [N20.5b] are

savings from 2011 recurrent expenditure cuts- on account of which the governor was

voted as the most prudent by the Revenue Mobilization and Fiscal Commission.

Identifying Budget Priorities:

The stated objective of budget 2012 is to restore the leadership position of ALL

sectors-but especially Commerce, Industry, Education, Agriculture and

Infrastructure. The goals and strategies which are the critical vehicle to drive the

budget 2012 were identified as follows:

Revenue Generation

Infrastructure

Human Capital Development Civil service reforms

Urban beautification

Enhancement of welfare of teachers

Development of community based technical and vocational education

Food security

Water provision



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health care

It appears that budget allocations are made in line with these strategic goals: the

major beneficiaries of the budget-with combined budgetary allocations of

approximately N194 billion or 87%- are shown in table 3 and fig 7 below:

Table 3: budget 2012 top ten sectorsMDA/Sector Allocation [Naira, billion] Share in budget

Land and Physical Planning 69 b 31%Education 35.5 b 15.9%Works and Housing 17.9 b 8%Health 17.8b 8%Agriculture 11.3b 5%General Admin 7.5b 3.4%Rural and Community Dev 6.98 b 3.1%

Environment 3,74b 1.7%Water Resources 3.11b 1.4%

Based on this, government priorities appear to be:



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Infrastructure development [land &physical planning and works &housing]-with

total provision of N86.88 billion or 39% of budget.

Human Capital Development [education and health] with provision of N53.7b or

24% of budget

Real Sector Development [Agriculture & rural development and Commerce]:provision of N19.6 b or 8.8% a distant third

Are these newpriorities of a new regime? On balance it appears that Government

priorities have not changed radically over the years. Budget 2012 however makes

provision of infrastructure more visible. This can be seen from the following:

o In 2o11, the 5 top priority sectors, based on actual budget spending [or budget

releases]were: education, health, rural development, budget &planning and

infrastructure

o With the exception of the rural development sector, all of these remain among

the top 5 priority sectors in 2012.

o However:

In 2011 infrastructure with only 5.5% of the budget lagged behind

education which had 29%, health 15% and rural development 11%



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In 2012 although education and health receive more in absolute terms,

their share in total budget drops to approximately 16% [from 29% in 2011]

and 8% [from 15% in 2011] respectively. On the other hand, the share of

infrastructure in total budget shoots up to 39.3% from 5.5%

Similarly the education sectors capital estimates in 2012 [8.8% of total]

fall short of its capital spending [13.2% of total] in 2011.

Table 4a: priority sectors 2011 [based on budget estimates]

Sector Budget estimates [Nbillion]

% of state budget Rank

education 19.87 29.7 1Health 9.90 14.8 2Rural Dev. 7.35 10.99 3Budget and Planning 4.16 6.2 4Infrastructure 3.65 5.5 5

Rural and community development received the highest capital spending

[33.33%] in 2011. In 2012 the sector seems to have fallen out of favor: its

capital allocation of N6.98b is less than 5% of capital budget

Agricultural sector does not feature among the top five priority sectors in

2011 or 2012-although it continues to retain handsome allocation and

share of the budget

Table 4b Priority sectors 2011 [based on capital expenditure releases]Sector Capital allocation [N, billion] % share in total capital budget Rank

Rural and Comm. Dev 7.10 33.33 1Budget and Planning 3.76 17.60 2Education 2.81 13.19 3Gen Admin 1.75 8.2 4Works /infrastructure 1.73 8.11 5

Table 5: priority sectors budget 2012Sector Budget [N billion] % of state budget Rank

Infrastructure 87.0 39.3 1Education 35.5 15.9 2Health 17.9 8.1 3General admin 13.4 6.1 4Budget and planning 11.7 5.2 5



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For the period 2008-2011 the top priority sectors based on budget releases were

education, agriculture, infrastructure, health and rural development. [table 6]. Of

these five, three-infrastructure, education and health- remain top priorities in 2012

Table 6: priority sectors 2008-2011Priority sectors: 2008-2011

Allocation [Naira billion] Share in budget

Education 50.16 20%Agriculture 38.60 15.76%Infrastructure 36.40 14.88%Health 26.70 10.9%Rural Development 26.70 10.9%

The Social Development Sector: Education, Health and Water Resources

Kano State does not appear to have any coherent and clearly spelt out social policy.

