Dwindling Funds… How The States Are Coping (1)

THERE is imminent danger across various states of the Nigerian federation. It started like the usual bickering between the governments in power and those opposing them. As Nigerians crave a deepening of democracy, the performance of governments is being x-rayed more than in the first eight years of the present fourth republic. Suddenly, it has dawned on state governors that fiscal responsibility, prudential budgeting and radical planning are about the critical prerequisites to stability and responsible performance. But stability has become a very scarce commodity in the country, following the tight financial situation of state governments.

The usual race to Abuja for the monthly ritual of Federal Accounts Allocation Committee, (FAAC) meeting is no longer offering much respite. The jamboree is over! Finance Commissioners from the states have been coming back to the state capitals, with less than what their governors expected, by way of their fair shares of the federal revenue from oil and sundry sources of national income.

It is on this FAAC that state governments depend to pay salaries and carry out some capital projects to promote development. As quick palliatives, most states had recourse to short-term bank loans so as to be able to offset monthly wage bills. This they had to do because most often than not, there were delays in the monthly FAAC distributions.

The most worrisome aspect of the harsh financial realities in the states is that most of them have very paltry receipts accruing from their internal revenue generation efforts. But, as the price of crude oil, the nation’s economic mainstay, in the international market tumbled, both the federal government and states started facing forbidding financial crisis, leading to inability to pay salaries of their workforces. Faced with this ugly development, states began querying the revenue sharing formula, which they said leaves a greater per cent in the hands of the Federal Government, leaving states and local governments with depleting coffers.

Even as the state governments complained against the lion share of the federal revenue available to the Federal Government, some of them closed in on the local government funds.
Two years ago, Edo State Governor, Comrade Adams Oshiomhole, cried out that the nation’s financial crisis has made it impossible for states to pay workers’ salaries. That was at a period of zero allocation recorded by some states.

The rate at which governors took bonds and other forms of credits from the capital market gave a hazy picture of the anomalous funding scenario in the states. The federal government through the Federal Ministry of Finance fell for the pressure to stem the ugly social upheavals that may ensue if government could no longer fulfill their financial obligations.

At a media briefing, the Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, disclosed that her ministry had to facilitated loans worth about $14.1 billion to finance projects and programmes of the federal sectors.
Now all pretenses are gone, many states of the federation can no longer pay salaries, pension and other allowances of workers. Even those states that were facing such financial hardships long before the drop in oil prices are getting into deeper mire. Workers are grumbling and strike actions are fast becoming commonplace.

In some states however, it is hard to distinguish genuine complaints about non-payment of wages and politically motivated industrial actions. Ebonyi State government, which put in place what it called budget stabilisation funds for instance, has had to confront workers strike.
Though the state government indicated that the industrial action was political motivated, it recalled how a committee headed by the deputy governor was set up to review the issue of appropriate wage structure for the state.

In Enugu State, the State House of Assembly turned down the governor’s request for another facility, which it stated was intended to help it round off work on some capital projects, especially the new state secretariat.
Recently, the Lagos State Governor Raji Fashola blamed the shaky financial positions of states on the unpredictable and haphazard management of fiscal and monetary policy. Fashola was at the state Assembly to press for the amendment of the state’s 2015 Appropriation Law.
More of such amendments are going to be made by other state governments because the budgets were premised on false benchmarks and false hope of bigger accruals from FAAC.

But while the adjustments are being done to figures, new strains are brought to bear on the state coffers by the exigencies of party politics and demands by electioneering campaigns.
There is as yet no clear line of demarcation separating funding for political parties and development projects. Campaign funding has distracted most state governments from their set targets and expenditure pattern.

To beat the scrutiny of anti-graft agencies, most state governments prefer to use amenable contractors for capital projects. Through this way, not only are projects over valued, ex gratia donations, which ultimately fall on the project funding, are made to the party in power or to the pet projects of the wife of the governor.

In Imo State, the deputy governor was impeached for allegedly receiving gifts from a contractor.
It is ironical that some state governors are presently calling for the total removal of petroleum subsidy so as to leave more money for FAAC to disburse. That measure would no doubt make the state accounts to bulge, but the social consequences seen in the likelihood of strikes is better imagined.

There is the likelihood that when the elections are over, there would be new focus on stringent taxes by the states. The prevailing financial experience may also push state governments to plug various loopholes through which scarce funds are frittered or misappropriated.
The situation calls for strict budget monitoring and implementation. In all, the call for fiscal federalism may prove the final destination of the effect of depleting coffers at the states, so that each state would learn to cut its clothes according to the size of the cloth.