Published On: Tue, Sep 3rd, 2019

A bailout isn’t a handout

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The Federal Government recently announced that it would ask 35 state governments to return N614 billion they received from it as budget support facility. Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, revealed the federal government’s intention during a press briefing at the end of a 3-hour meeting of the National Economic Council, presided over by Vice President Yemi Osinbajo. According to him, President Muhammadu Buhari’s administration had in the past three years intervened through loans, bailouts and Paris Club refunds to the 36 states to the tune of well over N1.1trillion.
On her part, Zainab said, “As at today, the budget support facility advanced by the Federal Government to 35 states is a total sum of N614 billion. This means an equivalent of N17.5 billion per state. Council agreed to constitute a team of the Nigerian Governors Forum (NGF), Ministry of Finance and the Central Bank of Nigeria (CBN) to finalize modalities to commence repayment of these facilities to the Central Bank.”
It makes a lot of sense now that the government is insisting that the states pay up. The very day the same finance minister assumed duty after her swearing-in, she told her staff that the nation was close to a financial crisis. “As you know, our nation is facing a near fiscal crisis, and it is up to us to make sure that it is arrested … We must increase revenues; if not, our country will slip into a fiscal crisis”, she said. “We have been growing in eight consecutive quarters, but it is a growth that is still fragile. Our revenues have grown, but they are still 55% of what we have budgeted. We still have to pay salaries and other statutory obligations. We have to pay debts and we need to operate on a day-to-day basis, and we need to do capital projects for the sustained growth of our economy.”
One of the specific conditions under which the states received the advances was that they pay arrears of workers’ salaries and pensions they had run up. Another was that they improve their capacity for internally generated revenue (IGR). However, many of them failed woefully on those two scores. They squandered the funds on non-essentials like foreign trips. The fact that the money was given close to an election year didn’t help matters. The governors that sought re-election knew where their mouths were exactly. Here too the federal government failed. One of the conditions was that it would monitor the way the funds it gave out were spent. It didn’t do so.
The question now is how to get the states, already cash-crunched, to pay up. Many of them have said they would not be able to pay the new national minimum wage of N35, 000 a month. Involving the Central Bank in the recovery plan suggests only one thing: the federal government is set to pounce on states’ monthly allocations from the federation account. We sympathize with the states, but this is the price they have to pay for their wastefulness and thoughtlessness. They mistook a bailout for a handout.

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