The combined allocations to the social development sectors are by no means generous

and do not appear to be well targeted at specific problems. Education, Health and

Water Resources have a total of N57.9 billion or 26% of total budget of which

approximately 60% is recurrent. The three sectors contribute nearly 48% of state-wide

recurrent costs and only 17% of the capital budget.

Table 7: allocation to social development sectors

sector Recurrent exp

Capexp

Statebudget

Share inbudget

All sectors 72.15 149.6

221.60

-

Education 22.20 13.

1

35.3 15.9

% Basic andpost basic

Tertiary

14.907.30

9.23.9

0

24.111.2

10.9%5.1%

Health 10.60 9. 17.80 8.0



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2 %Water resources 1.69 3.11 4.8 2.2

%Three sectors 34.49 25.

41

57.9 26.1

%

Education: education has been a most favored sector over the years: from 2008-

2011 the sector received approximately N50b or 20% of all expenditure- putting it ahead

of all other sectors. As fig 9 shows, budget estimates and actual spending show upward

trends since 2008-with only a dip in actual spending in 2009.

The sectors current provision of N35.5 billion [nearly 16% of total budget] exceeds 2011

estimates by approximately N8 b or 28%, 2010 estimates by N16b or 76% and theestimates for the period 2003-2007 by approx N4 b or 13%. The basic and post-basic

education sub-sector receives N24 b or 68% while higher education gets N11.2 b

representing 32% of the education sector budget.

Governments stated objective is to address the apparent collapse of the

education sector but the budget contains no specific details of the numerous



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challenges and constrains it seeks to address. Nor does the budget provide details of its

strategy.or specific measurable targets and milestones. Governments focus seems to

be on the rehabilitation of dilapidated physical structures and the building of new

institutions. Its star programmes remain the provision of uniforms to and feeding of

primary school pupils.

Table 8: education sector major projects 2012

Programme Allocation Remarks

Rehabilitation of existingstructures, purchase offurniture and instructionmaterials

N2,000,000,000 6% of sector budget /15%of capital budget

Establishment of additional

tertiary institutions-including theNW University and Public

Health University

N1,500,000,000 17.6% of capital budget

Establishment of new secondary

schools

N900,000,000 6.9% of Capital Budget

Construction of new houses for

teachers


Establishment of new

community primary and

secondary schools


Provisions of uniforms to and

feeding of primary school pupils

Not indicated ..

Although education is a top priority, the shortcomings of the education sector budget

are numerous and include:

o The 2012 sector share in total budget [15.9%] is lower than that of

2011[22.21%], that of 2009 [19.6%] and 2010 [17.8%].

o Education sector share in budgets-except for 2011- has been consistently below

20% since 2003. It thus falls short of the recommended 26% needed to tackle the

myriad of challenges facing the sector

o Education sector budgets have traditionally been overwhelmingly recurrent.

Investment in education is very low and insufficient to tackle the challenges

of the sector. For example 63% of the 2012 sectors budget is recurrent

expenditure and 37% capital. Also while the sector contributes up to 31% of the



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total recurrent costs, only 9% of the capital expenditure goes to education.

