- It’s high time state governments started looking inward for money
Many state governments in the country have to brace up for hard times from next month, when, hopefully, the Federal Government begins the deduction, at source, of the N614billion fund advanced 35 of the 36 state governments by the President Muhammadu Buhari administration between 2015 and 2017, to enable them meet urgent obligations. The money, popularly referred to as ‘bailout’ was advanced to the states under the tag of the National Budget Support Loan Facility.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, who disclosed this last week at the presentation of the Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) said the deductions would be made directly from their statutory allocations from the Federation Account Allocation Committee (FAAC). She added that since the money was a loan from the Central Bank of Nigeria (CBN), it would be repaid to the apex bank. Each of the states would be required to refund a total of N17.5 billion.
“The N614 billion bailout fund given to the states is not going to form part of the revenue for funding the budget. It was a loan which was advanced by the Central Bank of Nigeria (CBN) and the repayment will be made to the CBN. So, the recovery process is that we deduct from the FAAC allocations from the states and then we return it to the CBN and we are starting this process by the next FAAC” the minister declared.
We saw this coming.
Indeed, no one needed any soothsayer to know that it would get to this since the bailout was not gratis. We had warned in other editorials that it was high time state governments became more creative in revenue generation, rather than perennially relying on handouts from Abuja to fund their projects, or pay salaries. In spite of the vicissitudes that many state governments’ finances have witnessed, and continue to witness, we would have thought that they would have found a common ground to make a stronger case for themselves, especially with regards to the revenue sharing formula which presently is skewed in favour of the Federal Government.
We wonder what the governors discuss at the Nigeria Governors Forum (NGF). Where they are resolute and focused, it should not be difficult for them to prompt a review of the formula in a way that state governments would benefit more than they are doing now from the sharing formula. They have virtually what it takes to make this happen. We do not see, for example, how it would be difficult to carry their respective legislatures along on this journey. Securing the concurrence of the National Assembly members should also not be much problem because many governors have some influence over their state’s representatives in both chambers.
Moreover, with nearly all the states of the federation blessed with one mineral resource or the other, there is no justification for the heavy reliance on the centre for survival. The governors can use the same instrumentality of the NGF to speak with one voice on the need for true federalism under which states would have control over resources in their areas and only pay taxes to the Federal Government as was the case in the First Republic
We have said it before, and it bears restating, that the present revenue arrangement cannot endure; it is unsustainable. And, until the state governments decide to change the narrative, the cycle of bailout will only linger. Yet, as we have seen, bailout is not the solution to their financial predicament because it has to be repaid someday. The ultimate solution is for state governments to be in charge of their resources and finances. We can only imagine how dire the situation will be for many of them, with the proposed N30,000 minimum wage that is causing ripples already.
We know many state governments are already jittery over the minister’s disclosure because it is going to cause a lot of hiccups in their financial systems. But then, even if an amicable exit strategy is agreed between the Federal Government and the state governments now, it is still a stop-gap measure. The money has to be repaid somehow, someday because it is a loan from the CBN and it is doubtful if the Federal Government itself would want to write it off.
The way forward is for state governments to start thinking seriously about how to raise their internally generated revenue to enable them pick their bills without going cap-in-hand to the Federal Government every month.