Business
Anxiety in States over deduction of budget support as deadline ends
BY EMEKA EJERE
There are strong indications that the planned commencement of deduction of the N614 billion budget support facility from state governments this month is causing panic across 35 states of the federation.
The federal government through the Central Bank of Nigeria (CBN) between 2015 and 2017 made available the facility when all states but Lagos were unable to pay salaries and wages to their workers. The loans granted to enable states meet their financial obligations to civil servants and pensioners were provided at a nine percent interest rate, with a grace period of two years.
But the benefitting states have been lobbying for deferment of repayment which was acceded to until Edo State governor, Godwin Obaseki, accused the federal government of printing N60 billion in March to support allocation to states. CBN Governor, Godwin Emefiele, had rationalized Obaseki’s claim, and said it was time for states to repay the facility with a July deadline.
“It is very inappropriate for people to just give some coloration to the word ‘printing of money’ as if it is a foreign word coming from the sky,” Emefiele had said.
“In 2015/2016, we were in a similar (fiscal) situation, but it is far worse today. We provided budget support facility to all the states of the country and that loan remains unpaid till now. We are going to insist on the states paying the loan back since they are effectively accusing us of giving loans to them.”
After fruitless efforts to extend the repayment time again by way of lobbying, the governors agreed to make the refund on a condition of adjusting the revenue allocation formula, which was the basis of agreement for the new minimum wage. This led to the issue being referred to the National Economic Council (NEC) for intervention.
At the end of a meeting of the Nigerian Governors Forum (NGF) held in September 2019, the governors demanded that the bailout support be reconciled with debts that the federal government allegedly owes states. Many of such debts, according to them, involve amounts used to repair federal roads by state governments.
During the NGF meeting, chairman of the forum, Governor Kayode Fayemi of Ekiti State, said governors would repay the loans only after proper reconciliation of the accounts.
“If you borrow, you pay. Governors have never been averse to payment of loans that we took under legal environment and we don’t want a situation that our banking system and financial system will be in any jeopardy.
“However, governors believe that just as we are ready to pay, we also have a duty to ensure reconciliation of account as far as money owed to states may be concerned. That is the process which is ongoing,” Dr. Fayemi state.
On Thursday at the NEC’s 118th meeting, the minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said an agreement had been reached to start the deduction from the end of this month. While being silent on the account-reconciliation demand made by the governors, Ahmed said the CBN would, however, provide a bridge financing facility to states having financial difficulty.
Meanwhile, sources say, as a result of financial strain, many state governments have started reducing their overhead costs as part of measures aimed at addressing the dwindling funds from the federation account, but ruled out sacking workers or slashing salaries in order to reduce the states’ wage bills.
According to them, no matter how tight the finances of their states were, governors would not contemplate sacking workers because of the possible political backlash.
Last week, a top official of NGF, who confided in a national daily, said, “Except for a governor like El-Rufai (of Kaduna State), who is courageous enough to take decisions without thinking about the political implications for himself or his party, no governor will contemplate laying off workers less than two years to the 2023 elections.
“One of the major causes of Chief Bisi Akande’s failure to win second term in 2003 was the reform that he carried out in the civil service as well as the teaching service. Some teachers were laid off because of the irrelevance of their subjects. Some civil servants lost their jobs because their certificates were not genuine.
“Although the old man is a good manager of people and resources, he lost the 2003 election partly because of the reform, which was in the overall interest of the state.”
Recall that the Nigerian National Petroleum Corporation (NNPC), in a letter dated April 26, 2021, informed federal and state governments about its dwindling contribution to the federation account as a result of the bloated fuel subsidy.
The corporation also indicated that it would not make any remittance for April and May Federal Account Allocation Committee (FAAC) after paying fuel subsidy from its revenue.
As a solution to the dwindling revenue, the NGF at its meeting on May 20, called for immediate removal of fuel subsidy and suggested that the pump price of petrol should be N385 per litre.
But he Group General Manager, Group Public Affairs Division of the NNPC, Kennie Obateru, in an interview, ruled out the removal of fuel subsidy until the conclusion of negotiations with the organized labour. Findings show government is spending N720 billion on fuel subsidy between May and October. Current subsidy payment, according to NNPC GMD, Mr. Mele Kyari, is N120 billion monthly.
Now the woes of the states are being compounded by the CBN’s insistence on deducting the budget support loans advanced to them. Apparently mindful of the financial challenges of the states, governor of Sokoto State, Aminu Tambuwal, in April appealed to the CBN to shelve its plan to recover the $2.1 billion loan for now.
Tambuwal, who made the plea during a panel session at the high-level dialogue on financing safe schools and creating safe learning communities organised by the federal ministry of finance, budget, and national planning in Abuja, said recovering the loan at this time will hinder state governments’ funding to education and creation of safe schools.
“Recovering the debts now from the states will make it impossible for the state governments to fund education in general and the safe schools project in particular,” he cautioned.
Recently, the governor of Ebonyi State and chairman of the South-East Governors’ Forum, Dave Umahi, lamented that states were struggling to survive owing to the dwindling revenue allocations to them. Umahi, who featured on ‘Politics Today’, a current affairs programme of Channels Television, was responding to the question if the states were ready for the shock posed by dwindling revenue.
He said, “I don’t believe that the states should be allowed to further get any shock. The states are already bleeding; the states are already in a very bad situation. And the security of the nation, the states are shouldering that; to empower the youths, to create welfare for our people. The situation is very challenging. I will not advocate a situation in which there is further shock on the finances of the states.”
The governor said he and his colleagues would “sit with our leaders at the centre and be able to see how the situation will be managed, because a nation is as strong as the weakest state. If one state is in trouble, the rest of the states are in trouble. I’m sure that we are going to discuss it and try to find solution to that,” he said.
A couple of weeks ago, Kaduna State Government made clear its plan to downsize its workforce of close to 100,000. Complaining about dwindling revenue, Muyiwa Adekeye, spokesman to Governor Nasir El-Rufai, said: “Government finances have been severely stretched by higher wage bills at a time when revenues from the Federation Account Allocations Committee have not increased.”
He recalled how in November 2020 the state government had “only N162.9 million left after paying salaries.”According to him, the state received only N4.83 billion from FAAC that month and paid N4.66 billion as wages.
“In the last six months, personnel costs have accounted for between 84.97 per cent and 96.63 per cent of FAAC transfers received by the state government,” he said.
The dust raised in Kaduna was yet to settle when the neighbouring Kano State, after weighing all options, decided to stop the payment of N30,000 minimum wage to its workers.
It reverted to the previous wage scale of N18,000 in December, drawing the ire of the Nigeria Labour Congress (NLC) which served notice of an industrial action except the decision was rescinded. But it turned out to be a feeble move for the strike was suspended even before it took off.
National President of NLC, Ayuba Wabba, said the decision to suspend the strike was reached after an emergency meeting with a government delegation led by Head of Service, Hajiya Binta Ahmed.
It is very likely that the planned deduction from state’s allocations will trigger even more of the cost-cutting moves across many other states to avoid default in their obligations to workers.
“The federal government is just being petty. This is happening just because Gov. Obaseki spoke the truth”, said Mr. Ayoola Olu, a public affairs commentator.
“By the time states start to default in paying salaries and there is threat of social unrest, the same federal government will be forced to come back to their (states’) aid.”