Discordant tunes trail Abia’s financial status

There is confusion in Abia State over the true state of the state’s finances following the controversial approval given by Abia State House of Assembly to Governor Okezie Ikpeazu to borrow N30b. Already the opposition All Progressives Grand Alliance is kicking against it.  PETER OKORE in Umuahia reports

The story that dominated the airwaves and pages of newspaper about Abia state in the past two weeks was that Abia got N3bn as its share of the N713.7b federal government bailout fund to states. Within the same period the media was awash with the information that Abia State House of Assembly has approved that Governor Okezie Ikpeazu should secure N30bn loan from commercial banks. Earlier it was also announced that Abia state government has received   a grant of USD200million from the African Development Bank, ADB for Urban regional development.

As a result of all these assumptions or insinuations, more so, coming from state media organisations, among others, individuals and groups went to town and drinking joints with their interpretations of these financial commitments to the state. This scenario was created at a time civil servants, pensioners and contractors were on the neck of governments expecting something reasonable from the total bail-out package which could enable states clean-up outstanding arrears of salaries, pensions and other running costs.

Based on the high expectations, the N3b alleged to be the state’s share of the bailout promise was considered not enough for what ought to be the due share for Abia. Eye-brows were then raised on the pros and cons of the bail-out fund.

As expected, there were divergent views on the issues. One school of thought had it that N3b was too meagre an amount to be Abia state share from the total bailout fund to clear its outstanding obligations to civil servants; let aside pensioners and contractors.

Another school considered how Abia could borrow N30b from commercial banks, with the attendant high interest rates and shorter gestation period. They queried that if these happened, then Abia must have been short-changed or cheated in the sharing of the bailout fund, going by whatever sharing formula adopted.

Again, economy-watchers opined that exposing a state like Abia to secure a N30b loan from commercial banks at their high interest rate and short tenure would be outrageous and could cripple state activities.

Irked by the development, the Abia State chapter of the All Progressives Grand Alliance, APGA, went to market with an advertorial, querying the appropriateness of the N3b mistakenly said to be  the expected FG bailout fund,  just as they dissociated  their party from the resolution of the Abia State House of Assembly which authorised Governor Ikpeazu to secure a loan of N30b from commercial banks. They also reasoned that such an economic decision could plunge Abia state into huge debts.

In their statement titled “Abia Government N30billion loan request…beware,” endorsed by the publicity secretary, Madu Chikwendu, said “That Abia is presently indebted to many financial institutions, without clear cut strategy and sources of repayment, hence dragging her into a state of bankruptcy and depression through additional borrowing is unacceptable.

It queried how the government will repay the N30billion it seeks to borrow and which government will pay it”.

Following these doubts and misinformation, series of  telephone calls  were raised from patriots everywhere  for authorities in Abia  to speak out ; especially if and why Abia should receive only N3b from the total N737billion bailout from President Buhari.

Since the issues were more technical and academic than mere politicking, Hallmark sought the views of experts to put it in perspective for those who cared to know.

Mr. Obinna Oriaku, an astute banker and special adviser to Abia state governor on Economic Affairs, clarified the issues which is generating controversy in the state. The crux of the matter was that Abia has received N3billion bailout fund and another approval from the House of Assembly for Abia state government to obtain N30b loan from commercial banks for targeted new projects like roads, dredging of the Aba River, building of Fly-over bridges, etc, in Abia .

According to Oriaku, the truth is that the N3billion that Abia received was her share of the proceeds from $1.7billion Liquefied Natural Gas, LNG, dividends credited to the Federation Account and, accordingly shared among the three tiers of governments. It was not the anticipated FG bail-out fund; as the public was earlier made to understand. From all indications, the actual bailout is yet to come.

At this point, it will be pertinent to recall that sometime in July, 2015 state governors in the federation met with President Buhari and requested for a palliative or intervention measure in view of the current harsh economic realities, which has made most states unable to pay salaries, pensions and obligations to contractors.

According to sources, out of that sum Abia got N3.2billion. Going down the tier, the 17 LGA’s in Abia got N1.2billion, while the remaining N2 billion went to the state for other matters.

What were these anticipated bailout funds meant for? As Mr. Oriaku puts it, “they are meant for immediate payment of salaries and pensions”. In reality on assumption of office by the present regime, it was discovered that most states in the country were not able to pay salaries. And, there were no hopes anywhere to source for funds to pay salaries, pensions and other obligations; more so when most commercial banks were also not willing to deal with states that are highly indebted.

According to Oriaku, “the N3b LNG fund share for Abia is different from the bailout fund which state governments are still currently working out the modalities with the Debt Management Office, DMO, the Central Bank of Nigeria, CBN, and the Federal Government in Abuja.

