On August 23, many governors got a shocking news. What was that? The Federal Government ordered that the bailout funds disbursed in 2017 to 35 states under the National Budget Support Loan Facility be returned. The scary decision was taken after the National Economic Council (NEC) meeting.
To many followers of political developments in Nigeria since 2015, when the All Progressives Congress (APC) upstaged the Peoples Democratic Party (PDP), and assumed power at the centre, the governors’ fears were understandable. After the inauguration of President Muhammadu Buhari’s government, many governors battled to pay workers’ salaries as virtually all the states were insolvent; some of them were owing up to seven months’ salary arrears or more.
Peace had literally eluded most of the governors as workers were squaring up for battles with them for failure to pay salaries, and arrears in the case of some states. The situation was so bad that many of the state chief executives could not even contemplate taking up any infrastructural projects. So, it was at that point that the FG felt the need to rescue them with the bailout fund, which was given at a nine percent interest rate and to be repaid in two years’ time.
Those who understand the dynamics of politics in the country agree that it was a major achievement by the then new APC government. And for the embattled governors, when the Federal Government gave out the conditional budget support facility through the Central Bank of Nigeria (CBN) to about 35 states, they heaved a sigh of relief. The major reason behind the decision was to enable them meet their financial obligations, particularly payment of civil servants’ salary arrears and pension settlement of retirees.
However, the Federal Government was not acting as a ‘Father Christmas’. The facility was in the form of a loan but with low interest rate, hence, the Minister of Finance, Budget and National Planning, Zainab Ahmed, not long ago announced that the Nigeria Governors’ Forum (NGF) would have to cooperate with the CBN to work out agreeable repayment formula.
Surprisingly, though the conditions were well known before the governors accessed the facility, when the time for repayment came, it didn’t go down well with the beneficiaries. From reports in the public domain, the governors did not want the mention of bailout funds’ repayment. Some argue that traditionally and particularly in this clime, “people do not want to pay debts”.
But the Federal Government remained undaunted. The Finance Minister, had earlier hinted that deductions would start as from September 27 and explained that the FG gave the facility through the CBN to enable states meet their financial obligations to civil servants and pensioners and that the money was provided at nine percent interest rate with a grace repayment period of two years.
She said the repayment would be deducted from the affected states’ allocation during September’s Federation Accounts Allocation Committee meeting, adding, that since the funds came from the CBN, the loans, when deducted from the FAAC allocations of the states, would equally be remitted to the CBN.
“The N614 billion bailout fund given to states is not going to form part of the revenue for funding the 2020 budget. It was a loan which was advanced by the CBN and the repayment will be made to the CBN. So, the recovery process is that we deduct from the FAAC allocations from the states and then we return it to the CBN and we are starting this process by next FAAC in September,” she stated.
Following the announcement, governors under the platform of the NGF, led by the Ekiti State Governor, Dr. Kayode Fayemi quickly met to discuss the planned deduction. After their meeting early September, they agreed to adopt a subtle means of lobbying the President.
The governors at the end of their meeting resolved that some of them might not be disposed to paying back the loan any time. They adduced different reasons for that. The new governors said they were still going through the books left by their predecessors and yet to settle down. Others argued that the economic climate in their states was harsh and that any refund at the moment would simply force them to their knees.
For some analysts, the position of the governors is in order. To them, not all states can pay the bailout refund now as some of the governors are new and may really require time to study the books left by their predecessors. To buttress the argument, such governors would like to know how the bailout fund was expended and whether the state coffers at this time can withstand paying back any loan.
But as rationale as the argument to delay the repayment of the loan appears, many believe that the Federal Government is determined to make the governors start the process of paying back. And when it became clear to the governors that lobbying the president would not save them from the planned repayment, they met again and came up with conditions which must be met before the commencement of the process. This time, the governors demanded an audit of the bailout funds from the FG as a condition for the repayment of the loan. The NGF chairman and Ekiti State Governor, Kayode Fayemi said in Abuja on Wednesday, September 18, that it was important for an audit and reconciliation of accounts on the bailout fund to be carried out between the Federal and state governments as a precondition for repayment.
Fayemi made it clear that governors did not say they would not pay; rather they want certain conditions to be met before they can pay. He said: “Governors have never been averse to payment of the loans, and we don’t want a situation where our banking and financial system will be in jeopardy. However, just as we are ready to pay, we also have a duty to ensure reconciliation of accounts on money owed to states.”
