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Experts differ on FG’s handling of Paris Club refund

By Mathias Okwe, Anthony Otaru And Chukka Oditta (Abuja)
26 March 2017   |   2:43 am
Last Tuesday, state governments in the country got a shock of their lives when the Federal Government announced new conditions for the release of about N500b refunds of the over-deductions of their revenue...

Abdulaziz Yari

Last Tuesday, state governments in the country got a shock of their lives when the Federal Government announced new conditions for the release of about N500b refunds of the over-deductions of their revenue by the Federal Government from the Federation Accounts Allocation committee (FAAC) over the years for the servicing of the controversial Paris Club debt.

Part of the reasons given by the Minister of Finance, Mrs. Kemi Adeosun was that the Federal Government was yet to undertake a comprehensive reconciliation of the deductions and refunds so far made in the past, suggesting that some states may have been over paid in the last exercise, hence the need to clean the papers first before another round of disbursement.

Instructively, it is alleged that the Nigerian Governors Forum, an umbrella body of all governors may have dipped hands into their states’ receipt in the first disbursements, amounting to about N19b, as consultancy fees to ‘experts’ hired to undertake the reconciliation activities to know exactly how much the Federal Government was still owing them.

This is holding sway, as the Federal Government agency vested with the mandate of managing the country’s debt activity – the Debt management Organisation (DMO), seems to be locked in a crisis of confidence.

A look at the DMO documents at the weekend, indicated that for the year 2006, the management of the DMO at the time recorded the sum of N50.984b as over – deduction belonging to states as a result of reconciliation exercise concluded in the following year 2007.

Accordingly, the amount, so over- deducted was returned to the states concerned, while the amount in arrears was equally included in 2007 debt service due to the states. Had the DMO continued in that tradition, perhaps the Nation would have been spared the current crisis that Minister is trying to resolve.

The Finance Minister was unambiguous when she revealed thus: “The Debt Management Office (DMO) initially requested for a period of 22 months to complete the reconciliation and facilitate disbursement. However, President Muhammadu Buhari, considering the plight of salary earners and pensioners and the need to stimulate the economy, directed that the exercise be completed within 12 months.

“In addition, Mr. President gave an express Anticipatory Approval for the release of up to 50 percent of the claim of each state, pending final reconciliation. That reconciliation is undertaken by the DMO, Office of the Accountant General of the Federation (OAGF) and the relevant state governments. Accordingly, the disbursements are staggered in batches and payments are only made when the claims of each state have been reconciled with the facts at the disposal of  the Federal Government.”

The release of the first tranche, representing up to 25 percent of claims, being N522.7b commenced in December 2016. Disbursement was subject to an agreement by state governments that 50 percent of any amount received would be earmarked for the payment of salaries and pensions. In addition, each governor gave an undertaking that excess payments would be recovered from the Federal Accounts Allocation (FAAC), if the final reconciliation found that the amount paid under the Anticipatory Approval exceeded that due.

To date, nine batches have been processed, while some balances remain outstanding to the possible credit of a number of states. Given the foregoing, complete and final figures can only be released and published after each state and the Federal Government have reconciled and agreed on the sums due.

Meanwhile, economic experts and analysts have expressed different opinions on the latest move by the Federal government to stop further disbursement of the second tranche of the Paris Club Funds to states, unless they meet the requirements.

While some commended the move, others say such disbursements are not only illegal, but that its continuation will worsen the economies of the states and also enrich the leaders.

Executive Director, African Centre for Leadership Strategy and Development, Dr. Otive Igbuzor commended the Federal Government move to stop the disbursement until certain conditions are met.

He said: ‘’The decision of the Federal Government not to release the second tranche of the Paris Club refunds to states until they give details of how the first tranche was used is quite commendable. We all know that the fiscal insolvency of most states of the federation is partly as a result of fiscal irresponsibility and lack of accountability. The only way to deal with this is to improve public finance management and transparency and account ability.

‘’We all recall that earlier, the Federal Government agreed on a fiscal sustainability plan with the state governments. The plan agreed on 22 recommended action points for improved fiscal behaviour that will lead to sustainable economic stability. The actions include among other things, the implementation of a treasury single account in each state, financial reconciliations between federal and state governments, bio metric capture of all state civil servants, establishment of efficiency unit, system of continuous audit, domestication of Fiscal Responsibility Act and management of loans.”

According to him, these are good recommended actions to improve public financial management. It will be recalled that Adeosun made a similar statement before the first tranche was disbursed. Igbuzor said he hopes that this pronouncement by the Minister will be strictly adhered to. Monitoring the compliance of adherence to the issues agreed on the fiscal sustainability plan is the right way to go, to prevent state governments from becoming insolvent.

An economist, and leader of Wulus Resources Nigerian Limited, Olisa Uzoewulu told The Guardian that the funds should not be considered as surplus. He said: “These refunds are not to be considered as surplus, but a window to redirect economic activities within each state of the nation.”

On what should be done, Uzoewulu said there should be an agreement of purpose, which will involve all the citizens of the states and local governments as well as the communities. ‘’The funds, if left to the decisions of our elected officials will be mis-managed and spent on invisible items without economic growth, these invisible items are social activities without economic values.”

Fiscal governance expert and lead director of Center for Social Justice, Eze Oyekpere said that there is no big deal in states being refunded their money by the Federal Government from the Paris Club excess deductions. He said the Federal Government has no powers under the constitution to dictate to states how they should spend the funds when released.

“The FGN is merely refunding states’ money to states. Speaking legally and in the abstract, the Federal Government has no right and business dictating to states what they should do with their money. It is a case of someone who inadvertently overcharged you for a transaction dictating terms of the use of the money when he eventually discovers that he is wrong and overcharged you,” he said

He added however that only state assemblies are empowered by law to monitor how such monies are spent by governors, but expressed regret that most state assemblies lack the independence required to pull such task through.

He equally blamed the poor justice system, which makes it difficult to prosecute and obtain justice where governors and other politically exposed persons are caught in corruption cases.

The only way out he said is to build a viral civil society group and to build strong and independent state assemblies who would serve as a check on defaulting governors.

“It is a sad day for our democracy. There is no short cut, but to build the capacity of state agencies like the legislature and civil society. And where the state legislatures are collaborating to steal the money, the citizens who are the ultimate sovereigns should resist tyranny by insisting on full transparency and using the power of non-violent protest to demand their rights.

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