By AYOOLA OLAOLUWA
Many states and local governments in the country are currently struggling to fund their expenses as revenue derived from the federation account, as well as Internally Generated Revenue (IGR) continue to dwindle, Business Hallmark findings can reveal.
Already, many states and local governments are owing workers salaries, while many capital projects are stalled.
It would be recalled that the price of crude oil, which constitutes over 70 percent of Nigeria’s income, have traded below the $40 mark since the outbreak of Coronavirus from early 2020, before it’s recent rise at the beginning of this year.
While prices have remained low, the nation’s output has remained largely at 1.4 millions barrels per day as against 2.4million projected by the government.
In September 2020, Vice President Yemi Osinbajo, revealed that the nation was cash strapped as it lost 60% of its expected revenue
Since most states, except Lagos, Ogun and Rivers, derive their income from the federation account, they have been unable to cope with the deep fall in revenue.
According to the Nigeria Extractive Industries Transparency Initiative (NEITI), the Federation Accounts Allocation Committee (FAAC) shared N3.879 trillion to the Federal Government, states and local government areas in the first six months of 2020.
A breakdown of the disbursements showed that N1.53 trillion went to the Federal Government, while the states got N1.29 trillion and the 774 local government areas received N771.34 billion
The N1.53 trillion received by the FG in H1 2020 was 4.28 per cent lower than the N1.599 trillion it got in the first half of 2019 and 7.36 per cent lower than the N1.652 trillion it received in the first half of 2018.
For states, a total of N1.29 trillion was disbursed in the first half of 2020. This was 2.8 per cent lower than the N1.35 trillion disbursed in the first half of 2019, and 5.6 per cent lower than the N1.37 trillion disbursed in the first half of 2020
For local government areas, the 2020 first half disbursements were 2.64 and 3.04 per cent lower than the corresponding disbursements for 2019 and 2018, respectively.
The situation worsened in the second half of 2020. For instance, the three tiers of government shared N601 billion as federation allocation December.
A month earlier, the three tiers of Government had shared N604 billion as federation allocation in November. While allocation for January 2021 is still being awaited.
While the three tiers are going through hard times, the prognosis for the future is gloomy. The Organisation of the Petroleum Exporting Countries (OPEC), recently warned member countries that a prolonged second wave of Covid19 could lead to oil surplus in 2021.
“The earlier signs of economic recovery in some parts of the world are overshadowed by fragile conditions and growing scepticism about the pace of the recovery.
‘In particular, a resurgence of COVID-19 cases across the world and prospects for partial lockdowns in the winter months could compound the risks to economic and oil demand recovery,” OPEC stated in a document obtained by BH.
While allocations from FAAC is dropping by the day, governments are also not meeting IGR targets due to worsening economy brought about by poor economic policies and the effects of the Covi19 pandemic.
Unable to secure the much needing funding, states governments are resorting to drastic measures to beat the cash crunch, a situation that is creating friction between government and labour.
For instance, several states governments have suspended the implementation of the N30,000 minimum wage, drawing the anger of the local chapters of labour unions.
The Kano State government had suspended the payment of minimum wage since November 2020, blaming it on the drop in federal allocation and dwindling internally generated revenue occasioned by the COVID-19 pandemic.
The state Commissioner for Information, Malam Muhammed Garba, while defending the desicion, noted that the deduction was necessary to keep the government going, in the face of prevailing economic recession facing the country.
He pointed out that the state government took the measure instead of contemplating paying half salary, in batches or layoff as witnessed in other states.
“Similar temporary measure was taken, including cut in the allowances for all political appointees in its administrative structure during the first wave of the pandemic in the country between March and July 2020, which was withdrawn soon after the critical situation improved.
Also, the Gombe State Government had suspended payment of the N30,000 minimum wage since March 2020, following dwindling finances due to the effect of coronavirus pandemic on the economy.
The state Deputy Governor, Mr. Manassah Jatau, said the decision was taken after consultation with the standing committee on minimum wage and relevant stakeholders.
“The minimum wage increment and its consequential adjustments adopted by the state has been suspended until when the economy of the state improves.
“The Ministry of Finance is to review the 2020 budget to reflect the reduction in the price of oil in the international market and subsequent adoption of 30 dollars per barrel benchmark by the Federal Government.
“In view of the above, all salaries of political office holders and Permanent Secretaries will be reviewed accordingly as a sacrifice to the state”, the deputy governor had explained.
He said that the state revenue service would be strengthened to perform better with a view to reducing the state’s over reliance on Federal allocations.
Jatau added that the government would announce new austerity measures to further reduce financial leakage and enhance savings for execution of necessary capital projects.
Similarly, the Kogi State state government, which is yet to implement the new minimum wage, slashed salaries of its workers, blaming dwindling allocations from Federal Government to states.
While states like Kano and Gombe decided to suspend the new minimum wage, BH findings revealed that eleven other states are yet to start the implementation of the new rate since it was passed into law by President Muhamadu Bihari on April 18, 2019.
The states that are yet to pay the new wage include Adamawa, Akwa Ibom, Anambra, Benue, Ekiti, Kogi, Plateau, Imo, Nasarawa, Osun and Taraba. While the Federal Capital Territory (FCT), Bauchi, Oyo, Yobe and Kebbi are partialy implementing it.
It was gathered that negotiation on the new minimum wage and its consequential adjustment was concluded in Adamawa State before the outbreak of the COVID-19 pandemic, but was dropped after the state government complained of inadequate funding.
Likewise, negotiations have been concluded in states such as Anambra and Ekiti States, but the governments are yet to commence implementation of the new wage.
Apart from the slashing of workers salaries, most states have not been able to embark on new projects, while abandoned projects littered the states.
A human resource expert, Bosun Adedeji, warned workers to prepare for hard times.
“As revenue dwindles, workers and infrastructurural projects are the first casualties as politician seldom tamper with their own income.
“We expect the situation to get worse as the nation’s economic crisis fester. Slashing of salaries or non payment of minimum wage is going to be a child’s play, as feelers from across the states suggests that state governments are already owing salaries.
“Some are owing up to four months already. And these are even better periods. The worst is yet to come”, Adedeji warned.