Beyond The Bailout | Independent Newspapers Limited
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Beyond The Bailout

Posted: Mar 7, 2016 at 3:56 am   /   by   /   comments (1)

On Tuesday July 7, 2015 the Federal Government after due consultations with the Council of State announced some intervention measures to come to the aid of many states in the Federation that surprisingly have not adequately prioritized the welfare of their workers by being delinquent with the payment of salaries; some of the states we were told have unconscionably not paid salary to their workers for upwards of eight months. What is even alarming is that some states that are beneficiaries of special allocations from the Federation Account that have lived large going by some large projects they have embarked upon and the life style of their Executive Governors were inexplicably included amongst such delinquent states. Following this announcement considerable interest was stirred because of the unprecedented nature of this intervention particularly by the electronic and mass media.

It might help us to put this discussion in context if we recollect the details of the package reeled out by the Federal Government on this occasion to be better able to answer the question whether this intervention is a bailout or not. I recollect that I heard the Accountant General of Federation, Ahmed Idris announce that the President had authorized the sharing of the amount of $ 1.7 billion from the Excess Crude Account amongst the package of relief. But apparently this had been reported in error, as there was an immediate follow up message from the President’s media aids that this money was not part of what was to be shared.

There was the instruction to share the dividend paid to the Federation Account amounting to $ 2.1 billion by the Nigerian Liquefied Natural Gas (NLNG) Company; a Central Bank special intervention fund of between 250-300 billion Naira as a soft loan to be made available to the states for the specific purpose of paying the backlog of workers salary and a debt relief program to be put in place by the Debt Management Office to enable the states restructure their commercial loans estimated at N 660 billion and extend the life span of such loans to provide some relief on the burden of debt servicing. It should be obvious to all that certainly there is a bailout/ relief as these measures come on stream. Even in instance where this relief package included some monies that should be statutorily shared; we should enquire whether the sharing could have been done with the urgency that we witnessed.

But what we need to do is to embrace and enforce the content of the Fiscal Responsibility Act, 2007 which is an Act meant to ensure greater accountability, transparency and prudence in the management of the country’s resources. And to proceed to ensure that it should no longer be optional for the state governments but to launch their version of this Act with utmost urgency.

The Fiscal Responsibility Act mandates and instructs the governments of the Federation regarding the procedure for the proper management of the nation’s resources through purposeful medium term three year rolling plans which it dubs the Medium Term Economic Framework (MTEF). This is to be followed with the articulation of a Fiscal Strategy Paper (FSP) detailing policies relating to taxation, recurrent (non-debt) expenditure, capital expenditure, borrowings and other liabilities, lending and investments. The Annual Budget which should be ready and submitted to the National Assembly for its appropriation by latest four months before the end of the financial year should take its bearing, as logically should be expected from the content of the MTEF & FSP. It specifies the extent to which appropriations should go beyond the estimated revenue; not extending 3% of estimated Gross Domestic Product. This Act recommends quarterly progress reports on budget implementation with a full blown half yearly report to be laid before the National Assembly. Probably this requirement explains the presentation of budget implementation reports with much publicity to the organized private sector by the government in the past but which has since fallen into oblivion.

This Act is also quite specific on how government should go about incurring debt obligations. It makes it clear that borrowing should be only for capital expenditure and may be human development and should preferably be of long gestation period and on concessionary terms. And admonishes that the level of national debt as a proportion of national income must be sustainable. An overall limit was to be determined for consolidated debts to be incurred by the Federal, State and Local Governments. And a publication was supposed to be made on quarterly basis indicating those governments that have exceeded their borrowing limits. It is therefore obvious that the Fiscal Responsibility Commission which hitherto was to be axed as per Oransaye report now has its work cut out for it and as we noted here it is now a matter of compulsion for the sub-national governments if we must avoid a repeat experience of state governments being broke and not being able to meet their basic obligations of payment of salaries to their workers.