As Many States Go Bankrupt…

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As many states are increasingly unable to perform routine functions because of shrinking incomes, something has to be done before it is too late

When President Muhammadu Buhari said recently that about 26 states were almost too poor to pay their workers’ salaries, he was not saying anything new. The situation in the 36 states is so grim that some may not survive the prevailing economic spell. In the past few weeks, for instance, Ekiti State civil servants went on strike for being owed five months salaries. For want of anything to do about the catastrophe, Governor Ayodele Fayose went on sympathy strike with them. Chairman of the Nigeria Governors’ Forum (NGF) and Governor of Zamfara State, Alhaji Ibrahim Yari, recently declared rather ominously that many states would no longer be able to pay the N18, 000 minimum wage to their workers.

The inability of the states to pay salaries had a year ago attracted the attention of the federal government. Last July, the Central Bank of Nigeria in a special intervention package doled out between N250 billion and N300 billion in form of soft loans to enable the states meet their salary obligations to their workers. In addition, the Debt Management Office also helped them to restructure their commercial loans to the tune of N660 billion. There is no sign that it had salutary effect.

A recent report indicates that the internally generated revenues (IGR) for no fewer than 15 states were far below 10 per cent of their Federation Account Allocations in one year – from June 2015 to May 2016. Outside Lagos, Rivers, Delta and Ogun States which have relatively impressive IGR, the remaining 32 states rely more on the dwindling allocations from Federation Account to fund their services. States like Yobe, Zamfara, Ekiti, Borno, Kebbi, Taraba, Nasarawa, Adamawa, Gombe, Jigawa, Bauchi and Katsina that generate little to nothing in internal revenue are particularly marked for hardship.

It is therefore no wonder that many of the states are scrambling for the N90 billion recently set aside by the federal government to bail out the financially distressed ones. But unlike the first bailout, this one comes with 22 stiff conditionalities, including the publication of audited annual financial statements within nine months of the financial year, and realistic and achievable targets to improve independently generated revenue.

However, while we agree that the falling price of crude oil, the nation’s major source of revenue, has contributed to the financial constraints faced by many states, we also believe that there are many leakages that need to be blocked as well. As recently revealed in Kaduna Sate, biometric capture of all states’ civil servants will eliminate payroll fraud. It is also insensitive to continue with the generous pensions for ex-governors, many of whom are still drawing hefty salaries from government.

In addition, a situation where a governor appoints 500 personal aides is nothing but sheer irresponsibility. The current perception of the populace is that many of our governors have failed to plug leakages and wastes, which over the years have become institutionalised in their states. Top officials in some of these poor states are still ferried around in private jets and helicopters mostly to attend unnecessary social events, including marriage ceremonies and birthdays. The ostentatious lifestyles of most governors do not offer logical persuasion to the citizens they govern that their states are broke.

In the long-run, the issue of bankruptcy for many states poses the same challenge as the structural viability of Nigeria and the mockery of our federalism. When the government of Nigeria is mentioned today, the only unit that comes to mind is the central government – a symptom of the malady of over-centralisation. But the chicken is finally coming home to roost with the outright economic bankruptcy of many of these so-called states. Things have degenerated to an extent that the fiscal law of matching federal allocation proportionally with states internally generated revenue had to be violated in order to maintain what the preponderance of states receive, which is now not even sufficient to pay salaries.

Given the foregoing, we are yet to see a way out of the prevailing governance mess without ultimately embracing a return to fiscal federalism.

Quote: The current perception of the populace is that many of our governors have failed to plug leakages and wastes, which over the years have become institutionalised in their states. Top officials in some of these poor states are still ferried around in private jets and helicopters mostly to attend unnecessary social events, including marriage ceremonies and birthdays