Recent statistics released by the Debt Management Office (DMO) confirm what is already well-known about the finances of states around the country. Mirroring a national trend of soaring debt overhang, the states sink further and further into the debt quagmire. DMO informed a fortnight ago that while the external debt jumped by 40% between March 2013 and June 2014 from $6.7 billion to $9.3 billion, the country’s domestic debt cascaded upwards in the same period from N6.5 trillion to N8.9 trillion.
What this amounts to is that for both the central and sub-national governments a borrowing spree is afoot with devastating consequences especially for the states which finances are for the most part in shambles. Included among the top five debtors are such states as Lagos, which has topped the list for many years; Kaduna, Cross River, Ogun and Oyo. Theoretically, sourcing loans is sound economic wisdom provided that the loans are judiciously expended, the borrower has capacity to pay back without jeopardising her survival and that the loan makes sense when related to income generation. In recent times, however, there has been a shortfall in federal allocation to the states putting at risk the ability of the states both to meet their obligations and to remit their loans. Consequently, there has been a retrenchment of services in many of the states in such areas as the payment of salaries to workers and the upkeep generally of the health and education sectors.
It should be borne in mind that even before the incisive debt portfolio the majority of states generate very little internal revenue and spend close to 90% of their allocation from the federal kitty on the payment of salaries, emoluments and overheads leaving little or nothing for capital development. It is also not entirely clear whether due diligence was undertaken before the current burgeoning loans were secured and whether the loans were spent on income yielding items with financial empowerment potential or whether they were frittered away on dubious projects calibrated to enrich the pockets of a few politicians and their cronies. Ideally, the state assemblies which have the power of financial oversight ought to act as a check on the financial activities of the executives. Regrettably, however, most of these assemblies are rubberstamp in nature and weak in capacity and do not possess the competence or the will to countervail the executive.
Of interest for example is the recent controversy on the finances of Bauchi state; following a suit filed by Musa Idris Hardawa demanding for information regarding the allegation of a loan to the tune of N15 billion procured to “build houses for the former governor and his deputy and the incumbent governor and his deputy.” Ordinarily, and without prejudice to the truth or otherwise of this information a transparent financial culture would have made it possible to crosscheck details of government expenditure without recourse to the courts. There are also cases where state governments have precipitately approved increases in the salaries of workers without regard to the ability of the states to pay. The ongoing controversy leading to several months of strike in Benue State is one such example. It will also be interesting to see whether the mark-up in salaries in Oyo state was preceded by careful examination of the state’s financial wherewithal.
To be regretted too, is the ostentatious lifestyle of top notch politicians in some states which are already highly indebted. Ordinarily, a prudent if not self denying profile ought to characterise the leadership of states with expanding debt profiles. Unfortunately, however, what appears to prevail is a self-indulgent lifestyle and vanity fairs by politicians in charge of the affairs of the states. Fundamentally, the financial straitjacket cannot be interrupted under the current politics of disbursement in which increasingly unviable mini states run to the centre for the inevitable monthly allocation. Apart from making the states helplessly dependent on an imperial centre, the skewed political economy suggests that the states are not meaningful political or economic entities within what ought to have been a federal structure. That is why it is most regrettable that rather than seek to address the paradox of political devolution leading to a centralising outcome, the just concluded national conference had recommended strangely the creation of 18 or so more states. If such a bizarre stipulation is granted Nigeria might as well bid farewell to federalism which connotes a central government which is primus inter pares (first among equals) within the political community.
In the short and medium terms, political authorities in the states must be admonished to cut their coats according to their cloths and be less adventurous or reckless in financial management. There are no quick fixes but prudence should be the watchword in lean times such as this.