What does Borno’s economy tell us about Shettima’s competence?

Borno, one of Nigeria’s 36 states, is serenading news headlines because Kashim Shettima, its immediate past governor, has become a running mate in Nigeria’s next presidential elections.

Today, Bola Tinubu, APC’s presidential candidate and flagbearer, will officially unveil his choice for Shettima after announcing it on July 10 in Daura, Katsina state. The controversy behind both candidates is that they are Muslim despite the country having a population where 50% of people are Christians.
 

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While a Muslim-Muslim ticket has been heavily criticised, the reasons behind the choice will be full-blown by September 28, when campaigns officially kick off. However, Tinubu, the presidential candidate for the country’s ruling party, already said the choice for Shettima was based on prioritising competence.

Competence is not easy to assess. We've discussed whether it is even possible to tell if 'Governors are working'.

However, Shettima’s tenure in Borno can give us a small glimpse into the economic performance he delivered, even though he vacated office in 2019. One indicator, albeit imperfect, which we shall use is internally generated revenue (IGR), which has sharply increased since 2016.
 

Economists believe a state's ability to drive sustainable economic activities such as boosting employment and providing efficient public service shows in the level of independent revenue such a state can generate.

In fact, whenever people want to show how well Lagos state is performing economically, they often make statements about its revenue being bigger than the combined income of multiple states in Nigeria. And they are often right. For instance, in 2020, when Covid-19 crippled most economies worldwide, Lagos’ internally generated revenue (IGR) was ₦419 billion, which is ₦34 billion larger than the total IGR (₦385 billion) for Nigeria’s twenty northern states, including Abuja.

No state in Nigeria has been able to match or challenge its revenue position. However, the zeal to increase revenue and appreciate IGR growth is becoming popular among people who live in and govern other states. This brings us back to Borno’s IGR growth. Did it happen because of policies that have improved economic activities or the dwindling of the tragic insurgency that has plagued the state since the early 2000s?

Let’s find out. No prizes for guessing the right answer. 

Poverty haunts Borno, like many northern states

Historically, the people of Borno generate their wealth from economic activities such as trading and agriculture. Lake Chad surrounds part of the state and provides a natural water body for fishing activities. Also, Maiduguri, the state’s city centre, is a trading hub that serves the entire northeastern region. That is the type of role that economists tend to encourage to boost development.

But when you think of Borno today and the economic statistics that come from the state, it is hard to picture wealth. A third of Nigeria’s food insecurity and poverty is attributed to the BAY states (Borno, Adamawa and Yobe). And the state has one of the lowest IGRs in the country. 

Data highlighting Nigerian states’ revenue performance shows that Borno’s has hardly improved compared to its peers. From 2008 to date, Borno has churned out one of the ten lowest IGRs among Nigerian states and depends on federal allocations for over 90% of its total revenue.

While Shettima governed, on four different occasions, Borno recorded the lowest and second lowest IGR in Nigeria. Before 2016, the state hardly generated an income of over ₦2 billion—roughly similar to what Lagos’ Lekki toll gate generates in 120 days.

On the one hand, many have argued that the state’s dwindling economy fuelled its low revenue and insecurity. For instance, Lake Chad was once one of Africa’s largest freshwater bodies and a source of livelihood for about 30 million people.

But the lake is fast vanishing; it has also exacerbated poverty rates and has made many of the state's residents susceptible to the insurgency. And as the source of livelihood dwindles, unemployment figures rise. At 67%, Borno has Nigeria's 9th highest combined rate of unemployed and underemployed people. One of the largest employers, the state government can only staff 17,000 out of its six million people—less than 0.3%. This 'no or very few jobs' is often the reason behind states' inability to generate enviable tax-based income.

So states struggle with low IGRs because they can't improve individual-related taxes such as road taxes, capital gains tax, and personal income taxes like PAYE (Pay-As-You-EARN). And so, states with lower and poorer populations will struggle to generate significant revenues. For all states, including Borno, PAYE is the most significant contributor to IGR, providing over 60% of internal revenues, meaning that what people earn matters.

But the type of jobs people have is also important. Earlier I mentioned how trading and farming is the common occupation in Borno, and these are highly informal business practices which make taxes much harder to collect. It is why states like Anambra have resorted to biometric registration for their traders. And as one of only three states that could fund its operating expenses using IGR and VAT income, the success of Anambra’s new initiative could help it hit a ₦50 billion IGR target set for the end of 2022.

This is one development worthy of emulation by Nigerian states which struggle with low revenue.

On the other hand, the rise of insurgency and insecurity is often blamed for the state's poor economic activities. Borno’s case is another classic chicken vs egg scenario, but be that as it may, we can’t ignore the effects of insurgency.

A "profitable" tragedy

While the actual number of fatalities is likely to be much higher, Boko Haram insurgents have killed an estimated 20,000 civilians, including an undetermined number of women and children, since 2009. Consequently, Borno became a war zone, which crippled most of the little economic activities in the state.