Similarly:

Of the N50.16 b spent on education [2008-2011], N42.95 b equivalent to

86% was recurrent expenditure and only N7.203 b or 14% was investment

in education. That means for every naira spent on education only 14 kobo

represents capital investment

Capital investment of N7 billion over a 4-year period, amounts to an

average of less than N2 billion per annum and represents an Investment

per head of N583-assuming a population of 12 million

In the tertiary education sector, the sum of N15 billion has been expended

since 2008. Of this only approximately N900 m or 6% was invested. Thus



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Sc. And Tech Sch. 0% 0% 68.7%University of Tech - - 1.4%Kano Polytechnic - - 0%College of Educ. - - 26%Aminu Kano

College

- - 0%

Thus budget performance index varies from 0% to approximately 69%. In the majority ofcases, the index is abysmally low.

Health: Like education, the health sector in Kano is bedeviled by a myriad of challenges

and constraints: Inadequate coverage-[estimated at significantly less than 60% for

both urban and rural communities and perhaps less than 40% for rural communities and

urban poor]; dysfunctional, unreliable and inadequate equipment and materials,

shortages of health care administrators including doctors, nurses and midwives;

inappropriate orientation towards curative rather than preventive sources ofdiseases etc.

Here too, the budget sets no targets or milestones and seems to focus on infrastructure

rehabilitation and in addressing the problem of shortage of critical equipment in

hospitals and other health facilities 12

The sector is allocated approximately N18 b, of which N11b or 60% is recurrent, and

N7b or 40% capital. The sector allocation represents 8% of total estimates, about 15% of

state-wide recurrent and 5% capital expenditure. As previously indicated, the health

sector is, in terms of funds allocated, to be considered a priority sector.

Table 10: health sector key programmes budget 2012

Programme Allocation % of capital expenditure

General Rehab of selectedhospitals

N300,000,000 4.3%

Procurement of hospitalequipment

N500,000,000 7.1%

Establishment of three

new schools of Nursing

N500,000,000 7.1%

Construction of ICU atNassarawa Hosp

N250,000,000 3.6%

Renovation of AEU atMurtala Hosp

N50,000,000 0.7%

12 Budget speech of the Governor



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Other general features of the budget can be summarized as follows:

o Current estimates exceed 2011 by N6.6b or 59% and exceed 2010 by N6.7b or

nearly 60%. However, 2012 sector share in budget at 8% falls below 2011 and

2010 shares at 14.8% and 14.9% respectively

o Budget estimates and releases show generally an upward trend-with a dip in

actual spending in 2009

o Health sector share in total budget similarly shows upward trend since 2008:

6.2% [2008], 9.7% [2009], 14.9% [2010] and 14.8% [2011]

o Budget performance has been has been very encouraging over the years. The

best performance recorded was in 2008 with a performance index of 93% , and

the worst performance was in 2009 with an index of 48.6%



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o Investment in health sector is low: from 2008-2011 only N4.43 was invested.

This was equivalent to 16% of actual budget spending and represented an

investment per head of less than N400

Water Resources: The water project is said to be the most expensive single

undertaking ever embarked upon by successive regimes in the State. Water sector

share in state-wide capital expenditure has varied from 2.4% in 2010 to 10.6%% in 2009.

From 2008-2011 capital investment in the water sector was approximately N7b or 6% of

state-wide capital investment. [This was equivalent to the capital spending on

education and higher than the investment in the health sector over the same period].

Government had committed several billions of Naira-which do not seem to be reflected

in the budgets- for the rehabilitation of the Tamburawa Water Works and for the

construction of another water treatment plant at Watari, in Bagwai Local Government

area.

Yet, today, the fastest growing industry in Kano is water vending: either in sachets as

pure water or in 10/25 liter cans. In the metropolis 75% of households are served

with borehole water by water vendors in 25 liter cans. So are schools and hospitals.

It is estimated that up to 40.7% of households rely on unprotected well as main source

of drinking water, and up to 5.1% on unprotected spring. 22.8% of households rely on

tube well/borehole and 4.1% on protected well as main source of water. Only

approximately 12.8% of households have access to improved sources of water piped in

to their house (2.8%) or in to their yard (1.5%) or from a nearby public

tap(8.5%)13.

