Over $1trn Foreign Debt And N94.2bn Bond Maturing 2020
Eighteen states of the federation are technically bankrupt and unable to pay salaries; yet they owe huge foreign and domestic loans with little to show for it
Contrary to the impression being created by some state governors that the federal government is entirely responsible for their current financial woes, it has been established that the technical bankruptcy most of them are presently undergoing was largely the outcome of their own making. Investigation by The UNION revealed that 18 states that have not paid their workers for upwards of seven consecutive months are under the crushing weight of huge foreign and domestic debts totaling over $1 trillion and about N100 billion in local bond commitment alone.
The Nigeria Labour Congress (NLC) listed the states as technically insolvent and unable to meet their wage obligations for a long time. The states are Abia, Akwa Ibom, Bauchi, Benue, Cross River, Ekiti, Imo and Jigawa. Others in the limbo of inability to pay workers’ salaries are Kano, Katsina, Kogi, Ogun, Ondo, Osun, Oyo, Plateau, Rivers and Zamfara.
The UNION findings shows that the 18 states owe a total of $1.083 trillion in foreign debt as at December 31, 2014, while their various bond commitments amount to N94.2 billion with maturity dates ranging from June 30, 2016 to December 31, 2020. It is not immediately determined what the states used the foreign and domestic loans to do, reports however revealed that virtually all the 18 states have little to show for the huge borrowing that is now crippling their finances through unavoidable repayment plan.
This trend was highlighted at the Forum of Finance Commissioners last April where the state governors were openly criticised for not giving the welfare of their workers the priority it deserved. It was reported that Ebonyi Finance Commissioner, Barr. Timothy Odaah, who functioned as the forum chairman, told journalists at the end of the Federation Accounts Allocation Committee, (FAAC) in April that those owing should have made payment of salaries a priority, rather than spending state funds on electioneering campaigns. Odaah insists that the governors should be held responsible by the workers and the public.
He also observed that some state governors had been accused of squandering their state resources on unprofitable ventures such as hiring and flying private jets and excessive political appointments. According to him, such governors did not use the resources at their disposal to develop their states’ economy. As a result they could not generate internal revenue to support the state. Mounir Gwarzo, Director- General, Securities & Exchange Commission (SEC) had also frowned at the financial recklessness of the state chief executives.
While condemning the high indebtedness of the states, Gwarzo noted that it was a cause for worry that the debts did not measure up with infrastructural development in their states as the agony of unpaid salaries haunt most of them. He was said to have described the indebtedness as a bad omen, more so, where there are no infrastructure in place to underpin their debts. Edo State governor, Adams Oshiomhole, has consistently blamed the government of the immediate past president Goodluck Jonathan, for poor management of the nation’s resources and for not taking concrete actions to plug all the revenue leakages that hemorrhaged the nation’s finances. Oshiomhole has consistently disagreed with the fact that the slide in international price of oil which has direct effect on the nation’s revenue base, could have affected the states to the extent of their biting insolvency.
The UNION findings showed that some of the debts were incurred before Jonathan’s administration and were only rolled over thereafter. Findings also revealed that it was the strict actions taken by former finance minister, Ngozi Okonjo- Iweala, the prevented the states from embarking on further frivolous borrowings that would have crippled their states long before now. Aside the age of the debts, their volume also makes it difficult to be a matter that should be blamed on the federal government under Jonathan.
For instance, states like Cross River, Ogun, Bauchi, Katsina, Osun and Oyo whose external debts as at December 31, 2014, were $141.46, $109.15, $87.57, $78.92. $74.05 and $72.35 respectively do not proffer any hope of giving the state a healthy financial state in many years to come. Similarly, Ondo, Osun and Ekiti with bond commitments that will mature in 2019 and 2020, have not established any infrastructure or revenue-yielding project that would enable them redeem the bonds in the next four or five years. The states have bond commitments of N27, N35.52 and N16.95 billion respectively maturing between 2019 and 2010 (see table).
This is not the first time states owe their workers for a prolonged period. According to a recent media report, former Economic Adviser to President Olusegun Obasanjo, Professor Charles Soludo, had warned in 2003 that most state governments had signed away their future statutory allocations to contractors whom they owed. Explaining why many states were bankrupt and could not fund developmental projects, Soludo had argued that most states were technically bankrupt as huge deductions were made from their allocations to pay such creditors. Soludo said that after such deductions had been effected from the states’ allocations, they were left with little or nothing to operate with.
“As a result, most of the states are not able to perform their statutory obligations. Instead of telling the people the simple truth, they keep complaining of lack of funds”, the report stressed. On his inauguration May 29, President Muhammadu Buhari had expressed concern at the level of corruption and mismanagement of resources at the state and local governments, and promised to deal with the hydra-headed anomaly which is the reason the states are today writhing in pains of financial crisis. “Elsewhere relations between Abuja and the States have to be clarified if we are to serve the country better. Constitutionally there are limits to powers of each of the three tiers of government but that should not mean the Federal Government should fold its arms and close its eyes to what is going on in the states and local governments.
Not least the operations of the Local Government Joint Account. “While the Federal Government cannot interfere in the details of its operations it will ensure that the gross corruption at the local level is checked. As far as the constitution allows me I will try to ensure that there is responsible and •Continued from page 37 accountable governance at all levels of government in the country.
For I will not have kept my own trust with the Nigerian people if I allow others abuse theirs under my watch,” Buhari emphasised in his inaugural speech to the admiration of his audience. How this is going to play out is a subject of mere guesswork as the governors, including the heavily indebted ones, have resolved to approach Buhari for a bail-out. It will be interesting to know if the President would not ask questions before offering the kind of help the wasteful governors are asking for.