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 13, 2015 at 12:01 am   /   by   /   comments (0)

President Muhammadu Buhari on Monday last week approved a package of measures to bail out cash-strapped states to enable them to pay public sector workers, some of whom have not received salaries for up to ten months. In this special report,  by our reporters – Sylvester Enoghase, Oladunjoye Phillip, Emma Ogwuke, Abel Orukpe, Olamide Bakare and Judith Eshemitan, we examine the reason for the bail out; the source of the fund for the bail out and the reactions of labour unions and industrialist to the gesture by the federal government.




The crash in the price of crude oil at the international market, which many oil producing countries have been grappling with since the middle of last year, appears to be taking a huge toll  on the Nigerian economy.

This is evident in recent happenings in most states of the country where the various governors could not pay the salaries of their workforce.

Consequent upon this, many civil servants in most states had gone on the street protesting the non-payment of their salaries.

The State governors had last week at the National Economic Council (NEC) meeting demanded the sharing of the funds in the Excess Crude Account which they had put at $2 billion for them to settle the aggrieved workers.

Consequently, President Buhari had also approved a package of measures to bail out the cash-strapped states to enable them to pay their public sector workers, accusing Jonathan’s government of leaving the treasury ‘virtually empty’ while figures showed debts totaling about $63.5 billion at the end of March.

To bail out the states, the federal government agreed to share about $1.7 billion (N391b) left from the controversial Excess Crude Account with the state governments.

Accountant-General of the Federation, Ahmed Idris, after meeting with President Buhari, said that the sharing would be done at a meeting of the Federation Account Allocation Committee (FAAC) scheduled for Monday evening.

According to Idris, “Today, we are going to meet; the FAAC is going to meet, and we are going to distribute as agreed and directed during the NEC meeting last week.

“The position is very clear, what we met on ground is what we are going to distribute. It is hovering between $1.6 and $1.7 billion, and that is what we are going to distribute among all the three tiers of governments, the federal, states and local governments based on the approved formula.”

He said the President was clear in his instructions concerning more efficient management of the meagre resources available to the country now.

“Mr. President had a clear direction which we all have to fall in line – prudent management of resources and to identify more alternative ways of generating revenue – which we are set to do; and to manage the meagre resources we found on ground very efficiently and effectively for the betterment of the economy,” Idris stated.

Permanent Secretary in the Ministry of Finance, Anastasia Nwaobia, who accompanied Idris to meet with Buhari, added that but for the sharp drop in global oil prices, Nigeria’s financial status would have remained okay. She said the President underscored the need for prudent management of resources, blockage of revenue leakages and shoring up revenue.

“The state of Nigerian finances is okay, our finances are still okay, though we are still going through challenges of revenue stream to government, and this you know obviously is from the oil shock – the price of oil that has dropped.

“It has significantly reduced the revenue stream to government but we are working on other ways to see how we can shore up the revenue, so that we will be able to meet our expenditure,” she said.

 Source Of Bail-out Fund

Meanwhile, contrary to the belief that the bail-out fund was sourced from the Excess Crude Account, The Permanent Secretary, Federal Ministry of Finance, Anastasia Daniel-Nwokobia, said that the fund came from the $2.1 billion dividend paid to the Federation Account by the Nigeria Liquefied Natural Gas Company (NLNG).

Also, Presidential spokesperson, Femi Adesina, who described the initial reports as “incorrect”, clarified that the ECA balance was intact, as the funds were drawn from share of the dividend paid to the Federation Account by the NLNG as part of measures by President Buhari to deal with the problem of unpaid public sector salaries in many states.

Adesina said the other measure adopted by the President on the issue include a Central Bank-packaged special intervention fund that would offer financing to the states, ranging from N250 billion to N300 billion in the form of soft loan to enable the states pay backlog of salaries.

He also said that beside this a debt relief programme designed by the Debt Management Office (DMO) was also in the pipeline to help states restructure their commercial loans currently put at over N660b, and extend the life span of such loans, while reducing their debt-servicing expenditures.

“The measures approved by President Buhari definitely do not include drawing down the remaining balance in the Excess Crude Account or the “liquidation” of the account as some media outlets have wrongly reported,” Mr. Adesina explained.

“No such decision has been taken or approved by President Buhari, and last week’s meeting of the National Economic Council clearly concluded that the Excess Crude Account should be left untouched at this time,” he added.

At the end of the Federation Accounts Allocation Committee (FAAC) meeting for the month of May 2015 held last week in Abuja, the Permanent Secretary, Federal Ministry of Finance, Mrs. Daniel-Nwokobia, had disclosed that the balance in the foreign denominated ECA stood at about $2.078b.

 Labour Expresses Mixed Feelings

The Nigeria Labour Congress (NLC), while expressing appreciation to the Federal Government for releasing intervention funds to enable the 36 states governments settle salary arrears of workers in their states, said the Congress support the move as the intervention applies to all, and not only the states that are owing workers.

The NLC’s general secretary, Peter Ozo-Eson, commended the Federal government on the gesture, saying the intervention would go a long way in enabling the states to discharge their obligations to the citizenry.

Ozo-Eson said the government gesture was a positive response to the congress’ submission to the Presidential Transition Committee underlining the need for President Muhammadu Buhari to intervene in resolving the issue of backlog of salaries for workers at all levels of government in the country.

