 And it's time for our first hot topic as we take a look at the state's huge debts, low revenue and how they are continuing to raise concerns as both local and external debts hit trillions of Naira. Now this poses lots of questions. Are the states within reasonable debt to GDP ratio? Did they borrow for consumption or production? These are some of the things we want to take a look at with Dr. Frank Abagan, who is a senior lecturer and specialist in international economic relations, strategic studies, and public policies, Benio State University. Good morning to you, Dr. Abagan. Good morning. Good morning. Thanks for having me. It's so good to have you join us. You know, between 2015 and 2016, revenue to the states dropped because of the drop in oil revenue. And then in 2020, it dropped because of COVID-19, almost all the countries across the globe experienced recession. But then the debt profile continues to build, local and international. The unfortunate thing is that according to DMO report, which revealed to us last year, 2022, the second quarter of 2022, sub-national debt stood at 5.28 trillion Naira for domestic debt and external debt accounted for 1.89 trillion Naira. That's just second quarter of 2022. Now, the states, debts in itself is not a problem, as I asked, if the ratio is good. But that's not the case, because some of these states, as we have seen, they do not even generate enough IGR to even pay salaries. And so this making the debts pose very huge burden for the states. Let's start with that. Yes. Yeah, thank you very much. We've talked about this a couple of times till the states and the federal government itself, which is in the lead, gets into production. What are the states producing? The only state that you could say that has a potential. I still put it as a potential. We think that as part of the Nigerian GDP platform, it's a very good state. It's viable, but it's Lagos. Lagos is the only state that has the capacity to exist outside federal allocations. Karno in the north would have been able to do so, but production has gone down seriously due to other factors. Desert encroachment will have poor planning of the domestic economy in that state and many other factors. So we have seen a situation whereby states are just collecting money and spending without getting into production. The world is a marketplace. Our foreign creditors want us to collect loans from them because we have to pay. You know, you create a very steady stream of passive income when you take loans. You have to pay those loans back at compound interest. This is the situation. So for them, it's a windfall. They're going to make money. They have the product they are selling. The main deal we'll buy from them now is the PMS, such as the one that has impacted our economy. None of the states is producing goods that they have added quality. That means we are not processing our raw materials. So what are you taking to the international marketplace? We don't have that. All we're doing is just pumping more money into the system, and that is going to create inflation. Of course, so many other scholars who are looking at this issue are saying that the amount now, the total, this palliative that President Chinobuja has announced, it's about a total of 185 billion. That's five billion to the states and the FCT. But the process is still the same. We are going to give the states cash and then one billion for grains. Knowing from the past behavior of our governors, I don't see any difference. What states are going to do, they're going to go into more debt. You can even see, if you look at the conditions, we're going to do moratorium for this is just three months, and then you have to start paying 120 million monthly. With the huge budget profile and the whole debt profile of the states, how can we get out of this situation? But our political leaders don't seem to care. It's so unfortunate. The pressure is going to be much. We're going to see a slide of the value of the Naira more and more. Now it's even floating. Although we could say the stock gaps that will protect our currency are not there till we get into production. We're not into production yet. So you're going to see this slide for a while. I'm even worried because we're thinking of a war. Wars are very expensive. I wonder how we're going to do this. So the situation is bleak. I don't have any sentiments about this. The situation is not so good because what you're doing is you're just transferring debts from one particular account to another. And then unfortunately, we saw some governors borrowed money recklessly in the past, even some few weeks to the end of their tenure. They were borrowing money without clear-cut plans of execution for investment. And so that means that it also brings to mind the legislature, the legislative arms in those states, how responsive and responsible they've been in approving some of the loans that they approved in the past, doesn't it? Most legislative houses, unfortunately, most legislative houses are just robber stump. They are not trying to, they are not protecting their people very well because it is the legislative houses that quickly, you know, approve these loans when the demands for them are made by the executive branches of government. Because it's like a sharing thing. They are in the same boat together. So if the executive collects the loan, the legislative houses also get a share of it too. Because if they are going to exercise their oversight properly, they will exercise caution and also carry out extensive oversight. You've collected this amount. You're asking us to give you to approve this amount. You collected this amount in the past. How did you spend it? What were the sectors? What is the impact? Want to