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Anxiety Over States’ Finances As Debt Burden Worsens

Sam Diala & Joy Onyemaechi

With total external debt amounting to $3.265 billion, combined with domestic debt totalling N1.7 trillion (about $11 billion), owed by the 36 states of the federation as at December 31, 2014, it is obvious that the incoming administration would face serious challenge in raising finances to run the states. The situation is not different where the same administration would continue in office.

This is worsened by the accelerated decline in the Federal Allocation shared monthly by the three tiers of government (Federal, States and Local Governments) which has been on a steep slope since June last year when the international prices of crude suddenly nose-dived from over $100 per barrel to below $50 per barrel. This has taken a more serious dimension since the year when they shared N500.23 billion in January. In February, the three tiers of government shared N522 billion, which was a marginal increase of about N1.5 billion over the previous month’s N500.23 billion.

In March and April, the amount reduced to N435.06 billion and N388 billion respectively. Bashir Yuguda, former Minister of State for Finance had explained the reason for the decline. He said in February: “There was loss of about 24.48 million dollars in revenue due to further drop in crude oil prices from 52.3 dollars in December 2014 to 48.6 dollars in January.

The persistent shutdown and shut-in of trucks and pipe lines at various terminals continued to impact negatively in the revenue performance. None oil revenues dipped further in February 2015 relative to the previous month,” he said. He also added that the N35.5 billion which had become a monthly amount being distributed under the SURE-P Programme was no more because of the fall in oil prices.”

Unfortunately, there is little ground to believe that any or a combination of these factors will recede in the shortest possible time because of the high consumption nature of governance at the country, which has given the states and local governments self-imposed immunity against public accountability as they hardly beam the searchlight of integrity and transparency on themselves. To them, accountability must exist only at the centre.

The coincidence of 2015 election season which exerted heavy toll on the finances of the states has worsened the already bad situation. This is because the governors and other politicians mobilized available resources to prosecute the elections, which now left them with empty treasury to the extent that many have not paid workers’ salaries for upwards of 7 months. Aside unpaid arrears of salaries and pensions, some states have embarked on downsizing while others opted for salary cut. For instance, Cross River State slashed February salaries of local government workers including teachers by 50 percent, despite owing the workers two months’ salary arrears. salaries. Niger State last week announced the sack of 10,000 workers.

The Commissioner for Local Government and Chieftaincy Affairs, Alhaji Yussuf Garba Tagwai, attributed this to the increase in salary burden following the introduction of N18,000 minimum wage. Analysts predict that the culture of waste in governance among the state chief executives, the drop in revenue, huge salary bill and, above all, monumental debt burden may push the states to deep financial situation that would literally bring the machinery of government to a halt.

As a way out, they will intensify internally generated revenue (IGR) through aggressive tax haunt which many of them have warned must take place. This will increase the already financial burden of the people with little improvement in social services to offer relief. But tax collection is a function of productivity and economic buoyancy. With the states and local governments being more of cost centres with lean revenue channels, generations ahead may find themselves trapped in the miry clay of debt that will trap their feet and render them immobile – economic wise.

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