Another question could be how this bailout will affect states. We are aware that some states are highly geared; that is, that they (states) have borrowed so much from banks to the extent that the repayments are now making it difficult for them (states) to even pay salaries. The alternatives were then for Federal Government to buy-over these debts and agree with states on repayment modules. This can only be possible through Federal Government bond.

Oriaku said “the state governors have met with President Buhari over the poor financial situation of states.  After that meeting they also met with the accountants-general from the 36 states in the country, CBN and the Debt Management Office, DMO, respectively. These are the processes that must be followed before Bond is secured. The processing of this bailout is what gave rise to the controversial N30billion Bond being noised all over Abia”.

So, by states getting a FGN Bond means that the tenure for repayment of these funds will now range between 15 to 20 years. The importance of going through this hug is to enable states that are highly geared to banks the freedom to still function. There are a lot of states that are heavily geared.

A state like Lagos owes close to N400billion. Now if this N400billion is converted to FGN Bond, what it means is that the Federal Government is buying over these debts at single digit of seven or eight percent, and  spread over 20 years. With FGN bond, repayment is passed on from one administration to another. With this arrangement it gives benefitting states freedom to navigate around their needs.”

From the foregoing, it is clear that the N30billion loan approval by Abia House making the rounds is a condition from the federal government and DMO before they can buy-over old debts from states. This is only a documentation process, because of the tenure of the Bond, 20years.”

To put matters aright, the N30billion is not a fresh borrowing by Abia state. Rather, N30b is accumulation of all Abia state debts; made up of salaries, local government and state pensions, amounts owed to contractors, etc, for FG to buy-over.”

Incidentally, the understanding of these issues has been the bone of contention, including members of Abia House of Assembly. There could have been enlightenment on the bailout fund and the Bond processes, before the media and markets went awash with the state’s financial involvements.

However, a cursory look at the state’s debt profile shows that Local Government pension alone averages N9billion. Aside state pensions and current salary liabilities still outstanding, a summation of all with that of the bank exposures of the state, Abia state debts averages the anticipated N30billion loan being sought through Bond market. Of course, there are arguments that this figure ranks among the least in the country.

Nevertheless, the beauty of  the on-going FGN Bond processes is that with these palliative measures, states will be able to clean-up the backlog of salaries and pensions in all the Ministries, Departments and Agencies, MDA’s . Secondly, it will bring big relief to Abia state in particular and enhance rapid developments. Monies circulate faster in an economy when workers and pensioners are paid regularly.

To realise the objectives of the bail-out fund, the Federal Government should follow-up states to make sure that these funds are really used to pay down the arrears of outstanding obligations to civil servants and for government to continue to function. The federal government should be more pro-active to make sure that the state does not grind to a halt, as a nation.

It is, however well known that the cause of this development is because of the declining oil receipt. In the words of Oriaku, Abia state used to receive an average of N6.5 to N7.0billion every month, including VAT, SURE-P, JAAC, FAAC and all other statutory allocations summed-up. But today, the state receives just N3.5 billion, with the same high overhead.

What palliative measures is Abia state putting on ground to ensure the state does not grind to a halt? In answer, Oriaku stressed that Abia state government has introduced a number of belt-tightening measures to sustain activities.

To cope with the situation, Abia state has trimmed down its overhead and contrary to what obtained in the past. Said Oriaku ”It is no longer business as usual in Abia. The things we did when we got N7billion, you cannot  expect same now that the state receives N3.5billion”.

On salary issues the economic adviser disclosed that the state has discovered that civil servants engage in lots of “irresponsible activities over salaries payments” such as ghost workers, padding of salaries and a whole lot of them. We are saying no to such fraudulent practices which had been institutionalized within the system. We have come out with another creative way of paying salaries to actual workers and making sure that the real amount is what is paid”, he said.

”Today we have succeeded in saving close to N160million from this singular exercise. Out of about 65 MDA’s in the state, we have paid salaries to 62 of them as at 24^th July, 2015. By the time this exercise ends, we are sure of saving about N160million more. These various sums were, before now stolen or went to non-existing civil servants.

Nevertheless, government has continuously announced that by implementing economic measures that it is not witch-hunting anybody, stressing that the exercise is only targeted at making sure that the right people who work are paid.

Investigations revealed that there are lot of people (tagged ghost workers), residing in Lagos, Abuja and outside the shores of Nigeria who are not working for Abia state government, yet are receiving salary alerts from Abia state government every month. Problem of government in checking fraud are in some key officers, including sub-Treasurers, permanent secretaries, political officeholders, NULGE and NLC. These groups are not helping matters. Rather they are still foot-dragging to change. But, Oriaku maintains that those cogs on the wheels of progress would find it difficult to circumvent the strategies, this time around.