Table 11: the water sector budget estimates and releases 2008-2011

item 2008 2009 2010 2011 total

Rec. Exp [N b] 1.52 1.47 1.40 1.98 6.37Cap. Exp [N b] 2.40 6.09 1.51 2.81 12.81Budget Estimates [N b] 3.92 7.56 2.91 4.79 19.18Actual spending [N b] 4.01 0.337 1.16 2.13 7.64

Of which: Cap expenditure 2.82 1.89 0.639 1.22 6.57Budget performance % 1.02% 4.5% 40% 44.50% 39.8%

131

NBS: survey of socio-economic conditions



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In Budget 2012, the water resources sector was allocated 2.2% of total estimates- of

which nearly 65% is for capital projects. In absolute terms the sector is neither worse

nor better-off than it was in 2011- but its share in State budget drops to a little over 2%

this year from nearly 4% in the previous year

Budget performance is poor [table 11 above]: the water sector budget is not

implemented as intended. From 2008-2011 budget estimates amounted to a little over

N19 billion of which approximately N8 billion was released. Budget Performance Index

was thus below 40%. The best performance was in 2008 [102%] and the worst in 2009

[4.5%]. Index was below average in 2010 [39.8%] and 2011 [ 44.5%]



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State Economic Empowerment Programmes:

The State does not have a well articulated and coherent economic empowerment

strategy. Current programmes are spread across at least 10 MDAs and appear ad hoc

and haphazardly implemented. The Ministry of Agriculture leads the pack with at least

5 empowerment programmes with a budget of slightly more than N4 billion.

The star empowerment programme in the agriculture sector is the commercial

agricultural project for which N3.4 b is set aside. Other key programmes that could

impact on incomes and employment are:

o Establishment of 6 agric-related training institutes, envisaged to train an

unspecified number of women and youth in agric-related business activities. [N1

billion or 8.8% of agric budget]o Special focus on agro-processing and value-addition programmes to create

synergy between agriculture and small-scale industry-budgetary provisions not

stated

Under the Kwankwasiya Empowerment Programme [being coordinated from the office

of the Secretary to State Government] the budget sets aside N2.44 billion for the

execution of various women and youth empowerment programmes. This represents

approximately 1% of State budget. It is not clear how citizens can access the funds set

aside.

The Budget and Planning Ministry controls a chunk of the empowerment budget, to the

tune of N2.4 billion. This is set aside for and as MDG Conditional Grant Scheme and is

not expected to be disbursed to beneficiaries but for the rehabilitation and equipping

of Primary Health Centers, provision of solar boreholes and construction of small town

water supply as well as other related projects

[see tables A1-A3 in the Appendix for a list of State Empowerment Programmes and

funds allocated to each]



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Budget Implementation: The Revenue Connection

Will the 2012 budget be successfully implemented by the Administration? Will the State

reap the full benefits of the budget? Is the budget workable? Let it be said that even at

the best of times, Federal and State annual budgets hardly pass the simple tests of

credibility and efficiency in implementation or monitoring etc. At the end of the fiscal

year, there is almost always a huge performance gap, that is, between actual and

approved estimates.

Resource availability will undoubtedly determine the success or otherwise of budget

2012. First, to finance the budget, the state depends almost entirely on the Federation

Account-itself dependent on proceeds from the export of one primary commodity with a

highly volatile international price. Oil and gas contribute about 99% of Nigerias exports

and provide about 85% of government revenues that go into the distributable pool-theFederation Account. Thus any sudden, negative shocks which often characterize the

international oil market will increase the risks of non-implementation. Perhaps it was in

realization of this that the state moderated its expectations of revenue from the

Federation account by assuming that funds due to the state from Statutory allocation

will decline by 7.2 billion or 11.4% over 2011. However while its expectations are

moderate here, the state made several wild and not so easily tenable assumptions

about other sources of revenue.

