FG, debts and the economy
Even though this is what it ought to have done a long time ago to assist in either preventing economic recession or reviving the economy, the Federal Government deserves a measured commendation for the approval of payment of N2.7 Trillion owed to some of its creditors. The government had earlier shown little or no interest in settling its huge outstanding indebtedness, some of which became due in 1994. As this government would always want to point out, even when its innocence is in doubt, the Minister was quick to emphasize that the debts were “inherited and long outstanding federal government obligations to contractors, state governments and employees.” Adeosun also stated that out of the N2.7 trillion approved amount arising from debts that had so far been validated, N1.93 trillion will be used to settle contractors and suppliers while N740 billion will be for the settlement of pensioners and promotional salary arrears. It is a significant and noteworthy revelation by the Minister that government creditors that offered generous discounts were given priority in arriving at the N2.7 trillion. Meaning that, there might have been some arm-twisting and those who could not grant similar discounts have no chance of being accommodated for payment. This type of transaction, of course, is prone to corruption and discrimination, especially if it was done non-transparently.
It is nevertheless, encouraging that the government has, after all, realized the futility of holding the economy to ransom by refusing or delaying to pay its creditors. If it had paid the debts since, perhaps the economy would not have succumbed to recession or the substantial amount would have lent a revamping hand to the economy. However, until the N2.7 trillion is paid, the commendation the government gets should be measured, especially since approval is yet to be sought and obtained from the National Assembly and implementation of policies and decisions of government has always been one of the greatest obstacles to the country’s optimum performance.
It is necessary, however, to point out that the N2.7 trillion is just a fraction of the government’s overdue indebtedness. The debts extend beyond contractors, state governments and pensioners. From the Minister’s assertion, the obligations also include those due to oil marketers, power generation and distribution companies, suppliers and contractors by federal government parastatals and agencies, payments due under the export expansion grant (EEG), outstanding judgment balances and other benefits to Federal Government employees. These all remain untouched.
Highlighting the benefits derivable from the N2.7 trillion to be paid, the Minister was reported to have said it “will significantly enhance liquidity in the critical sectors of the economy” and also “go a long way in stimulating economic activities”. So, the government is aware of these benefits yet it still held unto other persons’ money, for so long, even against the constant protestations of this newspaper? In other words, the government failed to act even when it knew the money would serve those noble purposes that would have either prevented recession or brought the economy out of the wild woods. Thus, it deliberately decided to punish, without just cause, the electorate that brought it to power? This is, to state the least, unpatriotic, insensitive and an evidence of poor governance.
Now that it has made up its mind to redeem its outstanding financial obligations, it is expected that the Federal Government would go all out to make this possible. The use of tenured bonds to raise funds for debt settlement will make it even more feasible without rocking the system with too much liquidity at a time, which may worsen the rates of inflation and foreign exchange.
Nevertheless, government should realize that if indeed, some of the due debts date back to 1994, that is a confirmation of its status as a notorious bad debtor, which in ordinary business, would have earned it being declared bankrupt and perhaps, liquidation a long time ago. Besides, its poor attitude to payment of its debts must have sent many of its long-standing creditors to untimely death with negative consequences for their families, the society and the economy. Thus, it should not be a surprise if some of the government’s creditors will not be found alive to benefit from the impending repayment of the debts. This is a shame.
Henceforth, government must show good example in the settlement of its debt obligations to avoid jeopardizing the well-being and interests of its creditors, the national credit system, the economy and the well-being of all Nigerians. To ensure that the positive impact of the N2.7 trillion will be felt in the economy, the beneficiaries should, in turn, settle whatever debts they also owe, for example, to financial institutions. Furthermore, since the government is giving priority attention to creditors willing to offer substantial discounts to it, all those owed by the contractors who would receive payment from this N2.7 trillion should also see the need to grant generous discounts to their debtors as otherwise the amount received from government will simply be swallowed by, for instance, debts to banks. The rationale for this proposition is that the government that caused the debts to be outstanding is demanding and getting discounts. Thus, creditors to government’s creditors should follow suit by granting discounts and where applicable as, in the case of debts owed to financial institutions, interest waivers.
Finally, the Minister hinted that the National Assembly would be approached for approval before implementation. The lawmakers are therefore expected to show understanding in considering government’s proposals towards settling the long outstanding financial commitments by granting quick approvals for immediate implementation. On its part, the government should commence, without delay, processes that will lead to final settlement of all of its other due debts. The ailing economy and the citizenry will be the ultimate beneficiaries.