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Mortgaging states to FG in the name of bail-out

By Dele Sobowale

“There are no desperate…….

Even the village idiot knew that by May of this year, most states were in deep financial problems. Those hyped to be “innovative” and the confirmed wastrels and utterly corrupt suddenly found themselves in the same boat. I was probably the only person in Nigeria who was not surprised. Several articles had been published on this page predicting that outcome. Two, among others will serve as reminders.

FG-okWHY STATE GOVERNMENTS CANNOT PAY was written in 2013 predicting what we are now just experiencing.

Early in 2015, in the article titled BEFORE YOUR STATE GOVERNOR RUNS AWAY, I warned Nigerians that their governors, irrespective of political affiliation, will struggle to pay salaries up to the time of the 2015 elections. But, with the elections out of the way, the people will be told the truth, namely, that their states cannot on their own pay salaries anymore. Again, we have seen that happen.

With the elections over and Jonathan no longer giving a damn what happens to unpaid workers, most of the governors ran to Abuja or abroad to stay. The re-elected and new governors were waiting for one man to mount the saddle to go begging – President Buhari. Again, we were all witnesses to how the governors, at their National Economic Council meeting with the new President threw self-respect to the winds and openly solicited for bail-out.

At first, Buhari told them off and I must confess that I was one of those who sought for a compromise that enabled the Federal Government to come to the aid of the states. Unfortunately, what followed was not totally or even remotedly expected. The Federal Government first offered bail-out funds to the states from the usual Federation account beefed up by withheld revenue by the Nigeria Liquefied Gas limited from the consolidated account.

But, as it turned out, and as I knew that was insufficient to get the states out of trouble. Given huge loans thoughtlessly taken, funds for the projects diverted, “variations” (read campaign money for 2015 elections), suddenly sharp drop in oil revenue, the states could only survive one month on the first bail-out package. They needed more and that more must be a long-term package. Now, the Federal Government and several states, thank God excluding Lagos State, but surprisingly including Akwa Ibom State, have signed up for the deal packaged by the Federal Government.

In any other country where the state legislators, the professionals (accountants, lawyers, economists, finance and investment specialists, bonds managers, bankers etc) are alive to their responsibilities, this is a deal that should have caused the loudest uproar and should have been subjected to wider public debate before being sealed than it had been. In fact, a deal which, to me, is unconstitutional, between the Federal Government and desperate state governors has been foisted on the people.

President Buhari has my sympathy because he has never pretended to be an economist or financial expert. He has also never claimed to be a constitutional lawyer. I am also not a lawyer. But, I am aware that there are things called precedents. I also know that “the road to hell is always paved with good intentions.”

After initially tasking the governors requesting for bail-out to go and look inwards to solve the problem of outstanding wages, Buhari, had turned around to mandate the Federal Government of Nigeria, through the Central Bank of Nigeria, to assume the debts owed to workers in those states by converting the debts to bonds.

Nothing like this had ever occurred before in our federal republic, since the government of President Shehu Shagari guaranteed the external loans of the nineteen(19) states of Nigeria at the time. That economically ill-advised measure was partly responsible for turning the $2.8 billion facility acquired by Obasanjo’s government, and which was repayable into the $36 billion which both Buhari, Babangida, Abacha and Abubakar found it impossible to repay – until rapid rise in crude oil price under Obasanjo provided the funds for us to exit the debt trap.

Even that agreement, which was arranged by Dr Ngozi Okonjo-Iweala in 2004 resulted in partial debt-forgiveness for Nigeria. We paid only about $24 billion out of the estimated $36 billion owed.

What went wrong?

When Shagari set about to guarantee the external loans of states from 1979 to 1983, he could not have imagined that people elected to high office, specifically governors, could be so callous and conscienceless as to take loans on behalf of their people for development only to embezzle them. Unfortunately, that was what happened. Out of the nineteen governors who served from October 1, 1979 to October 1, 1983, only three escaped jail sentence for defrauding their states.



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