Reports show customers became scarce in Maiduguri’s Monday market since it became a frequent target of suicide bombings. Residents became even poorer, and most now live in internally displaced persons (IDP) camps. 

As of 2014, the height of insecurity in Borno, Boko Haram was reported to have controlled territories as large as the whole of Belgium. That same year, the Chibok girls' kidnap happened and has ironically fuelled the revenue growth in Borno since then. 

A couple of years after the Chibok incident, the Nigerian army and troops from neighbouring countries recaptured most of the territory previously controlled by Boko Haram. This happened due to the increased international attention the girls’ kidnap brought.

International organisations, including Michele Obama, the first lady of the United States, became interested in what was happening in Borno. So as non-governmental organisations (NGOs) trooped in and sent envoys to deliver humanitarian aid, economic activities picked up. For instance, lack of electricity is a re-occurring problem in Borno because these terrorists keep blowing up the power towers. But the NGO’s presence opened up business opportunities for small solar power distributors contributing to the sharp upward turn of Borno’s IGR growth in 2016.

In a conversation with Stears, Engineer Alhassan* explained that the NGOs need to power up their offices and the IDP camps. These NGOs also employ people to conduct research activities or administer services and aid, providing income to the indigenous workers. So while ActionAid and other NGOs don’t pay taxes to the government as a humanitarian body, they employ people who pay personnel taxes to the government. The NGOs are also customers of businesses that employ people who pay taxes. In addition, these businesses need licenses, often gotten at a fee from the state’s ministries.

Also, the government’s social transfers supported by the World Bank stimulate consumption in the state, contributing to increased tax revenue. According to Tochukwu Egesi, a financial services strategist at Genesis Analytics, the social transfer system has been plagued by corruption. But the government has now partnered with mobile money operators (MMOs) and payment service banks (PSBs) that, in turn, carry out financial services such as account opening, bill payments, fund transfer, and cash in/cash out for Nigerians in areas like Borno.

By electronically transferring cash, the government believes the ₦5,000 it sends out every two months can get to those in need and improve their consumption. According to the National Social Register (NSR), nearly 160,000 individuals are registered as vulnerable in Borno and are eligible to receive aid. As the government channels social welfare to these people, employment also boosts consumption, drives business sales, and contributes to the state’s revenue.

Essentially, it is hard to attribute whatever revenue growth the state recorded to its leadership’s policies or competence. IGR growth has largely been due to insecurity reduction and federal (not) state government policies.

Remember the tragic incident that brought Borno here

It will be remiss not to acknowledge what would happen if insecurity had not de-escalated. Remember that the state's revenue recorded little to no progress between 2011 and 2016 or for the first five years that Shettima led Borno. And considering the sources of income—mainly from humanitarian and federal government-backed policies—there are little kudos to attribute to the state government.

But, even Shettima’s competence has been severally criticised based on the point of insecurity alone. Critics believe insecurity in Borno got so bad in the first place due to Shettima’s complacency.

Again, the Chibok girls’ abduction provides the rationale behind this point. News reports show that the then supervising minister of education, Nyesom Wike, warned Shettima about the impending attack and advised him to move students but never heard back from Shettima. Unfortunately, the students remained in school, leading to the kidnap of 276 of them, out of which over 100 have been set free.

However, insecurity issues tend to be very controversial in Nigeria, mainly because no state government has autonomy over the police or other security-enabling agencies such as the army. For instance, Babajide Sanwo-Olu, the governor of Lagos, has on several occasions and on live TV explained how he has no control over insecurity or crime in the state. So governing a state as vulnerable as Borno with heightened insecurity is no easy task.

To state that insurgency has been a massive threat to the economy of northeastern Nigeria, especially Borno, is to overstate the obvious.

Still, we can’t ignore how unsustainable the state's IGR trajectory is. Engineer Alhassan who explained that his business picked up due to the arrival of NGOs in Borno, explained that these NGOs are now leaving. “The NGOs have several differences with the state, meaning I have to go to other states to create awareness for my business and look for customers elsewhere,” he said.

Earlier this year, Borno announced plans to sanction seven UN agencies claiming they’ve refused to pay income and release data on the agencies’ Nigerian staff and enterprise contractors. Some of the tax defaulters mentioned included World Health Organisation (WHO), World Food Programme (WFP), United Nations High Commission for Refugees (UNHCR), and United Nations Children’s Fund (UNICEF).

If these agencies leave for good, how will Borno cope with businesses that will lose their income? The truth is that the state needs to prioritise creating economic opportunities that are beyond promoting aid.

Before Shettima left the governorship seat, news of him creating the Borno Industrial Park in Njimtilo near Maiduguri reassured the state’s residents of driving employment with private partnerships. But, these initiatives are yet to yield significant results.

What matters now is for the people of Borno to see brighter days ahead through the kind of leadership that will create jobs and sustain their livelihoods. At the end of the day, competence is backed by results, and it's hard to pay compliments to Shettima’s results when looking at Borno state.