In other words, the governors wanted to use the opportunity to also recover their debts from the FG. For instance, a state like Ebonyi is insisting that the FG owes it N33billion, emanating from contracts it executed on its behalf over the years. It argued that if modalities of repayment of its debt are going to be discussed, such debt too should be on the table for discussion. All things being equal, it means that at the end of the day, the FG will be expected to subtract N17.5billon from the amount it owes Ebonyi State and repay the balance, which should be about N15.5 billion.
Governors also argued that the nine percent interest rate was a bit high. They are angling for five percent, which according to them would be good for them. They insisted that even if you go to bank to get a loan as government, it is five percent because government is a continuum.
Although the Ministry of Finance, Budget and National Planning, the CBN and the NGF agreed to a 20-year repayment plan, the governors were caught unawares. They were still hoping that an audit of the funds would be carried out as they requested before the deduction, when the FG went ahead to make good its promise of repayment deduction as from September 27. At the last count, the FG has already made the first and second months of N525 million monthly deductions in September and October, based on the earlier 20-year repayment period.
This move by the FG attracted governors’ outcry, as a result of which another repayment plan extending the years from 20 to 30, and equally readjusting downwards the monthly repayment from N252 million to N162 million was, last week, presented to the National Economic Council (NEC) for consideration.
Announcing this latest step after the NEC meeting on Tuesday last week, the Finance Minister said: “So, we are expecting that the Federal Ministry of Finance, Budget and National Planning, the CBN and the states will engage again with a view to having the CBN further revise the condition to reduce the monthly repayment burden.”
But again, the governors have kicked against the N162 million repayment plans as was widely reported in the media last week, saying it was still too huge. They have declared that any attempt to deduct such huge sum from their meager monthly allocations, especially now that most of them are also cracking their brains on how to pay the N30,000 minimum wage, would throw most states into unending labour crisis.
As the back and forth argument as to whether to repay or not, when and the modalities for repayment continues, Nigerians would want to know what the governors actually did with the bailout fund. The questions on the lips of many Nigerians are: If the bailout fund was actually meant to offset the salary arrears of workers and the stipends of pensioners, why do states, like Kogi, Ekiti, cross River and Bayelsa among others still owe their workers arrears of salaries running into several months; in some cases up to seven months and above? If the incumbent governors are saying they don’t know what their predecessors did with the fund, what steps have they taken to recover the money from such former governors? Didn’t the governors know from the outset that the bailout was a loan that would be repaid in two years’ time? Why are they foot-dragging now that it is time to pay back? And why is the FG opposed to auditing the fund as requested by the governors? These are some of the questions that Nigerians would want answers to even as some of them still want to know the legality of the FG doling out such huge amount of money to states in the name of bailout fund.
What analysts say
Political watchers are of the view that what the ongoing brouhaha about the bailout fund brings out is that Nigeria, as a federation, is not working. One of the promoters of this view is the Abuja Bureau Chief of the Guardian Newspaper, Igho Akeregha. Analysing the issue on AIT morning programme, ‘Newspaper Review,’ last week, he argued that he has never heard of any country where the Federal Government bails out states to service recurrent expenditure such as salaries, which has no direct bearing on capital projects that can directly affect the lives of the people. “What I know that governments do around the world is to release funds when there is economic crisis to service the revival of industries that can create employment and jobs and not to give money to state governors and what they do with the money, nobody has control over that,” he said.
He added: “Now the same governors are turning around to complain. I think the Federal Government should blame itself. It is like cutting your nose to spite your face.”
Although he agreed that servicing internal loan for 30 years by states amounts to enslavement, he also viewed with a different lens the state governors who complain that such deductions would affect their ability to pay the N30,000 minimum wage to workers. He said: “As a person, I do not understand why any state that is not insolvent cannot pay the N30,000 minimum wage. And that is why some people are clamouring for restructuring. If three or four states find out that they cannot generate resources to run the states, why not come together and just merge because this 36 states structure is a moribund structure that is not working and will never work. If states are already going to be servicing an internal loan for 30 years, then the states are already enslaved as it were.”
Critical questions are also being raised in some quarters as to who enslaved these states. Some are worried that if states indeed received that amount of money, which translates to N164 million when multiplied by 30 years, then that is a huge amount. And they also begin to wonder where these monies actually went to – were they spent on wage bills or capital projects that perhaps most states cannot actually verify that indeed, the funds were used to establish the structures?
Expressing his thoughts on the matter on the same AIT programme, the Editor, Nation’s Capital, ThisDay Newspapers, Iyobosa Uwugiarien said that when the bailout fund was given to the state governments, it was with good intention because it was a time the major source of the federation’s revenue dropped; that is the oil revenue. He also agreed that it was given at a point when many states could not pay salaries because many of them rely on the federation account to be able to sustain their policies and programmes and pay salaries.
