Funding Nigeria’s cash- strapped states



Almost 2 weeks after the Nigerian government announced a 90 billion naira budget support fund for cash-strapped states, the finance minister, Kemi Adeosun says none of the states are eligible yet to access the fund which has 22 conditions attached to it. CNBC Africa’s Esther Awoniyi spoke to Obadiah Mailafia, an economist and former deputy central bank governor for more on this.

One of the conditions attached to this money is that beginning from December 2016, a state would be required to compulsorily publish their financial statements, their budget and their quarterly performance, items like security, feeding, travel among others must be made visible but we have not seen any state come forward. What do you make of what is unfolding right now?

MAILAFIA:I welcomed the development because I was very wary at the first bailout in September last year and these funds were distributed to them with no conditions attached and as we understand, some governors used the money to settle the backlog of contractors, some of the money was tied to banks and many of them are back with a begging bowl and to me it is a bigger problem of what economists call ‘moral hazard’ meaning you are allowed to make ghastly mistakes and you bail them out.

How do you think things are going to pan out this time around because as at sometimes last week, the President did come out to say that 27 states still cannot pay salaries so if you are offering money to the state in stringent conditions, many of them still cannot pay so there is a problem of internally generated revenue and they are still in shaky conditions so how will this work if the state still cannot generate money for themselves?

MAILAFIA: Our whole system has been a gigantic abuse of the spirit of federal constitutionalism in which the states are expected to be financially sustainable and must be able to raise and spend their money independent of the federal sector. In most financially independent Countries like Canada, India, Australia what the federal gives is only to supplement what the state themselves can raise. Some of our states in Nigeria are almost entirely dependent on the government for handouts and obviously, that is not good enough.

What can we do to change this?

MAILAFIA: Some governors have over a hundred advisers for the state, they have to cut their coats according to their size. We need the public service in the state to weed out ghost workers, some states like Kaduna did it and they made very impressive savings, other states must follow through. The need to professionalise the civil service, performances, human resources management and those who are simply there to collect salaries must be cashiered off. Explore internally generated revenue which is very important. States like Lagos have done that and a few like Ogun and Rivers have also done this. Donald Duke also did this in Cross Rivers and today, people can see the results. Financial prudence, internally generated revenue, more taxation which is very good for democracy, we need to put all these in place to ensure that there is financial stability for the state.

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