see a performance profile of how much you expended? And what was the impact on our economy? These are some of the questions, but which of the houses of assembly are asking this question? No one. So this is the situation. They are supposed to help, yes, they are supposed to help, you know, the people who elected them by making sure that they exercise their oversight, that the executive is accountable for these monies they're collecting and expending. You can see, this is one of the reasons why they do state governor, got to know Berserking, was criticizing this new package that you see, that the state governors are just, it's a jamboree. They're getting money to spend again. Because for the grains, it's just one billion. That's what the total package of five billion they are getting. They're giving the states more money. And even the allocations from the federal allocation account has increased. About this month alone, we've got about 540 billion extra. So I mean, if we need prudence now, if there's anything we need, we need prudence, then each of the states has, what I've been saying, it has a comparative advantage. Each state has a particular, you know, factor in terms of economic production. Yeah, in Benway, it's food. So we need to get into processing, food processing. Then we can now approach the international market and earn the foreign exchange. We're not doing that. And we also need to also increase trade with our sister African countries to earn foreign exchange. These are the things we can do to improve our economy, our domestic economy, all the debt will still continue to increase. And there's always a payment date. We're already filling the pact as it is. And the new governors also should be reviewing the activities of their predecessors, isn't it, with a view to bringing them to account for the monies they borrowed while they were in office? Yes, yes. That is the step. That's the step they should take. But you know, some of these decisions carry political implications. So it's unfortunate that some of the new governors are not going to carry out proofs of their predecessors. But it should be done, even if it's for record purposes. I know that some governors are especially since some of these new governors are their master servants, those who left the office put them there. Some governors are doing so quietly. And you see that kind of proof going on when, let's say it's another political party that took over. For instance, if you had a state that was ruled by, let's say the PDP and an APC governor takes over, you see a semblance of a probe. But you know, the interest in politics changes. Sometimes the probe goes to its conclusion, but it ends there on paper. Although we've seen a bit of that in the North, right? Benwell state and which other state, where they went to recover, even the vehicles that the former governor took away. Yes, yes. But we expect to see more of this. If we're really serious, we can recover much more than what we've seen so far. Because a public office means that you should be accountable to the people. Since whatever you held, the money is the assets of the state you had it in public trust. If you spent correctly, you spent wisely, you don't have anything to fear. You're so clear that no, this is what came. This is what you're able to spend. This is what you were able to generate. Or have a situation whereby it's still the same old culture of getting into public office so that you can have access to public wealth while the people suffer. The things that are happening around us with our countries, you know, Niger, I know that should be reminded to us that it's not going to be business as usual all the time. There's a limit to human suffering actually. And then we've also seen states like Abia State fish out ghost walkers, which should be one of the things that the state even even here in Benway State. The government announced that it had saved close to a think of 1.2 billion, I think, from ghost walkers. And the process is going on, you know, the biometric verification and some of the government departments and agencies. It's ongoing. So if many states are this proactive, you'll be able to plug some of these, you know, leakages that you have in the Spanish of public funds. But like I said, overall, I guess in the modern international economy, you cannot help but borrow. Even United States borrows. But the thing is how you pay back. And you can only pay back if you have something to sell. We need to get into production, whatever it is. And we can, if we have a plan, there are many things that Nigeria has a comparative advantage. And I keep mentioning food processing is one of them. That's the thing. Because the West African corridor buys from us. Just as little crisis with Niger, you can see the number of trailers. If you see the videos parked at the border that could not go into Niger, because they buy almost all their food stuff from here. I remember recall a few years ago when former president Buhari also closed the borders. We had crisis right off the corridor, right, even reaching Senegal. So this is something we can take advantage of, we'll get more into production, and then we'll be able to have something to sell on the international market and make money enough so that we can offset these debts. Well, having looked at the new governors that have come in and those who returned to office to complete terms, would you say you've seen any remarkable change with regards to them going into production, with regards to them increasing their internally generated revenues? I'm aware that some governors are asking questions. They're also trying to take proactive steps. It starts with asking for what happened. You want to see the records, knowing the IGR