The groundswell of criticisms trailing the bailout package approved by the federal government for itself and cash-strapped states constitutes a diversion to the actual goal of governance and advertises in dramatic fashion, the skewed nature of the Nigerian federation. To all intents and purposes, the action is an exoneration of governors from the guilt of fiscal indiscipline. As a matter of fact, it constitutes a diversion to the actual goal of governance and development. A situation whereby state governors and leaders of state assemblies arrogate scandalous perks and huge remuneration packages to themselves is deplorable, amounting to sheer robbery. Imperatively, the President must ensure that the funds are judiciously deployed to improving the lot of the people, especially workers, who are owed salary arrears and not diverted into the private pockets of state officials. It is the prudent use of the bailout funds that would validate its relevance, given that no guidelines for accountability and new strictures against profligacy were applied, even as the President appears determined to stamp out corruption.
President Muhammadu Buhari approved that the three tiers of government share $2.1 billion proceeds of investments in the Bonny Liquefied Natural Gas Project. He also ordered the Central Bank of Nigeria (CBN) to provide a loan package of between N250 billion to N300 billion for states to pay arrears of workers’ salaries, while the Debt Management Office (DMO) is to facilitate the restructuring of the commercial loans put at N660 billion and extend the life span of the loans to reduce states’ debt service obligations. While the ruling All Progressives Congress (APC) commended the President for the bailout, some like Governor Ayodele Fayose of Ekiti which got N2.1billion considered it as a legitimate earning due the State from the Federation Account. In the same vein, the PDP declared that bailout funds came from savings handed over to Buhari by the past PDP-led administration, in clear contradiction to the earlier impression given by the President that he met a virtually empty treasury upon assuming office.
While the APC and the PDP trade brickbats and accusations and counter-accusations over the source of the bailout funds – the PDP said it came from the Excess Crude Account but the APC denies this – it is worth-noting that in his meeting with the governors sequel to his ordering the bailout, the President failed to mention or acknowledge the contributions of the governors to the inability of states to pay workers and the parlous state of their finances. On the surface, the policy provides a welcome relief to suffering workers, but it sends wrong signals for the improvement of fiscal governance at the state level. The governors’ posturing indicates an attitude of buck passing as though the cash crunch was caused by some ghosts. Clearly, they are responsible for the financial predicaments of their states. Given their predilection to plunder their states, the bailout amounts to rewarding the mismanagement and betrayal of public trust. Going forward, state governments must cut their coat according to the size of their cloth. The federal government is not a Father Christmas
For the states to function in the interest of the people, the financial recklessness and frivolities of governance must be stopped. As the Center for Social Justice noted in a statement, it is unconscionable to give public funds to be managed by “a governor who has appointed tens of special advisers and assistants; still maintains a long convoy of cars for his entourage and/or maintains an aircraft at state expense; or drawing hundreds of millions monthly on unaccounted security votes. It will also be a fiscal crime to allow states to have access to this bailout fund – where …accounts have not been audited for the past couple of years and there have been no follow-ups on audit queries and findings; no biometric verification of the workforce to remove ghost workers; or states that pay 20 per cent of their Internally Generated Revenue (IGR) to the private companies engaged in IGR collection; states with commercial bank loans and bonds that cannot be justified by capital projects in the state, among others.”
The country is in dire straits because resources have been looted, misapplied and misappropriated. Much as the federal government has bailed out the states at this point in time, it must set a new tone for accountability and erect new strictures on profligacy. The hands of debtor-states must be tied. In the long term, there should be provisions barring governors from running deficit budgets. But it must also be recognized that the skewed federal structure has made it impossible for states to benefit fully from natural endowments in their domains. Indeed, the incongruities have enabled the federal government to indulge in opaque financial transactions.
Ultimately, these bailouts will be meaningless unless the fundamental contradictions and the skewed nature of the Nigerian federation are addressed. It is indeed unfortunate that the funds will be spent servicing the corrosive, inefficient, patronage-ridden State bureaucracies to the detriment of national development. The outcome of the civil war informed the breaking of Nigeria into 12 states by the Gowon administration. Fiscal manipulation anchored on a voracious desire to share the national cake guided later efforts; reason why some states, despite paucity of their population have more local governments than others.
But despite federal allocations, many states, especially oil-producing ones are in the red. Conservative estimates by experts put the number of states that can survive without federal allocation, to no more than three. With a huge debt portfolio of over N2.00 trillion, the country’s 36 states and the Federal Capital Territory (FCT) are in dire financial straits. Nigeria’s Public Debt Stock as at March 31, 2015 stood at a staggering N63,506.14 12,062,335.23, according to the Debt Management Office (DMO). Of this amount, the external debt stock (FG + States) was N9,464.11 1,864,429.67, and the domestic debt stock (FG only) was N43,185.51 8,507,545.47, while the domestic debt of states was N10,856.52 1,690,360.09.
In its 2013 report, the last year when comprehensive data is available, the DMO listed Lagos State as the highest debtor with a contingent liability of N238.262 billion, comprising a local debt of N157.536 billion and a foreign component of N80.726 billion. Lagos is followed by oil-rich Bayelsa while Cross River is third. However, on a debt solvency and liquidity ratio analysis relative to revenue inflow to states, Cross River State is the heaviest debtor. Next to Cross River is Rivers State, followed by Delta, Imo and Kaduna. Crisis-torn Borno and Yobe emerged the least indebted with Borno pulling the least public debt of N3 billion. Yobe on the other hand has only contracted a debt toll of N6.939 billion.
Given these unedifying statistics, the FG should rather be seeking ways of harnessing the existing states into viable units, instead of offering them bailouts. The reality of the government’s financial quagmire is messy; and the governors should be held accountable. While it is imperative for state governments to run within the limit of their resources, the alternative to restructuring the Nigeria federation to unleash the development capacity of the component units cannot be financial bailouts, but rather; shrinking them into larger productive units in order to reduce the cost of governance and free resources for national development. This is what the country needs and Nigerians deserve no less.
