Faceoff looms between the federal government and some state governors over the refund of the bailout funds as both parties continue to disagree on terms. TOPE SUNDAY writes.
The federal government in 2015 gave state governments bailout funds for the settlement of the salary arrears. Four years forward and it is poised to recoup but the governors seem not to be ready to pay back.
The Genesis
In July 2015, President Muhammadu Buhari approved an N804.7 billion intervention package to help bankrupt states pay salaries. According to reports, at least 12 out of the 36 states were said to owe their workers salary and allowances.
In the period under review, the country experienced recession which was a global phenomenon. While it lasted, the country’s revenue, which depends largely on crude oil exports, fell sharply.
Under the period, most states were unable to pay salaries and the country’s economy was in shambles. To address the harsh condition of the Nigerian workers, President Muhammadu Buhari came to the rescue with the bailout funds.
Conditions for bail out
Before the bailout was released, 22 conditions was demanded by the federal government from states, including publishing their financial statements and receiving the bailout in monthly tranches, as opposed to full disbursement upfront as was the case with the 2015 bailout.
The conditions, which were contained in FG’s Fiscal Sustainability Plan (FSP) framework for sub-national governments (states) in Nigeria, was released by the former Minister of Finance, Kemi Adeosun, at a stakeholders’ meeting attended by the commissioners for finance in the 36 states.
35 states, aside Lagos, received the bailout as conditional budget support, which was provided by the Central Bank of Nigeria (CBN) to help them pay salaries, gratuities and pensions.
The loans were provided by the CBN at nine per cent interest, with a grace period of two years, while the federal ministry of finance helped in the disbursements, with documented approval by the presidency.
FG moves to recoup loan
Barely three months after the bailout was released to the benefiting states, the federal government on September 10, 2019, announced its plans to begin, from the same month, the deduction of the N614 billion bailout funds.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who disclosed this, said the deduction would commence in the Federation Accounts Allocation Committee (FAAC) provision for states in September.
She said the funds would be deducted from source and remitted to the Central Bank of Nigeria (CBN), adding that the refund would not form part of the revenue for funding the budget.
“It was a loan which was advanced by the CBN and the repayment will be made to the same CBN. So the recovery process for us is to deduct from the FAAC allocation to the states and remit same to the CBN.
“We are going to start these remittances by the next FAAC. So there will be no requirement for us to consider the Fiscal Sustainability Plan (FSP) implementation.
“We want the states to stay on the path of fiscal sustainability, but it will not be a condition for the deduction. We will deduct direct from source and remit to the CBN,” she had said.
Govs new song
But this move did not go down with the state governors. Blueprint weekend learnt that most of them were caught unawares by the development.
According to industry sources, the state governors are not prepared to meet the two-week deadline given by the FG to refund the N614 billion bailout fund.
Media reports indicate that the governors are insisting that the N614 billion was agreed to have a 20-year repayment plan hence they are surprised why the federal government is requesting for bulk repayment.
Also, the governors had reportedly insisted that over $1 billion of the bailout fund was sourced from the Nigeria Liquefied Natural Gas (NLNG) dividends, which states are entitled to. While the governors admitted to owing, they insisted that the N17.5 billion quoted was overstated and needs to be reconciled.
It was also gathered that the governors were concerned that the planned wholesale deductions will hurt the economy of most states and it will be unfair to the present generation of governors.
Diversion claims
The Independent Corrupt Practices and Other Related Offences (ICPC) had been quoted in the media to have indicted most of the states of diverting the fund, prompting the announcement of stringent conditions for the bailout under consideration.
Also, in September 2017, the Nigeria Labour Congress (NLC) threatened to name and shame state governors, who refused to pay complete salaries to workers in the country, in spite of the bailout funds.
The President of the NLC, Mr Ayuba Wabba, alleged that some state governors refused to effectively utilise both the bailout funds and the Paris Club refund given to them by the federal government.
According to him, 10 out of the 36 states were particularly guilty of the offence, while six of the ten states were in terrible situation.
He said, “The Congress has directed all states chapters whose members are owed more than three months’ salaries arrears to declare an industrial action and we have promised to name and shame them.
“The states included, Imo, which had been paying workers’ salaries in percentage and has not declared utilization of the bailout fund and Paris club refund.
“They paid 40 per cent pension to their pensioners without their consent and provided a form for them to sign under duress. That is not allowed in law.
“We have Bayelsa, which has between five to 10 months’ arrears, Ondo workers are owed between four and six, Ekiti, five to eight, Benue five to eight, and Kogi, which is the worst case scenario.
“We have three categories of workers in Kogi state. We have 40 per cent that are being paid up to date; we have 25 per cent that had not been paid between eight and 16 months.
