Tuesday, 31st January 2023
<To guardian.ng
Breaking News:

RIVERS: On Treacherous Financial Path

By Editor
21 June 2015   |   12:39 am
RIVERS State, which prides itself as the treasure base of the country, seems to be on a treacherous path due to its inability to promptly pay workers salaries and its proclivity for borrowing loans. When, in 2007, the immediate past governor, Chibuike Amaechi, assumed office, the state’s wage bill was estimated at N2billion per month,…


RIVERS State, which prides itself as the treasure base of the country, seems to be on a treacherous path due to its inability to promptly pay workers salaries and its proclivity for borrowing loans.

When, in 2007, the immediate past governor, Chibuike Amaechi, assumed office, the state’s wage bill was estimated at N2billion per month, but by the time he left in May 2015, it had risen to an astronomical N9.2 billion per month.

Rivers State’s recurrent expenditure had been on the increase since 2008, when the government took over the payment of primary school teachers’ salary estimated at about N2 billion.

Coupled with this is the mass employment of civil servants, including 13,000 teachers, 436 additional doctors, and 400 additional nurses employed. But since the state sole source of revenue is receipt from 13 per cent derivation and federation account allocation, the fall in the price of crude oil in the international market has had an adverse impact on the state’s revenue, hence, the reason why it has laboured to pay workers salaries promptly in recent times.

In fact, some workers have not been paid for the past three months. Despite taking away the burden of paying primary school teachers’ salary from the local government areas, the councils have failed to judiciously use their resources to develop the rural areas.

Amaechi recently said: “We inherited a wage bill of about N2.5 billion, but we now pay almost N9.2bn every month. We do not regret the injection of needed manpower into the system, especially, in health and education for the sake of the future of this state, but our monthly allocation has dropped by over 50 per cent.”

Giving an insight into the financial crisis facing the state, Amaeachi had blamed this on the loss of the state’s assets such as, oil wells in Soku and Etche, which he said, were ceded to neighbouring states by the National Boundary Commission, with no plan to return them despite numerous evidences.

By beginning of May 2015, the government owed pensioners three months payment arrears, while parastatal pensions stood at two months of arrears. But before Amaechi assumed office, pensioners were owed pension arrears of over N4.5Bn, a situation that the administration strove to resolve.

The domestic loan profile of the state has since increased by additional N10 billion following the approval of the new State House of Assembly approval to Governor Nyesom Wike to borrow the aforementioned money to run his administration and rehabilitate dilapidated roads in the state. There is no doubt that the state will continue to borrow as receipt from the federation account had dropped to N7 and N6 billion in March and April 2015, respectively. This is also a likelihood of sudden fiscal crisis as the state struggles to pay workers’ salaries and fulfill its debt repayment obligations.

The Speaker of the Assembly, Ikuinyi Ibani, while giving justification for the N10 billion loan, from Zenith Bank which the State already owe over N15billion, said it became imperative because the Wike government met an empty treasury when it assumed office last month and has been unable to function effectively.

Uncompleted monorail project

Uncompleted monorail project

Contrary to the Speaker’s claim of empty treasury, an aide to the former governor, Mr. Achinike Williams-Wobodo, said the sum of N7billion was left in government coffers by the immediate past administration. Governor Wike has personally refuted this claim, and corroborated the Speaker’s assertion that the new government met empty treasury.

The Nigeria Debt Management Office (DMO), currently puts Rivers State external debt stock as at December 2014 at $44,725,095.32. The failure of the state government to publish its annual audited account has made it extremely difficult to obtain its true financial status.

The Niger Delta Citizens and Budget Platform (NDCBP), a coalition of non-governmental organisations interested in transparency and accountability, had in 2014 expressed concerns over the constant recourse to borrowing and the rising external and domestic debt profile of Rivers State.

NDCBP had previously advised the state government against predicating a significant percentage of its programmes and projects on funds expected to be derived through borrowing either, as bonds, grants, domestic or external loans.

Coordinator NDCBP, Ken Henshaw, had warned that last year’s approval granted by the state House of Assembly for $280 million concessionary loan to be taken from the World Bank and the Africa Development Bank for the purpose of providing water and sanitation in the state, will only drive the state deeper into debt.

