Pros And Cons Of FG’s Bail-Out For States | Independent Newspapers Limited
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Pros And Cons Of FG’s Bail-Out For States

Posted: Jul 17, 2015 at 12:00 am   /   by   /   comments (0)

Federal Government Should Not Be Seen As Father Christmas

The National President of Senior Staff Association of Electricity and Allied Companies (SSAEC), Comrade Bede Opara in an interview with our correspondent said the federal government should not be seen to be playing the Father Christmas to state governments that have refused to diversify their revenue sources and their respective economic bases at a time of severe oil price volatility, thus further depleting the national treasury instead of shoring it up.

The move, by President Buhari, according to Opara, may encourage state governments to be lazy and perpetually dependent on allocation from the Federation Account to the detriment of being creative with Internally Generated Revenue (IGR) and harnessing the natural resources in their territories and create jobs and more sources of taxable income for the states.

He argued that many state governments have over the years shunned repeated appeals to diversify their revenue sources and be less dependent on allocations from the federation account.

He said: “It is believed that the withdrawing of $2.1 billion from the Federation Account, arguably from the Excess Crude Account (ECA), will leave that particular account literally empty.

“The other side of the coin of the bailout is a directive to the Central Bank of Nigeria (CBN) to come up with a “packaged special intervention fund that will offer financing to the states, ranging from between N250 billion to N300 billion. It is in a form of soft loans that can be accessed by the states for the purposes of paying backlog of salaries.”

He noted that the apex bank for its statement will also make available the special intervention fund to states and then negotiate the terms with individual state as it has several intervention funds applicable to different segments of the economy.

“Most, if not all, are designed as soft loans with single digit interest rates.

“The final leg of the bailout as directed by President Buhari is a debt relief programme to be proposed by the Debt Management Office (DMO) which will help states restructure their commercial loans currently put at over N660 billion and extend the life span of such loans while reducing their debt-servicing expenditures,” he said.

Commenting further, Opara said: “The states must, however, not see the bailout as a free meal. It is a loan, no matter how soft, they have to repay. They must also learn from the pitfalls of the past by being prudent in the application of resources at their disposal.”


States Must Put Their House In Order

Opara, who urged the Governors to put their houses in order, said the intervention will bring a glimmer of light to the embattled states which had been unable to perform their routine duties.

“The intervention will especially alleviate the sufferings of workers, many of whom were owed salaries for upwards of eight months. But there are costs. There are also questions to be asked as to why the federal government would abandon its initial stance that the ailing states should device measures to bail themselves out of the mess many of them created in the first place. But there is a point to be made that the money being shared actually belongs to the three tiers of government,” he said.

“However, it is an open secret that the governors in some of these debt-ridden states are remarkable for their recklessness. Not a few of them embarked on inflated and gigantic projects that many of their people can hardly relate to. In fact, some of the governors cannot pick their wage bill because they used state resources to finance the last general elections, perhaps the most expensive in the annals of the nation,” he stressed.


Bailout Will Boost Purchasing Power

Meanwhile, some financial experts say that the bailout will boost the purchasing power of a good percentage of local consumers and thereby reflate the economy.

In its recently released report on poverty findings, ActionAid alleged that “state governments, Ministries, Departments and Agencies (MDAs) and local governments have mismanaged public funds, while money laundering has become a major means by which the country’s wealth is siphoned and stashed abroad.”

The report also noted that the private sector was involved in corruption through kick-back, under-declaration of profits and non-performance, while operations in the oil and extractive industry was still opaque and prone to corruption.

The report argued that while the Buhari administration might continue to guarantee and bailout erring state governments, another government might take a different view and leave the states to their creativities as allowed by law.

Some of the recommendations made by the report included the creation of “special programmes for areas with high incidence of poverty through geographical targeting; social protection policy; strengthening of state-citizen relations; making corruption a development issue; compliance with the FoI Act by all MDAs; autonomy for all anti-corruption agencies, (ACAs,) to enable them discharge their mandate in fighting corruption; public reward system; and increased support and commitment to NEITI to ensure accountability in the extractive industry.”


Labour Monitoring States Against Financial Recklessness

The Association of Senior Civil Servants Nigeria (ASCSN) has stated that the union was monitoring the situation in Osun states as regards the bailout given to the state governor to pay the salaries of the state’s civil servants.

The Secretary General of the Association, Comrade, Bashiru Lawal, while speaking on 100.5 FM  Radio programme, “Fact File” yesterday, stated that what had happened in Osun and other states owing workers salaries was due to the financial recklessness on the part of the various governors.

