A large number of states in
Nigeria are running on avoidable deficits due to overdependence on centrally
allocated crude-oil dependent revenues. Many of the state governments came into
power with the mindset of getting monthly allocation from the federation
account but the decline in the oil price and the lingering slowdown due to
destruction of oil pipeline and installations have dashed many hopes. Unpaid
salaries, uncompleted and abandoned projects and many socio-economic and
political challenges are many states due to paucity of funds.
In this article, I will be
focusing on how Kwara State can become financially
independent through aggressive drive for non-oil exportation. According to BudgIT, Kwara is among the states
in Nigeria that is running at a huge deficit. This is because the total income realisable from both the internally generated revenues and
the federal allocation are grossly inadequate to meet the recurrent expenditure
talk less of the capital expenditures.
My position has been that all
the states in Nigeria have what it takes to internally fund their budgets and
survive independently of the federal government allocation. To achieve this,
they only need to focus on two major sectors namely; agriculture and non-oil
export. The strategies put forward in this article are capable of not just
helping the states to generate revenue and become self-sufficient, in addition
to this, it will also help them to create numerous jobs for their teeming
population.
Kwara is
blessed with very large land mass that is suitable for the production of
different kind of exportable agricultural commodities, but in this article, our
recommendation for this state is Raw cashew nut
export. Even though this is a tree crop with gestation of about two years for
improved varieties, but the potential upon maturity will last for many years.
According to the
Collaborative Survey by National Bureau of Statistics, Central Bank of Nigeria,
Federal Ministry of Agriculture & Rural Development and Federal Ministry of
Trade & Investment, this state produced about 39,000MT of raw cashew nut in
2012.Using the national average of
about 38 per cent, this state currently has arable land that is about
1,414,080. hectares of lands. We have made some
reasonable and very conservative assumptions in this analysis and these include
that: the state is using just 40 per cent (565,632 hectare) of this land for
cashew nut plantation .The yield per hectare of
Cashew nut is 1MT per hectare (even though, there are varieties that can yield
more than this) this yield was used to make provisions for losses that might occur
during harvest -the unit price of cashew nut is $1,000/MT FOB Lagos (even
though it can be as high as $1,200) -cost of farming was put at N25, 000 per
hectare based on some research works -cost of exporting per metric tonne was put at N35, 000 base on the export projects I
have handled in the past
With a yield of 1MT per
hectare, this means that the state can produce 565,632MT of cashew nut on the
land size stated in the assumptions above. If this cashew nut is exported at a
free on board (FOB) price of $1,000/MT, the total proceeds will be
$565,632,000. Using a conversion rate of N310 to 1$, this amount to N175,
345,920,000. The unit cost of farming Cashew nut and exporting are N25,000 per hectare and N35,000 per MT respectively. The total
cost of farming plus 50 per cent profit on the sales to the government (or to
the trading company engaged by the government) comes to N21,211,200,000 and the
total cost exporting (transport, documentation, freight forwarding etc) comes
to N19,797,120,000. The total project cost (farming and exportation) will be
about N41,008,320,000. The estimated profit that can
accrue to the state on this project comes to about N134, 337,600,000.
According to data obtained
from government sources, the IGR of the state for the year 2014 was about N17,497,620,787.52. This will remain low and even drop further
because it is mainly generated from the personal income tax on workers in the
state most of which have not been paid for some months now. From the analysis
we have done on farming and exportation of Cashew nut, the state government
could grow her revenue several thousand times over and above the current level
if the government can embrace this new way of thinking in their drive for
revenue generation.
The state can start this drive
with the exportation of Cashew nut to meet the current financial obligations
but with a plan to begin to add value and process it into Cashew Kernel which
will more than triple the revenue from the raw cashew nut.