Presidential bailout for states – Tayo Ogunbiyi

The recently an­nounced presidential bailout approved by President Muham­madu Buhari for States owing workers months of unpaid salaries is, indeed, a welcome development. It is good news for the con­cerned workers and the af­fected States. It should be stressed that more than a quarter of the 36 States of the federation owe work­ers’ salaries in arrears be­lieved to be over N110bil­lion. The worst hit States are Osun, Rivers, Oyo, Eki­ti, Kwara, Kogi, Ondo, Pla­teau, Benue and Bauchi.

An integral part of the bail­out strategy as announced by government is for the Federal and State governments to share $2.1 billion (about N497 bil­lion) sourced from recent LNG proceeds to the Federation Ac­count. Equally, the federal gov­ernment has directed the Cen­tral Bank of Nigeria, (CBN) to arrange a special intervention fund that will offer steady fi­nancing to the States.

The pack­age, which is between N250 billion and N300 billion, is to serve as a soft loan available to States to access to settle arrears of salaries. Additionally, the President has approved a debt reprieve plan devised by the Debt Man­agement Office, which will help States to streamline their com­mercial loans, which is pres­ently put at around N660 bil­lion, and extend the lifespan of such loans while reducing their debt-servicing expenditures. Another part of the plan is to free up more money currently being used for debt servicing by guaranteeing the elongation of the loans in the interst of the States. Various public affairs ana­lysts and social commentators have taken divergent positions on the presidential bailout since it was announced.

While some applaud the initiative, others simply denigrate it. To those in support of the move, it is the best option available, for now, especially given the parlous state of the nation’s economy occasioned by dwindling glob­al price of oil. With the sharp drop in the monthly revenue allocation to States coupled with their various debt commit­ments, there is no way most of the States could offset unpaid salaries arrears. However, those who are against the move hinged their stand on the fact that it will fur­ther entrench corruption in the system.

They argued that, in as much as it is true that the na­tional economy is experiencing a downward trend, most of the States actually compounded the situation through unbridled financial recklessness. Bail­ing them out would, therefore, amount to promoting and com­mending their perceived cor­rupt tendencies. In a democracy, these con­flicting views and opinions are quite understandable. It is, however, essential to point out that in a troubled economy like ours, government bailout is one of the economic measures that could rescue the polity from collapse. It is customary, even in advanced democracies, for government to roll out bailout strategies in order to preserve democratic institutions and provide succour to the down­trodden.

Without a doubt, most of the States might possibly go insolvent partly in view of the parlous state of the national economy. It is equally impor­tant to stress that but for the bail out, we would have had an unavoidable workers’ rebellion that could pose a serious threat to democracy. The snag, nonetheless, is: For how long will the federal gov­ernment continue to bailout the states, especially if the econo­my doesn’t record a significant improvement as soon as expect­ed? This, of course, is where the states need to be more creative and inward-looking in shoring up their Internally Generated Revenue (IGR) base. It is better not to have states than to have States that are not economically buoyant. Such would only serve as a huge burden on the coun­try. According to the National Bureau of Statistics (NBS), the IGR of most states in the country is recording a down­ward slide. For instance, the IGR of Lagos State in 2014 was N276, 163,978,675.95 as against N384, 259,410,959.19 collected in 2013. Next to Lagos is Riv­ers State with an IGR collec­tion of N89, 112,448,347.58 in 2014 compared to N87, 914,415,268.80 collected in 2013 fiscal year.

Hence, there is a need for States to plug all loopholes for an improved IGR base. To achieve this, we need to re-examine the idea of global taxation for all citizens. This major source of funding has for long been relegated to the background. Now is the time to reverse the trend. In most of the states, the source of government revenue is limited to taxes paid by the civil servants. Creative strategies must be evolved to drag more taxable citizens into the tax net. Governments all over the world run on the taxes paid by the citizens, we cannot be an exception. It should be stressed, however, that funds accrued from taxes should be judiciously expended in order to encourage taxpayers.

Also, the states and other tiers of government should em­brace prudent management of available resources. The cost of governance must be reasonably pruned down. There is no point keeping arrays of needless aides if the economy cannot afford such. Our leaders need to start leading by example. All meaningless extravagant tendencies that could plunge the states and, indeed, the na­tion into deeper economic mess must be shunned. Transpar­ency and accountability must become the order of the day in all government establishments. It is equally fundamental for both the federal and State gov­ernments to address the issue of over-bloated civil service.

If it is true, as it is being alleged, that some MDAs keep more than the required number of staff, efforts must be made to deal with such. It is particularly undesirable for any govern­ment to spend the bulk of its re­sources in paying the wages of a lethargic and parasitic work­force.

The bureaucracy that is required to drive democracy is one that is prompt, forthright and farsighted. In any nation where bureaucracy has become a drain pipe, democracy will certainly become endangered. Perhaps, more importantly, the Federal Government should step up efforts to improve the national economy. One way of doing this is to develop the non-oil sector. It is unacceptable for a country of Nigeria’s stature to continue to be a mono-econo­my. Our current national eco­nomic predicament is a direct result of the failure of the feder­al government to diversify the country’s economy. Succeed­ing administrations have for long been paying lip service to the development of the non-oil sector, but they all failed when it comes to actualization of the plan. This trend must change.