Wednesday, April 27, 2016
States and folly of overreliance on bailout
Shortly after the inauguration of President Muhammadu Buhari and state governors on May 29, 2015, many of the state chief executives who allegedly met empty treasuries and backlogs of unpaid salaries came together and jointly made a demand via the Nigeria Governors’ Forum for the Federal Government to come to their rescue. In July 2015, the President after due consultation with the National Economic Council approved a bailout for the states.
First, the federal and state governments shared $2.1 billion (about N497 billion) sourced from the Nigeria Liquified Natural Gas proceeds to the Federation Account. Second, the Central Bank of Nigeria prepared a special intervention fund to the states. The package, between N250 billion and N300 billion, was to serve as a soft loan available to states to defray backlogs of unpaid salaries. Vice-President Yemi Osinbajo, who heads the National Economic Council, said the loan was repayable at an interest rate of nine per cent over a 20-year period and it was “solely for the purpose of paying the backlog of (unpaid) salaries.” Third, the President also approved a debt relief programme designed by the Debt Management Office, which helped states restructure their commercial loans which were then put at over N660bn, and extend the life span of such loans while reducing their debt-servicing expenditures.
Since that approval, about 27 states out of the 36 have allegedly requested the bailout. However, only 23 reportedly have got the intervention fund. The benefiting states are Adamawa, Bauchi, Benue, Cross River, Ekiti, Katsina, Gombe, Kogi, Nasarawa, Niger, Ondo, Osun, Ogun, Plateau, Sokoto, Kwara, Bayelsa and Imo. Others are Enugu, Oyo, Delta, Kebbi and Zamfara.
On Friday, April 22, 2016, the Independent Corrupt Practices and Other Related Offences Commission released a report of the monitoring of the disbursement exercise jointly carried out with the Nigeria Labour Congress. The ICPC report said that some states actually diverted some of the funds meant for the payment of workers’ salaries and retirees’ pensions to other means. The findings published by the commission showed that Benue, Enugu, Imo and Zamfara states topped the list of those who allegedly mismanaged the funds.
However, many of the indicted states have been churning out press statements debunking the ICPC claims.
There is no doubt that Nigeria, being a monoculture economy, with over-reliance on crude oil proceeds has been having it rough since the last quarter of 2014 when the price of crude in the international market nosedived. Just last week, the Minister of Finance, Mrs Kemi Adeosun, announced loan deferral (deduction of loan repayment) of about N10.9bn for states for the month of March 2016 while asking states to take some actions. The finance minister was quoted as saying: “We have prioritised getting the states back into good financial health. Now, part of that is this commitment to fiscal sustainability and that is why we have asked the states to commit to cleansing their payrolls, commit to efficiency, and maximising their internally generated revenue.”
Some states are already asking for another round of bailout forgetting that by its very nature, the scheme is a short-term ad hoc intervention. While it is most desirable for the states to be supported through this harsh economic quagmire occasioned by the dip in oil revenue, it behoves the states themselves to start to think out of the box. Many states have yet to get it that the era of profligacy in government ought to be over by now. Unfortunately, many of the states are still embarking on all sorts of white elephants such as building of airports, overhead bridges, and new government houses. Some states have yet to cancel annual government sponsorship of pilgrimages to Mecca and Jerusalem; appointment of hordes of aides, chartered flights, including purchase of jets for the comfort of the state governors. It is also criminal for the governors to have diverted the bailouts meant for the payment of workers’ salary arrears to other areas for which the intervention fund was not ab initio meant.
State governors should come off their day dreaming for perpetual bailout by the Federal Government. Times like this call for critical thinking. What most governors have been doing since assuming office is to blame their successors for running the states aground. That is unhelpful. After all, they expectedly were supposed to appraise the situation before offering themselves for election into the office of governor. It wasn’t the only office they could contest. They could have chosen to be lawmakers at the state or federal level or even stay off politics altogether. Having offered themselves to serve and having wooed the electorate to vote for them, they have no excuse indulging in perpetual blame game. If per adventure they did not do their homework well to know the enormity of the problems they are coming into office to face, they can as well resign and allow some other people who are better prepared to administer the states.
I should expect governors to cut down drastically on their overheads. That has not happened in many states. Where is the economic blueprint of many states? There is none. Those that managed to put theirs together have decided to shelf it or “kill in view”. If states will work with the Federal Government to provide an enabling environment for business growth, there are so many private investors willing to stake their resources in the 36 states of Nigeria. This is where I have problems with obtaining loans for consumptive rather than wealth creation purposes.
While it is true that workers deserve their wages, critical infrastructure such as roads, electricity, information communication technology, pipe-borne water, hospitals, metro line, schools as well as provision of adequate security are most needful. It is true that many states have lean purses, however they can go into joint ventures on some of the infrastructure such as roads and metro lines with private investors who will build, operate and transfer or will co-share the costs of construction with mutually beneficial cost recovery plans. The Oodua Investment initiated by the late Chief Obafemi Awolowo is a testimony to how states can pool resources together to embark on successful joint ventures.