He said: “We are happy that President Muhammadu Buhari has made this happen. We are all the more happy that this intervention applies to all, and not only the states that are owing workers, as this would have been tantamount to rewarding profligacy.”

He  said the intervention could be appropriately viewed within the prism of legitimacy and normal duty of sharing, adding that the government should go beyond that and ensure that the states appropriately utilised the funds for the purpose it is meant for.

“In light of this, we would wish to invite Mr. President to bring the full weight of his office to bear on the governors in order to ensure that the funds disbursed are applied as of priority to the payment of the full arrears of salaries and pensions owed workers and retirees,” he said.

To ensure compliance, the NLC directed their state councils to closely monitor the disbursement and utilization of these funds. It warned that reported cases of misapplication would attract appropriate response from the workers.

The Trade Union Congress (TUC) in a statement signed by its President, Comrade Bobboi Bala Kaigama, and Secretary General, Comrade Musa Lawal, expressed strong reservations about the total liquidation of the excess crude account, stressing that it would have kicked against the bailout but for its mindfulness of the pains of millions of workers and their families who would benefit from it.

“The move is tantamount to eroding and eating up the future of unborn generations. But we shall allow it because of the innocent workers and their dependants and on the condition that sufficient arrangements are made to guarantee early repayment of the money by the states. How can a governor who is also head of a family owe workers up to ten months salary in a country where there is no price control?  Such laxity is totally unacceptable, a typical example of man’s inhumanity to man,” it lamented.

The Labour Center however acknowledged contrary reports credited to the presidency and contending that the earlier report on liquidation of the Excess Crude Account is incorrect and expressed hope that the earlier report is indeed untrue.

The statement warned that the Buhari administration must guard against the presence of fifth columnists in its midst so as not to give Nigerians any reason to regret voting it into power.

“It appears some people in the administration are only there for themselves, their families and cronies instead of working for the improvement of the lot of the people, stopping the increasing spate of bomb explosions that have claimed hundreds of lives and destroyed much property in the once peaceful North-Eastern part of the country; while financial waywardness, profligacy, impunity and the awkward belief in business as usual must come to an end,” it advised.

The TUC said that certain cogent questions are yet to be answered irrespective of whether or not the bailout funds are from the Excess Crude Account. They particularly queried the wisdom of the Federal Government’s allocation of money to the state governments twice for the same purpose.

“If your rent is N200, 000 (two hundred thousand naira) per annum and you pay that amount to your landlord in January, do you still go ahead to pay him in June, July or any other month of the same year? Is it sane or proper to pay twice for the same thing?  These governors must be investigated for their recklessness and monitored to ensure that the bailout money is judiciously applied for the intended purpose.  In line with this, we call on the Federal Government to publish the comprehensive list of the bailout sums of money allocated to each state, for public information and ease of monitoring,” it said.

Call For Bail-out To Private Sector

Reacting to the latest move by Government to rescue the State Governments, the President of Construction and Civil Engineering Senior Staff Association (CCESSA), Dr. Augustine Etafo, urged the Government to extend same bailout measure to the private sector

He said: “We, from CCESSA, say kudos to the President of the Federal Republic of Nigeria, President Muhammadu Buhari for the Federal Government’s bailout package for cash strapped states. In as much as we looked at this as a welcome development and also an element of “change” which is widely preached by the present administration, we are of the opinion that this bailout should not be restricted to the public sector alone as the case is now, instead, it should be extended to the private sector where lots of our employers are being owed huge debt on already executed project or contracts and this has translated into loss of jobs in the private sector.

“As we are talking right now, our immediate constituency, which is the construction industry has retrenched or put on redundancy no fewer than 50,000 members of its workforce which is the resultant effect of the non-payment of debt owed to the contractor on already completed projects.

“We therefore urged the federal Government to make the private sector inclusive in the special intervention fund that will offer financing to the state (Public Sector), ranging from N250 billion to N300 billion.”

Etafo said the 250 – 300 billion special intervention fund to be package by the Central Bank of Nigeria (CBN) to offer financing to the states and local councils (public sector) struggling to tame their aggrieved workers, who have been owed month of salary arrears, would not be completed without such intervention in the construction industry, textile, mining, the agro-based industries and all other private sector established industries.

“As part of the president’s plans to reduce unemployment in the country, the textile industry which used to have 350,000 workforce and today has less than 30,000 workforce, and the construction industry, which has for the year 2014/2015 alone sent more than 50,000 worker packing and our mining industry that are also struggling with the same precarious problems should not be allowed to go down the drain but also need the helping hand of government either by way of such intervention package or in the case of the construction companies, pay all the debt owed to them for them to settle the loans they took in the course of executing most of the contracts which have long been completed.

“Let Nigerians not play politics with this issue because all is not well if most of our youths are on the street doing nothing. Therefore any economic agenda that has to put a smile on the faces of Nigerians must be tackled holistically without leaving any stone unturned,” he emphasised, explaining that the driver of the economy was not just the public sector but a combination of the public and private sector and a bailout for one without the other was not only a disservice to that sector but also to the economy, and the unemployed Nigeria youths in general.