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The bailout the economy needs

During the inauguration of his cabinet, President  last week commended the Central Bank of Nigeria (CBN) for assisting more than 30 states of the federation with concessionary loans to offset salary arrears for their workers. The President observed that the Bank also implemented country-specific and innovative policies that had helped to stabilise the exchange rate and conserve the nation’s reserves.

The president had conceded to the plea of state governors for help and approved an epoch-making financial bailout package to enable them settle salary arrears in order to avert looming industrial unrest in the affected states. Profligate campaign spending and steeply dwindling oil revenues left most state governments cash-strapped and unable to carry out their basic financial responsibilities shortly after the May 29th hand-over date.

We are, however, not altogether satisfied with the manner in which the bailout was administered in some states. The Governor of Kogi State, for instance, is alleging political victimisation in that even after fulfilling all the conditions for the release of the bailout fund, the CBN has refused to hand it over for the payment of workers. The bailout issue should not be politicised. Rather, the money should be released to all states which fulfill the conditions laid down by the CBN. Strenuous efforts should be made to ensure that it is strictly deployed to offset workers’ salaries.

The Federal Government should monitor the ways that governors are spending their bailout fund and ensure that it is not diverted to other purposes. It is the constitutional duty of state assemblies to ensure prudent spending of resources by the executive branch.

Unfortunately, they abdicated this balance of power function, which was why many governors found it easy to bankrupt their states. The Buhari administration should encourage state assemblies to be up and doing in their oversight of the financial resources of states to avoid a situation where states will come back for another bailout.

The CBN must resist pressure from the politicians for further bailouts to pay workers’ salaries. States should now settle down to explore ways of raising revenues and maintaining their services. Good governance is not just about spending of funds from federal allocation. It is also about being able to introduce policies and programmes that grow the revenue bases of governments.

The CBN should actively turn its attention to the possible bailout of the real sector of the economy, particularly agriculture, mining and small/medium business to create employment and expand the economy. We should learn from US President, Barack Obama’s bailout of the US real sector after the 2008 financial meltdown. This helped to restore the American economy to robust health.

That is the bailout our economy needs.

 


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