Marketers, FG and N800 billion debt

CBN building

It is no longer an exaggeration that there is hardly any major sector of the economy that the Federal Government of Nigeria does not have its feet deep in debt, most of which are long outstanding. If it is not road contractors today complaining of non-payment of huge financial claims on the government, it will be another group of private sector economic agents. And the number of such complaints keeps increasing despite series of reported remedial meetings and even promises made by government to settle its indebtedness. The other day, the nation was alerted by the downstream oil marketers that the Federal Government was indebted to them to the tune of a whopping N800 billion. The amount, according to the report, is made up of money the marketers spent to finance importation of petrol (PMS) plus bank interest charges that had accumulated from the banks. Although the principal amount borrowed and accumulated interests were not separated, the marketers further claimed that as a result of government’s debts to them, they in turn, have been unable to repay to their bankers’ debts amounting to USD1.2 billion.

This is pathetic. Indeed, it is distasteful that the government is leading by bad example in settling corporate financial commitments. This has given rise to some persons using the government’s attitude as excuses to justify non-payment of their debts to others. That is why, these days, ‘if the Federal Government owes some people, who am I not to owe somebody?’ has become an anthem for shameless citizens and ‘if the government, with all the billions of dollars it earns, is unable to settle its debts, why should my creditors expect me to pay them?’ This ugly development is bound to complicate settlement of legitimate financial commitments by parties in the country. For instance, if the government cannot pay its creditors and such creditors cannot, in turn, pay what they owe the banks, the ultimate burden bearers will be persons who had deposited their money in banks. For as long as banks’ debtors are unable to pay their debts, the banks risk being unable to meet their depositors’ repayment demands. If such a situation is prolonged for a period of time without commensurate inflow of fresh deposits into the banks, the country may back-pedal to the era of banks’ distress and failures, with the very familiar unpalatable experiences. Indeed, if deposit-run on banks is triggered, the expectations that the country will soon exit from recession will be a mirage.

As the marketers clearly pointed out, continued government’s delay in paying the debts will adversely affect their businesses with side effects of employee lay-offs, fuel shortages, a return to long queues at fuel stations, mounting bank interest charges and even eventual closure of some of the businesses, among others.

There is nothing wrong in government being in debt, but the greatest damage it can impose on itself is to allow the debts to be classified as bad. That will impact negatively on its integrity, image and credit rating. In other climes, a bad debtor will find it difficult, if not impossible, to access credit facilities in future. The Federal Government, no doubt, is aware of this and that is why its agent, the Central Bank of Nigeria (CBN), initiated its internal Credit Risk Management System (CRMS) and private sector-owned Credit Bureau to keep tap on the credit behaviour of bank debtors and to check-mate serial bad debtors from causing havoc in the system. It is hypocritical of the government to be supporting the tightening of noose around the neck of bad debtors in the banking system while it is not paying its own creditors. Today, if a credit risk assessment is conducted on the government it will most probably turn in a result that government is the biggest and perhaps, worst debtor in the same system. Thus, its debts could be acquired at huge discounts by Asset Management Corporation of Nigeria (AMCON) to smoothen the books of the banks. By extension, if any of the debts of the oil marketers becomes so bad that it has to be acquired by AMCON, it is an indirect way of government’s own debts being subjected to acquisition by AMCON. This type of situation will create hazards.

To avoid creating or exacerbating problems in the economy and to aid its recovery from recession, the Federal Government should commence, without further delay, settlement of its indebtedness to its various creditors. No one says government must repay all of its debts in one lump sum. Properly planned and scheduled, the debts, across board, can be drastically reduced without further agitations by the creditors and exposure of the economy to preventable dangers.

All creditors’ claims on government should be properly verified before settlement. Verifications should start from confirming the existence, genuineness and validity of contracts. Successful execution in accordance with predetermined terms and that payment had not previously been made, should also be verified. Anything short of proper verification may lead the government into the trap of corruption.

It is good news that the oil marketers met with the Acting President Yemi Osinbajo on their plight and that the Minister of Finance, had been directed to ‘‘solve the problem.’’ With that Executive directive, it is expected that the minister will act fast, recognising the implications of further delay on the country’s socio-economic situation. Finally, as government fast-tracks and resolves its debts that have become subject of complaints, it must strive hard to avoid a repeat of this embarrassment.

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