Table 12: IGR-total revenue relationship 2008-2011

T Rr

Year 2008 2009* 2010 2011Rev 70.7 b 43.7 b 59.8 b 72.58bIGR (actual) N8.3 b 5.7 b 9.99 b 9.85bIGR (estimates) 18.8b 31.24b 27.28b 26.08IGR

(performance)

4.4% 18.3% 36% 37.8%

IGR/Rev

%

11.7% 13.0% 16.7% 13.6%

In particular, government identified IGR as one of the critical vehicle to drive the

budget 2012. According to the Gov: .we are guided by the belief in the centrality of

our human resources and a passionate desire to develop our state and make it self-

reliant especially in the area of Internally Generated Revenue [IGR]14. Accordingly

the state is expected to generate, internally, approximately N4b monthly and a total of

14 2012 budget speech by the governor



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N46b or 21% of revenue estimates. This requires that IGR increase by 164% over 2011!

This is undoubtedly a tall order given the following:

o Historically IGR have constituted only 11.7%-16.7% of total revenue- and had

an average growth rate of less than 20% per annum over the period 2003-

2009.

o There is a huge gap between actual and estimates of IGR: IGR collected has

been between 4.4% and 37.8% of estimates. In 2011 actual IGR was less than

40% of estimates and contributed less than 14% of total revenue

o The bulk of IGR up to 51% - is collected by the Board of Internal Revenue

[BIR] an inefficient and ineffectually managed government institution.

Although it occasionally exceeds its self-set [usually under-stated] revenuetarget [such as in 2008 when performance was 108%] or does well [ as in

2010 when it achieved 71% of target], the BIR is at best an average

performer [53.7% in 2009 and 53.9% in 2011]

o Admittedly, the Boards current efforts have been encouraging as monthly

collections have gone up from approx N500m in June 2011 to N1.2 billion in

early 2012. However the revenue collections mid-way into the fiscal year is a

far cry from the N4 billion monthly target. Other significant hurdles remain:

The BIR is not out of the woods yet in spite of the presence of a new

and determined executive chair: The Agency remains within the civil

service structure and no new structural changes have been

introduced in the Board;

There is yet no evidence to show a change in tax-payer voluntary

compliance rates: [currently 0-5%!] and the recent increase in revenue

is mainly from tax areas

Table 13: BIR performance 2008-2011



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Year Actual Estimates Perf.

2008 N4.27b N3.95 108%

2009 N3.49b N6.5b 53.7%

2010 N6.4b N9.0b 71.%

2011 N4.35b N8.07b 53.9%

o Budget also expects substantial revenue [N15.5b] from the Ministry of Lands and

Physical Planning and from other MDAs which, historically, have had poor outing

in revenue generationThe performance of the MDAs in revenue generation

ranges from 4% (Ministry of Education) to 21.5% (Ministry of Works and Housing).

For example in 2011, [table 14 below], the Ministry of Lands was only able tocollect approximately 8% of its revenue estimates-and the performance of the

education ministry was even worse. That certainly is not promising!

Table 14: revenue performance of selected MDAs

MDA Actual Revenue Estimates Performance

Land and Physical Planning N186m N2,337m 7.95%agriculture N35.8m N1,852m 1.9%commerce N18.1m N347.7m 19.6%Works and Housing N665m N3,088 21.5%

Education [basic] N67m N1,527 m 4%

o Finally Government envisages a 360% increase in capital receipts: namely loans

and grants. It is unclear where these are coming from: the easy sources are the

domestic commercial banks. However, a commercial loan will be expensive and

therefore counter-productive. Credit facilities from development finance

institutions will perhaps be more attractive but slow in coming given the

stringent conditions-as specified by the Fiscal Responsibility Commission and the

DMO.

o Two other factors are likely to affect the resource projections:

The current security challenges in and around the state have adversely

affected business activities and by extension, revenue collections: There

are reported cases of factory layoffs and a significant reduction in



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capacity utilization. Trading activities have similarly been adversely

affected with a noticeable reduction in human and vehicular traffic in and

around the major markets in the metropolis.

