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It may appear as if Lagos State is blowing its own trumpet with the Lagos Economic Development Update (LEDU) 2025, prepared by Lagos State Ministry of Economic Planning and Budget to highlight its economic strategies, fiscal sustainability and revenue mobilization. The report claims that Lagos State has achieved a $259 billion Gross Domestic Product, based on purchasing power parity, derived presumably from the exchange of the naira to the US dollar.
The report suggests that the figure may rise when the National Bureau of Statistics carries out the anticipated rebasing of Nigeria’s GDP, by taking cognizance of hitherto unacknowledged aspects of the economy, which include e-commerce, fintech, online services, (the obscure) modular refineries, pension funds, quarrying and social programmes, like National Health Insurance Scheme and Nigerian Social Insurance Trust Fund.
The revelation makes the Lagos megalopolis, although a state, the second largest city economy in Africa, ahead of Pretoria and Johannesburg, in South Africa, but trailing behind only Cairo, the capital of Egypt, which takes the cake as the richest city economy in Africa.
If Lagos State were to be a country, its economy would be higher than those of Tanzania and Ghana, with GDP of $100 billion and $60 billion respectively. Indeed, it would be the fourth largest economy, after Nigeria, Egypt and South Africa.
The report also claims that the economy of Lagos State significantly increased by about one-third from N19.63 billion to N27.38 billion at the end of the first half of 2024. In spite of this positive news, the report, however, regrets that tax-to-GDP ratio of the Lagos State economy is a paltry 2.3 per cent.
This suggests a weak revenue mobilization and collection strategy. Yet observers project a N2.7 trillion revenue collection in 2025, to retain Lagos State on the top of the pack of Nigerian states with the highest Internally Generated Revenue.
The report’s economic projection for Lagos State for 2025 is an increased GDP growth rate of 5.02 per cent to 6.49 per cent, or nominal figure from N54.77 trillion to N66.47 trillion – although the World Bank projects a 3.5 per cent expansion for Nigeria in 2025, highlighting a cautious economic recovery for the country.
The report attributes the projected growth for Lagos State to significant reduction in the price of petrol, a relatively stable foreign exchange regime and an expansion of the services industry.
These indices, which have nationwide effects, however, apply to the entire country and are outside the control of the Lagos State Government. Indeed, many polices that seem to work to the advantage of Lagos State are not completely under its control!
For instance, we recognize that the Lagos ports, through which most imported goods enter into Nigeria; relatively high supply of electricity, (compared to other regions); proximity to Ogun State, (that makes up for the Lagos housing deficit); and the relatively extensive road network, significantly contribute to the viability of the economy of Lagos State.
We also recognize that the currently high headline, food and bread inflation rates that accompany the relatively stable foreign exchange rate (that could change without notice), and infrastructure deficit, (that are traditionally under the control of the Federal Government), may adversely affect the rosy projections of the Lagos Economic Development Update.
The World Bank is concerned that inflationary pressures; unimpressive crude petroleum production; the currency that it still considers to be weak, (which the optimistic Lagos State report claims to have a degree of stability); continuously rising debt servicing costs; and low tax collection regime, may have adverse effect on the national economy, including the economy of Lagos State.
As for Lagos State specifically, the World Bank notes the following challenges to the performance of its economy: significant housing deficit; low collection and recycling of waste; heavy reliance on road transportation; and inadequate access to potable water for industrial and domestic use.
All these roadblocks point to the need for the Lagos State Government to be a bit cautious with the rose-coloured prism through which it is projecting its economic future. We acknowledge the need to be optimistic but governance must be based on realistic policies, programmes and projects that are driven by credible data.
While we acknowledge the laudable efforts of Lagos State Ministry of Economic Planning and Budget, it is hoped that projections by third parties like the Central Bank of Nigeria and the Nigeria Bureau of Statistics will add to the credibility of the 2025 Lagos Economic Development Update.
Finally, we take cognizance of the efforts of Governor Babajide Sanwo-Olu in addressing the challenges highlighted by the World Bank. We applaud his economic-development mindset, which drives such innovative and forward-looking exercise embarked upon by Lagos State Ministry of Economic Planning and Budget. The Lagos Economic Development Update (LEDU) 2025 is a laudable initiative. We urge other federating states to take a leaf out of the book of Lagos State, especially in the areas of comparative advantages.
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