“We also have another 25 per cent that have not been paid between eight and 21 months. In all the sectors, they had categorised the workers into three categories.”
The president of the Congress also listed Osun, Ebonyi, Zamfara, and Abia, among others that owed salaries and were not implementing the 2011 national minimum wage for workers.
Also, in 2016, Peoples Democratic Party (PDP) in Kwara state accused the state government of diverting the over N3 billion bailout funds it received from the federal government to pay the salaries and pensions of workers and retirees.
The PDP, in a statement issued in Ilorin by the Publicity Secretary in the state, Rex Olawoye, said: “Our party is alarmed by this curious conduct and we dare say that the diversion is criminal, insensitive and a total negation of the spirit behind the funds’ release.
“Our party reliably learnt that the Kwara state’s share of the bailout funds was paid on Wednesday, July 8, 2015. But till this very moment, over five months’ salaries being owed some categories of workers in the state are yet to be paid.
“We, therefore, call on the national leadership of the NLC, Radio, Television and Theatre Workers Union of Nigeria (RATAWU), Nigeria Union of Local Government Employees (NULGE), Association of Senior Civil Servants of Nigeria (ASCSN), the Nigerian Union of Teachers (NUT), and ASUP whose members are the worst hit in Kwara state to prevail over the Kwara state government to immediately commence the payment of arrears of salaries, allowances and pensions of workers without further delay to ameliorate the suffering of the civil servants in the state.”
Reactions trail impasse
Reacting to the development, the former Deputy Governor of the CBN, Dr Obadiah Mailafia, who said the bailout was given to the states while on distress, described it as a welcome development.
Mailafia, who was the presidential candidate of the African Democratic Congress (ADC), however, faulted the purpose for the disbursement of the fund and how it was utilized.
Speaking to Blueprint Weekend, he said: “The bailout released to the state governors was given when the states were in distress. But the question is, was the purpose of issuing the loan achieved?
“Another issue to be addressed is the timing of the issuance of the loans to the benefitting states. When was it given? Like in some states, the bailout funds were released some few days to elections. In that situation, what do you want the governors to use it for?’’
Also reacting, the Research Officer, Grassroots Development and Advocacy Centre, Comrade Kareem Abdulrasaq, said the state governors see bailout fund as a free gift.
Abdulrasaq in an interview with our correspondent in Abuja, also alleged that the governors did not use the fund for the intended purpose, and asked the CBN and federal government to be sincere in its disbursement.
He said: “State governments have seen the bailout fund as a free gift that should be tapped when necessary. They do this without considering the consequence not only on the state but on the people they are meant to govern.
“Having believed that the money will not be entirely paid during their tenure, they designed all means to sabotage it repayment during their tenure.
“In 2016, about 27 of them received about N338 billion from CBN. In 2019, about 35 of them have received a total of N614 billion. The question is how effective have they utilized the money?
“Was the money used for the payment of salary back locks of the civil servants and pensioners as claimed by them? The answer is negative.
“Giving Kogi state as the case study, despite N30 billion received, the state government still owed it workers. Recently, about N20.8 billion bailout was again received by the state government. But the state workers are being owed over 30 month salary arrears.
“The point is that utilization of the fund is shrouded with fiscal mismanagement with no effective measure to check how such fund is utilized. The CBN and federal government should be sincere in such disbursement. It is a fiscal abnormality to give loan to someone who has not displayed any means of fiscal accountability.
“The state governments should come out clear and explain to their people how the bailout funds were spent (the number of workers paid, how much is paid, to which account, when the money is paid, how many months is paid with the fund, how many salary is the fund covered or published such in the national dailies).
“It is when all the information is provided that the people and international community will have confidence in them as far as fiscal transparency is concerned.
“Therefore, effective utilization of the bailout fund is rested on effective oversee and strict regulations on the part of the federal government. I hope that the next time such kind of fund is requested, there would be stricter condition attached to the condition that will make them think beyond bailout fund.”
Speaking further he said: “On the issue of repayment, I suggest that federal government should not dance to the tune of the governors’ forum. It should go ahead to remove the said amount monthly from their federal allocations and such reduction should not affect local government allocation; because the level of development at the local level is very low.
“Even despite the current policy of sending the money directly to them, the federal statutory allocation is still going to the state government account. A good example is Kwara state where the 16 local governments are only given running cost monthly between one to four million up till today by the state government from the federal allocation.
“This is wrong. The local governments should receive the monthly allocations directly from their LGA account from federal government and should be allowed to determine their own destiny.
“Federal government must be weary of the state governments on the bailout repayment because they will make all efforts toward preventing the repayment during their own tenure so that they could get money to steal.
“They should be reminded that government as an institution is continuous and whatever your action and inaction is today will affect others tomorrow.’’