The new Fed Govt. policy on personal income tax is expected to lead to a

significant drop in revenue from PAYE tax. Kano expects a 40% drop in

revenue from that source.

Conclusions

1. The key attraction of the 2012 budget is its emphasis on investment. Capital

expenditure takes a lion share of the budget-and this is necessary for sustainable

growth and economic development. Of course, recurrent expenditures are

inevitable, but universally acknowledged is their limited capacity to promotegrowth, even when they are judiciously and responsibly incurred.

2. The flip side however is that bulk of the nearly N150 billion capital vote is being

applied in the execution ofeconomic infrastructure projects- especially roads

and urban beautification projects. In contrast, only 14% of the capital vote is

being spent on social infrastructure-education and health. The point should not

be missed that there is as much crises in the health and education sectors as in

the economic front. Public schools lack basic infrastructure like chairs and

desks, laboratory equipment, water and sanitary facilities etc. Class rooms are

congested and a significant number of teachers are unqualified to teach. In a

2010-2011 schools survey, a Pupil-Class room ratio of 246 in primary schools, 126

in JSS and 132 in SSS was recorded in a number of local government areas

including Kunci, Kumbotso and Dala. The study shows that up to 62% of primary

schools in the State lack toilet facilities and where available these facilities are

grossly inadequate: pupil-toilet ratio ranges from 68.5 in JSS to 85.6 in SSS and

200 in primary schools. Less than 40% of primary school teachers are qualified to

teach and the pupil-qualified teacher ratio could be as high as 570 in primary

schools, 74 in JSS and 73 in SSS15.

The health sector challenges are no less daunting: system coverage is low,

facilities are decayed or unavailable and there are severe shortages of health

care administrators-including doctors, nurses and midwives- Kano has only

15 Annual School census is carried out by ESSPIN in collaboration with Senior SecondarySchools Board. See also the Federal Ministry of Education Digest of Education Statisticspublished in 2011



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approximately 8.4 doctors per 100,000 population and 18 nurses per 100,000

population.

Human capital development holds the key to long-term development of the state

and Government must invest more to upgrade its social infrastructure.

3. Resource availability is the key to good budget performance: current resource

position remains precarious and many of the resource projections are at best

wild and untenable. Government has not presented any convincing case that it

can balance a N221 billion budget.

The focus on IGR is sensible: Kano with a population of nearly 12 million people

and a strong commercial base has the potential to generate more revenue

internally for economic development. To succeed, government must [1] reformthe tax collection machinery and more importantly [2] improve the delivery of

basic services to the citizens and demonstrate that tax revenues are being spent

judiciously.

The BIR remains in the mainstream civil service- a factor seen by many as a

primary impediment to efficiency. Many see it as a failed, ineffectually

managed institution, barely able to deliver on its basic functions. It needs to be

reformed and strengthened to make it more innovative and efficient in service

delivery. BIR should be a professionalized and mechanized organization that is

firm, but civil, accountable and transparent. There shouldnt be any more delays

in the implementation of the 2010 Revenue Law which gives the Board some

measure of autonomy.

4. Spending efficiency must be maintained. Governments bold initiative in this

regard led to a saving of nearly N20 billion between May 2011 to January 2012. It

was indeed a commendable effort but government needs to be a bit more

scientific in determining the level of recurrent expenditure: current allocations

are arbitrarily determined-using a 2003 benchmark! Withholding such

expenditures could harm some MDA operations

5. Government must explore other funding options to finance its budgets.

Increased IGR and expenditure controls will conserve revenues and narrow the

budget gaps. However, given the daunting development challenges, government

will still be unable to provide socio economic services on the required scale. The

state must therefore broaden its resource horizon by exploring other sources of



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finance such as the domestic capital market and the international development

finance institutions-the ECOWAS FUND, AfDB, IDB, and WB. One option is for the

state to utilize the opportunities in the domestic capital market by issuing a

bond to finance its hugely capital intensive projects- basic infrastructure like

roads, dams, water, electricity, industrial & housing estates, markets,

commercial office blocks and several other services-oriented, income-yielding

projects which can pay for themselves. Such projects can be undertaken in

partnership with the private sector-under PPP arrangements.

