Salary Crisis: Nation’s Price For Ignored Warnings
THE deepening bankruptcy of states, occasioned by sharp decline in revenue, which has manifested in failure to pay salaries, is an enemy that had always knocked at the door but was ignored. It only wore a new jacket, last week, when it re-appeared in the form of verbal warfare between the federal and state governments.
The development has enveloped the Senate with disappointment and sadness particularly for the deaf ears that had been paid to all the motions, reports and recommendations it churned out on the danger posed by declining revenue to states, caused by a combination of factors including improper revenue formula, abuses and leakages in the Internally Generated Revenue.
The sad news was first broken in the Senate some two years ago when it was revealed that the financial accounts of 27 states were in the red, as some of them were declared either “distressed” or “gloomy.” Only Abia, Akwa Ibom, Anambra and Jigawa states were given a clean bill of health.
The six states that were in financial distress were: Kano, Sokoto, Niger, Zamfara, Katsina and Osun. The critical were: Ekiti, Plateau, Benue, Edo, Borno, Adamawa, Cross River, Enugu, Taraba, Ogun, Kogi, Yobe, Ebonyi, Ondo and Kaduna. In the unhealthy cadre are: Oyo, Bauchi, Bayelsa, Nasarawa, Gombe and Rivers, while Imo, Kwara, Lagos, Kebbi and Delta were given the ‘tolerable’ tag.
The data was sourced from the Nigerian Governors’ Forum (NGF) Labour Policy Report, 2011 as contained in a motion titled: Looming danger of bankruptcy in states:
The need for fiscal evaluation, sponsored by Senator Olubunmi Adetunmbi (ACN, Ekiti North). Adopting that motion after an exhaustive debate, the Senate advised the Federal Government to expeditiously review the revenue sharing formula in favour of states and local governments.
The Upper Legislative Chamber also directed its Committees on Finance, National Planning; States and Local Governments to study the situation and submit remedial measures to avoid total collapse of the economy of the affected states.
Senator Adetunmbi had alerted the Senate of the “great fiscal challenge and looming danger of insolvency as well as bankruptcy facing the states as a result of growing wage-bill associated with the implementation of the minimum wage and other recurrent responsibilities of the states. “
The bulk of the revenue of these states is currently financing payroll of the civil service which constitutes less than four per cent of the total population in all states. If this trend continues, many of the states would become financially insolvent and increasingly handicapped to finance real sectors and drive economic growth, jobs and improved livelihoods,” he said.
Contributing to debate on the motion, Senate Leader Victor Ndoma-Egba, canvassed a merger of states and slammed the practice of state governments going cap in hand to Abuja for revenue, adding, “there is federalism more in name than in practice.”
Also, Chairman of the Senate’s Niger Delta Committee, Senator James Manager, re-echoed the call for merger of states and asserted, “all the states are distressed. Something has to be done. So many states are not supposed to be states because they have nothing to offer. They are burdens on Nigeria.
Those not viable should be merged with the viable ones, hence, the imperativeness of fiscal federalism.”
As a follow-up to this motion, the Senate adopted a report with recommendations for a review of the Revenue Allocation Formula currently in operation in favour of states and local government councils with increased responsibilities arising from further devolution of power.
Considering the reports of the senate ad-hoc committee on national planning, economic affairs and poverty alleviation, appropriation, finance and states and local governments, the Senate advised that states should diversify their economies in order to enhance internally generated revenue in such areas as agriculture, tourism, solid minerals etc.
It also said the cost of governance should be reduced by cutting down on recurrent expenditure particularly the reduction/pegging of the number of political aides, harmonization of the functions/activities of ministries/departments/agencies; elimination of ghost workers at all levels of government.
The Senate further advised, that “Government should imbibe budget discipline in producing balanced budgets and also ensure strict budget implementation; the legislature should consider appropriate legislations limiting the total exposure of states to external and domestic borrowing to not more than 20 per cent of their allocations from the Federation Account.
Such borrowing should be for economic projects only; and when it is absolutely necessary. Furthermore, there should be strict compliance to the relevant provisions of the borrowing by public bodies.”
It also recommended that the application of the 13 per cent derivation principle should be properly implemented. Considering the Supreme Court judgment in suit SC28/2001 on April 5, government institutions should be strengthened to effectively monitor and ensure full compliance with the extant laws in the use of public funds.
And grants, stabilization fund and allocation from the Excess Crude Account to the states should be targeted at economic projects that have direct impact on the people.
“The National Assembly should come out with a clear direction of future state creation to guard against the creation of unviable entities in the name of state, and the Civil Society Organisations (CSO) should use the FOI Act and available technology to ensure that the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) and Budget Office publish up to date records of funds allocated to the states and their local government areas and the items that these funds are spent on.”
The committee found out that over dependence on oil revenue at the expense of Internally Generated Revenue (IGR) by states is responsible for their continued call on the Federal Government to share the proceeds of the Excess Crude Account to meet the growing cost of governance in states.
“For instance, the sum of $1.5 billion was shared in three equal installments from the Excess Crude Account in 2011 alone, out of which the states received the sum of $400,800 million. The final payment amounts to $500 million.”
It stated further that records available from the Debt Management Office (DMO) show that as at December 2011, the total external debt stock of all the states (Multilateral) stood at $2.165 billion.
Most of them are equally highly indebted to various local banks in short-term borrowing and are substantially exposed to the capital market. Most of these loans are tied to the irrevocable standing Payment Orders (ISPOs) issued to the Accountant-General of the Federation to deduct directly from their monthly statutory allocations.
The report also found out that there is high rate of corruption and corrupt practices through misappropriation and misapplication of public funds, abuse of immunity clause by some states governors and the incapacitation of the various anti-graft agencies through political subterfuges.
JUST last Wednesday, the Federal Government absolved itself of blame in the inability of some state governments to pay their workers’ salaries.
It said the governors of such states should be blamed for the development because they were told through the Federation Accounts Allocation Committee to make the issue of wage a priority. The Minister of Finance, Dr. Ngozi Okonjo-Iweala, said this in a statement by her Special Adviser on Communications, Paul Nwabuikwu.
The statement was necessitated by the All Progressives Congress (APC) governors’ claim that the negative manner the outgoing Jonathan administration was running the economy had made it difficult for them to pay salaries regularly.
But Okonjo-Iweala said that despite the 50 per cent drop in gross federally collectible revenue, the Federal Government had made the issue of workers’ salaries a top priority in order to ensure that the “people do not feel the negative impact of the revenue drop on the economy.”
For instance, the minister said that contrary to the “misinformation being put forward by certain governors to the effect that federal workers are being owed, staff salaries at the federal level are up-to-date.”
All the states are distressed. Something has to be done. So many states are not supposed to be states because they have nothing to offer. They are burdens on Nigeria. Those not viable should be merged with the viable ones, hence, the imperativeness of fiscal federalism
She said in the five paragraph statement that the states, being one of the three tiers of government that receive monthly allocations from the Federation Account, should be blamed for their predicament.
The APC governors had during a meeting with the President-elect, Muhammadu Buhari, in Abuja, expressed frustrations about their inability to pay workers’ salaries.
They therefore appealed to Buhari to consider a bailout plan for all the 36 state governments after his inauguration on May 29.
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