He lamented that the FG’s good intention to save many states that were already in trouble before the bailout, was utterly misconstrued because according to him most of the governors rather than use the money for what it was meant for, used it for other things. “So, at the end of the day, the money was not used for the purpose it was meant. Many states diverted that fund and now they are saying they cannot pay. They should know that when that money was given to them, it was not for jamboree; it was for them to pay salaries of their workers so that they would pay back later,” he said.
He equally finds it funny that the governors are complaining about the repayment plans, saying, “For me, the way the repayment was structured is not a big deal because on a monthly basis, some of the governors collect more than that as security votes. There is no state today that cannot pay its workers N30,000 a month if they block all the loopholes in the system.”
Reacting to the governors’ lamentation that they would find it difficult to service other problems, particularly the minimum wage, he also wants the governors to tell Nigerians whether the money was given as a gift in the first instance. He advised the governors to go after the former governors who misused the money and live a moderate lifestyle so as to save money to attend to the needs of their states.
“Why will a governor travel to Abuja with 16 to 20 vehicles in his convoy? We must look at how we run governance in this country. A governor going to Abuja to attend the Federal Executive Council meeting can go with only three aides; that way he will cut cost of accommodation, fuel, and feeding. Peter Obi did it in Anambra State and that was why he was able to save for the state. All the governors that are complaining now live above their means while Nigerians are living in poverty and squalor. Some people can’t even feed once a day but you have governors who are driving all over Nigerian cities with siren and convoys. I know of a governor that has about 500 political aides and many of these aides receive nothing less than N150,000 per month. Now, they can pay their political aides N150,000 per month but they cannot pay civil servants N30,000 at the end of the month. I think they should tell that to those who don’t understand how they run their government,” he submitted.
Chieftain of the All Progressives Congress and former Minister of Information, Prince Tony Momoh faults the FG for giving out money to states without collateral. “The fact is that if you go to the bank to borrow money, the bank will ask for collateral and meeting the demand of collateral is the condition for accessing the loan you want,” he said.
He argued that President Buhari might have decided to bail out the states, taking a cue from the similar action he took as head of state in 1984, when teachers all over the country were not paid salary for up to 18 months and the FG brought out money to pay all the teachers in Nigeria.
The 1984 action, according to Momoh, was taken without any arrangement on how the states would pay back. “Apparently, when the FG decided to bail the states out, I think the president must have thought of what they did in 1984 when he was head of state. Then it was discovered that most of the teachers were not paid for up to 18 months and they brought out money to pay all the teachers in Nigeria. And there didn’t seem to be any arrangement to ask the states to pay back the money,” he said.
In this particular case, the former minister said it is a different ball game because they are two different scenarios – military and civil rule. Besides, he clearly stated that under the current democracy, the president cannot just take federal allocation and give it to states. “I think the president or the FG may have discovered that you can’t just say you are giving money to states because they have their own budgets and allocations from the Revenue Mobilisation and Fiscal Commission (RMFC), and you have no business or you are not protected if you give money from your own budget to another. In other words, you know that after budget and you want to move money from one head to another, which they call virement, you have to seek approval of the relevant lawmaking body; it is as strict as that. So, I think the FG may have tried to help out the states this time but discovered that they can’t do so because audit will bring out the fact that they have no right to send money to where they did,” he stressed.
However, he cautioned that the terms of repayment has to be negotiated and if the states are not comfortable with the current negotiated condition, it is his belief that further negotiations have to be made until a balance is struck. “So, that being the case, they may have told the states, ok you have to refund the money and the way of refund has to be negotiated. And if for instance, the states cannot pay, you have to renegotiate because I don’t think the FG is out to punish the states but just that there is no free lunch anywhere when it comes to budgeting and expenditure. So, if they say they can’t pay, they have meeting regularly at the level of National Economic Council meeting; and I think that is where they can discuss this kind of thing but pay, they must,” he insisted.
Although the governors might have used the money for a different purpose from what it was originally meant, Prince Momoh argued that auditing would expose that. He stated that the FG has no power to tell the states how to spend money. “FG can allocate money to states and governors can also divert the money but only auditing will show it as the FG does not supervise states in the expenditure of money,” he said.
Again, the APC chieftain agrees with the governors for insisting that the bailout fund need to be audited as condition for repayment, saying, “That is legitimate but if they discover that one owes the other, it is a simple question of arithmetic. You either pay if you owe or have the deduction made from your allocation. But, repayment should be the outcome of negotiations. I think their demand to audit the bailout fund is a legitimate case.”