OKE: States’ Indebtedness A Fallout Of Fiscal Recklessness, Dollarised Elections
Babatunde Oke, a Senior Lecturer in the Department of Finance, University of Lagos (UNILAG), tells IKECHUKWU ONYEWUCHI that governments, who arbitrarily used monies meant for salaries and other state activities to prosecute elections, caused the unsavory state of the treasury in some states. He argues that the way out would be to plug leakages; reduce cost and increase revenue sources, among others.
Why are 18 states abjectly broke?
THE fiscal recklessness is very high. A lot of states have personnel expenses in terms of so many advisers, complete with perks of office. We have security votes that belong to everybody and nobody; the governor has access to that and no one can query him — anything goes. The waste in government is so high that everybody wants to have a piece of the cake, regardless of what happens to the rest of the world. Where that is not even enough, these governors go borrowing. And we don’t really see what they do with these funds. The one that is available, that comes from the federal allocation are not deployed judicious, used mainly on recurrent expenditure, salaries and all. There are very little capital projects.
Also, it is an election year. That is the major reason why most of the states are unable to pay salaries. Most of the funds were diverted to prosecuting the elections. That is the case with Nigeria: winner takes all; because when you win, there are opportunities to do whatever in office. Politicians usually do what is legal and illegal to win elections, going as far as dipping hands into the state’s treasury to source funds. During the last elections, it cannot be denied that monies were diverted for electioneering. Money meant for public servants and pensioners were diverted; contractors are being owed. During the electioneering period, all projects stalled; there were no fresh projects. A lot of the focus was on the elections, really.
We are seeing these because the last election was a money gobbler; so much money was spent. Unlike previous times where the Peoples Democratic Party (PDP) government won and the government at the center would find a way to rescue the states with little or no noise, that is not happening in the new dispensation. There is so much exposure. As new governments are taking over from the outgoing ones, we can now see what is going on. New governors from All Progressives Congress (APC) have taken over and are exposing the deceit.
Personally, I wouldn’t call for the creation of states. What we really need to do is to empower the local governments. What we see is a situation where monies meant for the local government are given to state governments and the latter does whatever it likes with it. All the tiers of government ought to be independent. Monies have to be disbursed to the local government without recourse to the state government. I don’t think that is what is happening. The monies are given to the state government that is why they are overbearing on the local governments.
I don’t also believe that the local governments are responsible. They are not responsive; a lot of them know only how to share money. They don’t see to meeting the needs of the people. Nothing serious is happening there.
By and large, most of these states are not sustainable. But they are there already; we have to find a way of managing them. That would also mean that they should also find a way of generating revenues from within, like Lagos State.
Is the Federal Government bailout really the solution?
Does the federal government have money, also? Don’t forget that the price of oil has gone down drastically. If one should get a feel of the state of the treasury, how much do we have? We should do that first before we can think of these states. In any case, the state should look for ways to fend for themselves. Meanwhile, some of these states have aircrafts, what are they still doing with them? I am glad the governor of Akwa Ibom has said he is going to sell-off the aircrafts procured by his predecessor. Let all of them do these and cut down on these waste, so that they can free up resources to meet their needs. It is not as if they don’t have money. But a lot of things are tying down the funds — the advisers, special assistants and what have you, too many aides.
What are the fiscal strategies for survival?
The main advice for them is to reduce cost and increase revenue. They are still getting allocations, aren’t they? It only means that what is coming in should be well managed. Though the allocations are somewhat reduced due to loans and other exposures, it is not as if government is deliberately reducing the money. In any case, when what is going into the Federation Account is reduced, it would definitely affect what they get. Is it not what is in the Account that is shared? So, if the revenue coming in from oil export is reduced and revenue is reduced, definitely, it would affect them. It is not anyone’s intention to make them insolvent. Government should plug all the loopholes.
When people see that their governor is sincere and trustworthy, they would key into his vision. But when government tells people to tighten their belts, like they always do, and you see the leaders buying more jets, how do you explain it? They say the country is broke and senators are getting overwhelming sums as wardrobe allowance, who would believe them? People don’t think they are serious. That is the problem: people don’t trust government because they see the waste. There has to be that credibility. The governor, who wants to do something for his people, must show sincerity, empathy, and let them know that he is serious and ready to serve. Just like El Rufia did in Kaduna State, reduce waste, number ministries and all duplications. And as we see in Akwa Ibom, sell off private jets. Cameroun government does not have a private jet; the president came to Nigeria the other time with a chattered British Airways jet. The federal government should also sell off the jets in its possession. What does it need them for? One is enough. This is time to be serious. If you want to make money, go to the private sector.
How should states balance the sheets in terms of borrowed ends?
A lot of the states exposed themselves. They borrowed even from the capital market; they issued bonds recklessly. Professor Tella had issues with Ogun State some years back because he advised the lawmakers to be careful in approving bond proposals of the then governor. He argued that the governor had been taking bonds and no one had seen or knows what he did with them. He was a Vice Chancellor of a private university at the time and because of the comment, was relieved of his position by the visitor of school. He was asked to retract the statement, but he insisted that he was saying the truth. He returned to the state university where he had taken a leave of absence. We need more of such people to speak up. Governments run into these dire situations because the legislators compromised. That’s how these loans keep piling up. The same thing is happening at the federal level too. At the time Obasanjo left office, we had an impressive bill of health, but over the years it has kept piling up. The legislature must know that they are there for the people. They should scrutinise whatever loan is brought before them. What happens sometimes is that the benefits of the loans are not felt by the ordinary man in the street.
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