ABUJA, Federal Republic of Nigeria. Nigerians woke up, yesterday, with the cheering news that the Federal Government has arranged a bailout for states to enable them pay salaries of workers. It was cheering because the President had earlier told states to find ways of resolving their financial crisis.
However, hours later, the Accountant General of the Federation came out forcefully to say that what was reported by the media was misleading and that only N359.374 billion was shared by the three tiers of government.
According to the Accountant-General of the Federation, AGF, Alhaji Ahmed Idris’ clarification, the money shared between the three tiers of government, on Monday stood at N359,374,355,607.60 which was a far cry from what the Presidency gave.
Financial matters are very explicit and should not leave any one in doubt. The office of the Accountant General of the Federation has the figure of government inflow and out flow at his fingertips. Was it that he was not informed or that the Presidency is playing games with Nigerians?
The figure of what was shared released to the media by the Head and Deputy Director of Press and Public Relations of the office of the AGF, Kenechukwu Offie, in Abuja said that the figures published by most media outfits were inaccurate. He also explained that the money was from the dividend earned from the Nigeria Liquefied Natural Gas, NLNG, and not from the Excess Crude Account.
What each tier got
Details of the each tier got showed that the Federal Government got 56.68 per cent amounting to N181,745,674,112.72; State governments got 26.72 per cent amounting to N92,183,834,705.62; while local government councils got 20.60 per cent amounting to N71,069,872,564.96.
The Presidency had earlier said President Buhari okayed a three-pronged relief package, including sharing of fresh allocations, granting of soft loans and restructuring of states’ debt-servicing payments. The packages are expected to go into effect this week as the President is said to have directed that release of the funds should be made urgently to assuage the plight of thousands of Nigerian workers in the federal and state governments.
About $2.1 billion (N413.7 billion) will be shared in fresh allocation between the states and the Federal Government. The money is sourced from recent Liquefied Natural Gas (LNG) proceeds to the federation account.
The media report had said that a Central Bank of Nigeria (CBN) packaged special intervention fund that will offer financing to the states, ranging from between N250 billion and N300 billion. This would be a soft loan that states could access to pay the backlog of salaries.
Implementing a debt relief programme proposed by the Debt Management Office, DMO, will help states restructure their commercial loans currently put at more than N660 billion, and extend the life span of such loans while reducing their debt-servicing expenditures.
What to be shared
Also, a total of N391 billion from the Excess Crude Account, ECA, will be shared among the three tiers of government, the Accountant-General of the Federation, Ahmed Idris, disclosed yesterday. With the N413.7 billion LNG proceeds it means the three tiers of government will share a total of N804.7 billion.
By extending the commercial loans of the states, according to the third package, more funds would be made available to the state governments, which otherwise would have been claimed at source by the banks.
In the media report, the Central Bank Governor, Godwin Emefiele, was said to have directed that state governments should forward details of their loans to the apex bank, by yesterday. He was reported to have told Commissioners of Finance at an extra-ordinary FAAC meeting in Abuja that CBN needed details of the loans in order to work out a mechanism with which such loans could be restructured.
The governor said, however, that there would not be any free money for the state governments and that the restructuring arrangement was meant to give them some respite such that the loans could be spread over longer periods of time, thereby making more funds available to run the states.
According to the CBN boss, the apex bank would enter into an agreement with the banks on behalf of the states to provide some sort of guarantee for the loans that had bogged down state governments.
This is not to say that the CBN will package some fresh loans from the banks to states.
Where will the CBN raise the money from, by ways and means? Certainly, a bank pursuing a single digit inflation cannot indulge in printing money and releasing same into the economy.
The CBN will just provide a life jacket for the states. It will give them a temporary relief and the loans they have obtained from banks will be spread over a longer period. This could give such a state a lifeline. It will also open them up to the temptation of securing additional facility which could sink them into deeper debt.
Restructuring the loans states owed to banks will, however, lift them out of the burden of interest payment by reducing the amount paid as the loans are spread over a longer time period. If the states are able to work on their internally generated revenue or the global oil market improves the fortune of the federation account to increase revenue allocation to states, such states could get out of the debt trap.
States’ debt profiles
States debt profiles are in three categories: external debt, which they must service; bank loans facility or over draft which many states take in anticipation of revenue flow from the federal allocation.
The third is for bonds which some states floated at the stock exchange. While they pay interest in foreign and bank loans, they signed a sinking fund to which money must be paid into to service the money raised from the capital market.
Many of these states have signed irrevocable payment order with their banks as a result of their indebtedness and whatever revenue gets into their account, the first line charge is to the banks. While the CBN can ask the banks to restructure states debts, it cannot tell investors who bought into a state bond to wait. The state has to meet its obligation to this class.
The unfolding drama in this new administration is why are there conflicting signals from the Presidency and the office of the Accountant General of the Federation? The real question is: was money withdrawn from the Excess Crude Account which balance as at the last count was $2 billion? If money was withdrawn as speculated in the media, it will give the states some relief and breathe to push for the next pay day.
The problem here is that the ECA account has been depleted and there is not much left there to share in the near future that could tide the states over a much longer period.
State governors must put it at the back of their minds that salaries of workers must, henceforth, be given priority by being treated as first line charges.
In the final analysis, states may end up using their annual budgets in debt repayment and payment of salaries with nothing left for the capital development. This will be too bad for an already fragile economy.
Credit: Vanguard (Nigeria)