capacity of the state, and then trying to create a basis where the IGR will be able to take care of the basic expenditure, the current expenditure of salaries and the cost of governance. Many state governments are trying to do that, but I don't think this is the story for all state governments. Even as far as the five billion that the federal government has given to states in terms of palliative, some states already complain that it's simply too small because of the populations they have. A Kanu who's complaining, I think you are hearing that kind of complaint from Lagos too because of the kind of populations they have. Some of them say that they've only gotten the two billion. Some of them are saying they've only gotten the two billion dollars. Quora has said to Gombe, Katzena, the ministries that have acknowledged that they've got the two billion and they've instructed the local governments to also commence the purchase of grains from the grain reserve. The grains are going to be sold. The one billion is like a sale. CBN is the one doing the sale on behalf of government. The one billionaire will be the debited, you understand, from the states and they will give them the value in the form of grains. But the four billion is going to be given out in cash. And this is where the problem is. We've seen what many governors have been able to do with cash, you understand. But the main thing I keep saying is all states need to create a basis for going into production. That's the only way we can get out of this. What are we selling? What do we have to sell? Even amongst, even within the domestic economy, what do you have that you give? What are the services you have, you understand. And we need also need to exploit. I'm also a bit happy that we've created the blue economy that was an untapped area. We're not even tapped into tourism, which is a money spinner. So there are many other factors, many sectors of the economy that can give us what the kind of income we need. But we're not doing so yet. And this is where the worry is. I just hope many states will realize that you have to create the nebulous environment. We've said that states, governments rather, should only go into partnerships with the private sector. But they should create a nebulous environment for the private sector to come and invest. But the state needs to also accelerate the increase in the space of infrastructure and services. You need electricity. You need roads. Those ones are the responsibilities of the states. You need more of those. You have to create an enabling environment for businesses to thrive. Then allow the private sector to come in and then engage in production. Then you can now collect your taxes. And when you do that, you create jobs, jobs that will take care of people you reduce the social pressure and also add a particular time increase the IGR profile of the states. I think this is the fundamental path to recover the most states have to take them. Many are not there yet. Well, we've also seen some states, governors, new ones who have bloated their governments even before you say Jack Robinson. Some of them are having as many as that is something personal aids. There was one that has already gotten up to 40 aids, media aids. I'm not talking about the commissioners, his own media aids. And when you look at such governors, you wonder exactly why are they there in the first place? Can these ones even create any form of, go into any kind of investment that will boost the IGR of the states? Well, a lot of our leaders are morally ambivalent. That's unfortunately does the truth. They are morally ambivalent, for a lot of them is business as usual. These are the people who didn't sleep, who are the polling units, so they must be compensated. But there are ways you compensate, you understand? If you improve the economy, you can now get many people involved in the economy. But because there is no production, the economic production is zero. So only the state now can cater for those needs, because the state has the wealth. So the only quick solution now is to have an over-bloated structure of the state, where many of the political supporters of the governors, the ministers have positions so that they can get access to funds directly from the public post. If there is production, if the economy is working fine, the economy will absorb most of these people we're talking about. So it's still the same problem we're talking about. Many of the governors are looking at quick solutions, you understand? So the main thing to do is just increase the size of the structure of governors. And we've said this so many times that the cost of governors is simply too high. It's affecting the performance of the states. But you have a situation where the supporters too are important and they're putting pressure. And these are the people who help these governors win elections. So it's a vicious circle. But if the governors are pragmatic, more pragmatic than they are, you see a difference over time. So I don't see any change to that. You may even see states with very huge, you know, employment profiles with their supporters. Unfortunately, this is going to be the situation till we see an improvement. Well, let's hope that some states will actually give us reasons to rejoice and be hopeful that things will change. That won't be business as usual. We're watching them and taking note of what they are doing. Thank you so much, Dr. Frank Abhagan, Senior Lecturer and Specialist in International Economic Relations and Strategic Studies and Public Policies. Thank you so much for your time. Now, thanks for having me. Okay, so you're still watching The Breakfast on Plus TV Africa. We'll take your break and come back with our second hot topic. Stay with us.