He observed that since 2008, Rivers State has experienced a steady rise in the amount it owes external creditors. For instance, in 2008, Rivers State owed $32.3 million, which increased to $33.7 million in 2009. By 2010, it rose to $35.5 million and decreased to $33.8 million in 2011, only to rise again to $36.6 million in 2012 and $42.6 million as at the end of 2013.

Henshaw said the growing loan profile of Rivers State and its inability to pay workers has a direct corollary to the unrealistic ambitious infrastructural strides in the state. According to him, the debt profile is as a result of an attempt to drive the infrastructural stride of the state at a pace that its finances cannot handle.

“A major concern in this regard, is the cost of servicing these debts. The budget of Rivers State indicates that the burden of debt service payment is already taking its toll on the finances of the state. Between 2010 and 2011, there was an increase of 2,500 per cent in debt servicing re-payment. The amount of money which the Rivers State government sets aside for the repayment of debts, increased from N250 million to N6.250 billion. This trend resulted in the reduced capacity of the government to pursue infrastructural development,” said Henshaw.

An audit by Nigerian Extractive Industries Transparency Initiative (NEITI) revealed that Rivers State recorded N1.510 trillion as revenue between 2007 and 2011. According to the report, the government receipts in 2007 fiscal year were N238.821 billion. It later grew to N361.111 in 2008 fiscal year. But the receipt recorded for 2009 was N241.336 billion. The state revenue increased in 2010 to N272.294 billion and rose to N397.023 billion in 2011.

NEITI analysis of the various revenue heads indicated that the highest receipts came from the 13 per cent derivation with N639.747 billion that is; the excess crude account receipts accounted for N252.973 billion; internally generated receipts N222.997 billion; the statutory allocation N141.697 billion; the loan receipts accounted for N110 billion; while both the NNPC refunds and Akwa Ibom refunds accounted for the least receipts N1.602 billion and N1.532 billion respectively.

As the state receipts from 13 per cent derivation, which has been the fulcrum of the state’s earnings increased, so did the cost of running state mechanism such as Government House, House of Assembly and judiciary functions and the cost of administration; salaries; remuneration; allowances; pensions and gratuities, overhead expenses of ministries, departments, and agencies and so on.
As at November 2012, Rivers State receipt was N227.58 billion from the Federation Account, while IGR was N69.59 billion. Aggregate revenue (FAAC & IGR) achieved by the end of November 2012 stood at N297.17 billion. The amount spent on recurrent expenditure, as at November when Amaechi presented the 2013 appropriation bill to the State House of Assembly was N93.54 billion.

In 2013 alone, Rivers state received the sum of N230billion from the federation account according to the former Minister of Finance, Ngozi Okonjo-Iweala and as at September of the same year the IGR was estimated at N61.142 billion, while N177.924billion was budgeted for recurrent expenditure. And between January to June 2014, the state received N95.67 billion from the federation account.

Irrespective of the gloomy economic atmosphere, an international credit ratings agency, Fitch in March 2015 has placed Rivers State’s Long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘BB-’, affirming its National Long-term rating at ‘AA-’ with a stable outlook. It has also projected that the internally generated revenue (IGR) will rise towards 30 per cent of total revenues and exceed N100bn by 2016, or about N8.5bn per month, up from N84bn in 2014.

Fitch observed that the state had significantly reduced Rivers’ debt levels to NGN51bn in 2014, from N106bn in 2013, using the current surplus generated, asset disposal proceeds and capital transfers amounting to almost N60bn, while maintaining investments at N160bn in 2014.

Nevertheless, even in a stressed scenario, Fitch said debt is not expected to exceed half of the budget size, with debt service cover ratio remaining strong at below one year of the current balance, when both interest and principal repayment are considered.

Fitch believes that debt will continue to be deployed for funding the state’s capital investment plan for the medium term. “The capital expenditure is for the construction of infrastructure and service facilities such as roads, bridges, hospitals and schools, as well as in the oil and gas industry, to sustain gas supply both for the state and Nigeria.”

The NDCBP reckons that the current economic situation should be a wake up call for the new government to diversify the state economy and desist from the debt hangover. The group has recommended that the more prudent approach to development should be conceived and government should consider growing its internally generated revenue base through lucrative investments, a more efficient taxation system, a drastic cut-down on wasteful expenditures, and the blocking of all avenues for leakages.