He added that there had been suggestions in some quarters that the Federal Government should set up task force to monitor the implementation of the bailout given to some of the states, adding that if that was done it would offend the issue of Federalism we are talking about.

He said that ASCSN was monitoring the situation but that the governor of Osun states was not doing the right thing by saying that he would pay the workers two months only.

According to him, “We as union are monitoring the situation. As I speak, it appears that Osun State is not doing it right. The governor is saying he is going to pay two months and you and I know that he paid workers salaries last in November last year. I want to believe that they have collected the funds. A meeting was held with the stakeholders, all the trade unions were there and he told them he was going to pay two months. Though we are still on that and we wondered how he can be saying he would pay two months when the money he collected is for months owed workers and so on? But invariably even the months he said he would pay, he is paying some people half salaries.”

He said that the association believes that something was happening and that the federal government should look into it to ensure that both the union and the government were on the same page, adding that the governor is not doing well in Osun state.

According to him, “The workers stayed at home because the governor has defaulted in the promise he made when he said he was going to pay two months. Like I said earlier on, we are still questioning that two months because after all the deductions, it would not be enough. As far as we are concerned, the state government has defaulted and it appears that the man does not want to solve the problem. If he does not want to solve the problem, he should step aside so that sanity can prevail.”

On why Osun’s case seems to be very obvious, the unionist said, “It is because when you look at the totality of the months he is owing, it is about the state that is owing. Most states in the north are paying as at when due. Even down south here they are still doing well. But in Osun, it is about nine months .So you want to ask yourself what is really happening there. We believe that is simply financial recklessness and nothing more than that. The primary function of government after security is to ensure that its people are adequately taken care of.

A labourer deserves his wage. Salary is supposed to be a first line charge to government. Before you do anything, you sit down to know what you need to pay your workers and then you can plan with others.”

He stated that all these had been jettisoned and that what he was telling the people were stories, adding that Osun state was a civil service state and that presently, the economy of the state was in some difficulties.

In his words, “The economy of the state is in shamble because most of them depend on the earnings from the workers. Even their Internally Generated Revenue (IGR) has reduced because most of it is based on pay as you earn. So, if you are not paying workers, how do you collect taxes? We have not seen this kind of thing before. The simple truth is that somewhere and somebody from the higher quarters has to look at their financial recklessness.”


Advice To Other Governors

The President of Association of Senior Staff of Banks and Financial Institutions (ASSBIFI), Comrade Sunday Olusaoki Salako, in an interview with our correspondent advised governors to be prudent in their spending.

He said: “The governors should be financially prudent in their spending. They should sit down and look at their expenditure and know the next step to take. There is enough to go round but some people somewhere are just too greedy.

He alleged that when governors travel out of the country, they go with a lot of aides, who are family members, and that apart from that most of the governors and their aides flies first class.”

To buttress his point, Salako, who is the Deputy President of Trade Union Congress (TUC), said some governors, from the information available to the Congress, had paid up to June salaries in their respective states even before the bailout and that these states are not even collecting up to what some of the states that are owing workers salaries from the Federation account.

“I am not holding brief for some of the states, but, as I speak some of them have paid salaries for June even before the bailout. Are they not running the same government? Even some of the states that have paid up to date are not even collecting up to what the states that owe salaries are collecting from the Federation account. Something is wrong somewhere. Some people believe that it is time to accumulate wealth for their generations yet unborn.”

He continued, “We are not saying they should pay salaries and not do other things. The state governors were doing something before this salary issue started happening. What we are saying is that some of these governors are financially reckless. They were not saying this two years ago but the point is that some of them are financially reckless.”

Perhaps, nobody has captured the situation better than an analyst, Mr. Mathew Oboh, who said: “I think the governors railroaded President Buhari into this – and he had no advisers to ask the difficult questions. Some of these banks collude with the governors, grant them unsecured loans, share the money with the governors and here we are federalising the debt. The CBN and DMO are now going to guarantee the debts and restructure them over a longer period. Then the CBN will print N250-N300 billion of new currency not backed by any economic activity! What are the debtor governors giving up in return? And what is the message to the governors that have been more prudent than their peers?”

“Those indeed are serious posers that should task the relevant authorities. While there is hardly a state in the nation without some deposits of “gold”, enough to sustain its needs if properly tapped, most of the governors rely entirely on the allocations from the Federation Account for virtually everything. It is therefore little wonder that many of them can no longer meet obligations as basic as payment of workers’ salaries,’ he added.