Standard Voice Media Communications : Bailout To Indebted States May

Bailout To Indebted States May

Encourage Fiscal Rascality, Group Tells

Buhari

By Eric Ojo – Following President

Mohammadu Buhari’s decision to grant

financial bailout to state governments that

are unable to pay salaries of civil servants in

their respective states, Centre for Social

Justice (CSJ) said such intervention amount

to tacitly endorsing fiscal rascality.

According to the Presidential directive, the

three tiers of Government are to share

$2.1billion being proceeds of investments in

the Bonny Liquefied Natural Gas Project and

$1.6bn from the Excess Crude Account (ECA).

The Debt Management Office (DMO) is to

facilitate the restructuring of the commercial

loans put at N660bn and extend the life span

of the loans which will reduce states debt

service obligations

The Centre said the gesture also runs

contrary to the provision of Section 41 of

Fiscal Responsibility Act applicable to all

States of the Federation (vide items 7 and 50

of the Exclusive Legislative List) which

prohibits borrowing for recurrent expenditure

and payment of salaries.

“On the surface of it, these are welcome

developments but a proper analysis of the

legal and policy implications of these

developments sends wrong signals for the

improvement of fiscal governance particularly

at the state level”, the group said in a

statement made available to African Examiner

on Tuesday in Abuja.

The group added that it is a fiscal crime to

allow states to have access to a bailout fund

in a society like Nigeria where budgets are

not public documents, where accounts have

not been audited for the past couple of years

and there have been no follow-ups on audit

queries and findings, where no biometric

verification of the workforce to remove ghost

workers, or states that pay 20 per cent of

their Internally Generated Revenue (IGR) to

the private companies engaged in it

collection; where states with commercial

bank loans and bonds that cannot be justified

by capital projects in the state.

CSJ further warned that granting such

financial bailout for states to pay arrears of

workers’ salaries, without conditionalities is

nothing short of licensing fiscal rascality writ

large, adding that it clearly sets a bad

precedent as well.

The minimum that is expected, according to

the Centre, is that strict conditions of fiscal

reform should be attached to accessing the

loan, noting that it will be unconscionable for

CBN to give public funds to be managed by a

Governor who has appointed tens of Special

Advisers and Assistants, still maintaining a

long convoy of cars for his entourage and or

maintaining an aircraft at state expense, or

drawing hundreds of millions monthly on

unaccounted security votes.

The statement also noted that sharing the

proceeds of profits accruing from investments

in the Bonny LNG at a time Nigeria is looking

for resources for further trains of the Bonny

LNG Plant and for new LNG projects at Brass

and Olokola is not a good practice worthy of

replication.

It added that if the profits accruing to the

Federation Account from Bonny LNG had been

properly managed and invested, Nigerian

would have gone beyond the present six LNG

trains and would have been in the tenth to

thirteenth train and thereby laid a solid

foundation for diversified earnings to the

country.

The statement further observed that in the

discussions between the President and the

Governors that preceded this bailout package,

there was no mention or acknowledgement of

the contributions of Governors to the inability

of states to pay workers and the parlous

state of their finances.

“Rather, they heaped the blame on the out-

gone Federal Government. However, the truth

remains that the poor state of finances at the

state level is a product of the fiscal

irresponsibility of Governors who mismanaged

their state finances”, the statement stressed.

It also pointed out that sharing the remaining

proceeds of the ECA leaves Nigerian totally

vulnerable to the continuing oil price shock.

“Yes, the vulnerability has started manifesting

as reduced oil resource inflows into the

Federation Account but this development of

sharing all in the ECA leaves Nigeria at a

total rock bottom with no elbow room at all.

“We note that Governors have been

clamouring for the closure of the ECA and find

this as a good opportunity to do so since the

founding fathers and mothers of ECA appear

to have left government. Pray, by the time the

ECA is closed, where will the next funds to

share come from?” it added.

The statement further expressed fears that

bailout will only treat the symptoms and

leave the fiscal ailment to deteriorate as there

will be no penalties for fiscal malfeasance or

a guarantee of non-repetition.

“Any state intending to access the CBN funds

should undergo a federally administered fiscal

governance and public finance management

review which will identify the loopholes and

challenges that need to be closed to avoid

waste and abuse of state finances.

Funds should be released in installments, over

time when the state shows evidence of

substantial progress and commitment in

overcoming the challenges. The way forward

is to convert this challenge into an

opportunity for improved fiscal governance at

the state level. We should not use public

funds to reward fiscal irresponsibility”, it

stressed.

It said fiscal crime to allow states to have

access to this bailout fund – where budgets

are not public documents; accounts have not

been audited for the past couple of years and

there have been no follow-ups on audit

queries and findings; no biometric verification

of the workforce to remove ghost workers; or

states that pay 20% of their Internally

Generated Revenue to the private companies

engaged in IGR collection; states with

commercial bank loans and bonds that

cannot be justified by capital projects in the

state, etc.

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Standard Voice Media Communications

Saturday, July 11, 2015

Bailout To Indebted States May

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