6. Government must design an empowerment strategy to lift the youth and women

out of poverty by providing them with opportunities to earn a living in productive

jobs. Studies have shown that growth performance of economies is not

sustainable without a conscious, determined effort to distribute gains from

growth and fight poverty. The States poverty index [72.5] and unemploymentrate are above the national averages. It is imperative to have a coherent, clearly

stated poverty alleviation agenda and strategy. The rural populace is particularly

vulnerable and Kano must therefore invest to provide support for the people to

engage in off-farm economic activities: the cottage industry and empowerment

scheme and the rural industrialization scheme should both be reinvigorated by

providing sufficient funds for on-lending. In the urban sector, government should

provide more support for the informal sector of the economy, build more skill

acquisition centers to mobilize the youth and enable them take initiatives and

exploit market opportunities as they present themselves.

7. Government should expedite the completion of the new Kano State Development

Plan and put an end to stand-alone budgets. Next and subsequent years

budgets should be linked to a defined vision for the State. In particular, sectoral

budget allocations should be made after a proper evaluation of opportunities

and must be linked to identified challenges and to overall state vision.

8. Government must pay particular attention to budget performance. The

budget performance index for capital expenditure from 2008-2011 averages

45%. The index was less than 30% in 2009 and only slightly above that in2011. Government should ensure realistic revenue and expenditure estimates

as well as timely releases of funds to MDAs

Table 15: budget performance [capital expenditure 2008-2011]

Year Estimates Actual [N,billion] Variance Index



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[N,billion] [N, billion]

2008 65.22 51.86 13.36 79.5%2009 72.07 17.80 54.27 24.72010 56.19 26.05 30.14 462011 65.59 21.31 44.28 32.52008-2011 259.08 117.02 142.06 5.6%

9. Improve the budget process by ensuring the full participation of relevant

stakeholders: Nigerian budget process is mostly viewed as an executive-

legislative affair. The general public lacks understanding of the process and

hardly gets the opportunity to make contributions in project selection,

implementation or monitoring. The government has found the Community Re-

orientation Committees [CRC] useful in implementing a number of itsprogrammes especially at the grassroots level-and there are no reasons why the

Committees should not be similarly employed in budget formulation,

sensitization and monitoring [for example use CRC to ensure that

communities participate in the selection of projects to be included in

budgets.

Table A1: State Economic Empowerment Programmes

Ministry Programme 2012 vote

Information, Youth

andCulture

Youth EmpowermentProgramme

N50m

WomenAffairs andSocial

WomenEmpowermentProgramme

N250mN20mN20m



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Development

People withSpecial NeedsEmpowerment

Orphans andVulnerableChildrenProgramme(OVC)

VocationalTraining,

RehabilitationandReintegration ofTraffickedChildren

N10m

Planningand

Budget

MDG ConditionalGrant Scheme

N2.4 b

Rural andCommunity Dev.

Local CraftDevelopment

N10m

Ministry Programme 2012 vote

environme

nt

Waste to Wealth

Project

N15m

Health Lafiya Jari Participatory

Learning andAction for

N50mN50m



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CommunityOwnership

Commerce

andIndustry

Rural

IndustrializationScheme

Small ScaleIndustry CreditScheme

N100m

Office ofSSG

KwankwasiyaEmpowermentProgramme

N2.44b

Table A3: State Economic Empowerment Programmes

MinistryofAgricultu

Programme 2012 Vote



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The Kano Budget-2012

Documents

Transcript of The Kano Budget-2012