Financial crisis in the states

Buhari-Assembly-CopyNOTHING perhaps underlined the near insolvency of most of the states in the country more than their visit last week to President Muhammadu in Abuja. The visit was ostensibly to curry the presidency’s favour to finding a solution to their inability to pay workers’ salaries.

The combined facts are disheartening as well as worrisome when laced to the default by the Federal Government to pay the salaries of its ministries, departments and agencies.

What is at once visible is the age-long abnormality inherent in the existing federalism, which has turned the states into beggars; and the Federal Government as ‘Father Christmas.’ Surely, that arrangement portrayed a disaster waiting to happen, particularly with the profligacy, mismanagement and extravagance of many of the states.

Now that the chicken has come home to roost, it is expedient for all the parties concerned to explore an enduring solution. When the state governors ran to Abuja to seek the Federal Government’s appreciation of their problems and intervene accordingly, they presented a list of complaints, including compliance with extant Supreme Court ruling that all monies go into the Consolidated Federation Account; an order from the President that all revenue generating agencies must pay into the Consolidated Federation Account; review of the Revenue Allocation Formula; refund of the monies expended by states on Federal projects; a special consideration for the three states of the North East under the siege of Boko Haram; full details of the amounts that accrued into the Excess Crude Account from 2011, and an answer to how the money unbelievably shrank without official sharing.

The President’s response was equally alarming but clear, that the country was in dire condition financially and that what happened in the second republic paled into insignificance when compared to what had happened in previous administrations under the prevailing fourth republic. He further warned that hard times were ahead of the country in the near term and that the state governments must run within the limit of their resources.

The subsequent statement by the leadership of the governors’ forum to the effect that they (the governors) were not conferring with the President to seek a bailout since the Federal Government was not a Father Christmas and was itself in financial crunch, would then appear to be immaterial. Nonetheless, the governors pressed for reimbursement for Federal Government projects which they had allegedly executed in their states.

Also, they asked the President to streamline the accounts of the federation, such as the Excess Crude Account (ECA) into a single account, that is, the federation account. That demand is reasonable in so far as the ECA is contrary to the provision of Section 80 of the 1999 Constitution as amended; and besides, there has been no accountability and transparency in the management of the account while it existed.

It is just as well that the President promised to look into the governors’ complaints and respond accordingly. In particular, the Federal Government said it would ascertain what was immediately available in the federation account so that the states could at least meet some of their public obligations.

The reality of the government’s financial quagmire is messy; and the governors should squarely take the blame. They ought to stew in their juices.

Their 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. However, the skewed federal structure which has made it impossible for the states to access and benefit fully from some natural endowments in their domains is lamentable. Indeed, the incongruities have enabled the Federal Government to indulge in opaque financial transactions. In the short and long term, there should be some provisions barring governors from running deficit budget but a balanced one.

The hue and cry about ECA is the wrong way to try to do a budget. State governments must cut their coat according to their cloth. The frivolities of governance must be reversed. A situation whereby governors and the leadership of the state assemblies award huge severance packages to themselves is deplorable, amounting to sheer robbery. Imperatively, the President must insist on balanced budgeting henceforth.

The President has an opportunity to set a new tone for accountability and erect new strictures on profligacy. His efforts to recover looted funds are notable; and Nigerians and the international community should help the country to recover all of its stolen money. For the states to function and in the interest of the people, financial recklessness must be stopped.

The workers’ apparent complacency in the face of fiscal rascality on the part of public officers must change. They should resist mismanagement through their collective bargaining power. Much as the Federal Government does not have the resources to bail out the states at this point in time, it may have to do so by sheer fortune of the fluctuating crude price; but it must be on the basis of strict financial guidelines. Bretton Woods-type conditionality for states seeking bailout, must apply in this case.

The President appears determined to stamp out corruption. He must be strengthened. The country is in dire straits because resources have been looted, misapplied and misappropriated. The hands of the states must be tied.

The debtor-states must make commitment. Every governor must deal with the Federal Government individually, and on its terms, and not under the bogus umbrella of the governors’ forum.



2 Comments
  • bongabiz

    This article raises many important and interesting points..

    It is not in the interest of the Nigerian people to have situations where state governments enter periods of near fiscal hibernation, especially given our status as a nation in development. The states should ideally busy themselves with the implementation of much needed development programmes. Looking to the future, however, it is important that we focus on how to prevent the current cash crisis affecting many Nigerian states from repeating itself. The federal government should promote a situation where states have more control of their own resources.

    With added freedom should come added responsibility – each state should also be more prudent in their handling of resources. And the best people to help enforce this are within the states themselves – the state legislators. These should concentrate their efforts on ensuring that budgets are reflective of reality, and should use their influence to make sure that governors and their executive councils refrain from wasteful spending. But of course, this would require them to set a good example and desist from awarding themselves jumbo expenses at the cost of the taxpayer.

    The electorate also have responsibilities of our own. We need to keep ourselves updated with the way our governments are run, and also to make our voices heard, both by engaging in discussions with our elected representatives and in the long run we should send clear messages to support responsible administrators (and to rebuke the imprudent) through the ballot box.

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