In November 2017, President Muhammadu Buhari approved the sum of N800 million each for 35 states of the Federation except Lagos, totalling N28 billion to help them meet salaries, pension and other infrastructure obligations. Excited, the governors expressed appreciation to the Federal Government for the restoration of the Budget Support Loan Facility.
This 2017 largesse as it appeared to many states including Edo was however, the second tranche of a 2015 package, which saw the President approving a $2.1bn (£1.4bn) intervention package to help bankrupt states pay salaries.
This became necessary because, as at when the APC assumed control of the Federal government of Nigeria in May 2015, at least 12 of Nigeria’s 36 states owed their workers more than $550m in salaries and allowances with workers having not been paid for over six months.
This week, the apex bank, Central Bank of Nigeria, CBN, hinted that state
governments will soon start paying back these loans. Godwin Emefiele, the governor of the bank stated this in reaction to claims by Edo State Governor, Godwin Obaseki, that the Federal Government printed an additional N50 billion to N60 billion to make up for state allocations in March 2021
He said, “It is important for me to put it this way that in 2015/2016 … we did provide budget support facility for all the states of the country. That loan remains unpaid till now and we are going to insist on the states paying back those monies going forward, since they are accusing us of giving them loans – effectively that’s what they are saying”.
Worried by the CBN move, a better informed and articulate Governor of Sokoto State, Aminu Tambuwal, is leading the team of governors from the PDP to beg the Central Bank of Nigeria and the Federal Ministry of Finance not to carry out the threat of recovering the loans given to state governments as budget support facility 2015 and 2017.
The CBN govetnor added, “If you understand the concept of printing of money, it is about lending money. There is no need for all the controversy around the printing of money as if we are going into the factory, printing naira, and then distributing (it) on the streets. It is very inappropriate for people to just give some coloration to the word ‘printing of money’ as if it is a foreign word coming from the sky.”
Interestingly in April 2020, Nigerian Governors Forum urged the CBN to suspend all funds deductions from states and restructure their debt repayments. Leading the governors, Mr Kayode Fayemi of Ekiti, as the NGF chairman, said the request to the CBN was agreed on after a briefing it held with the Minister of Finance, Budget and National Planning, Zainab Ahmed.
He said such measures would help safeguard the liquidity of state governments and mitigate the economic impact of the COVID-19 pandemic ravaging the economy.
“…the Forum called for urgent fiscal measures to safeguard the liquidity of state governments, including the acceleration of an arrangement to suspend all state deductions and restructure all debt service payments on federal government and CBN-owned debts”.
Usually all loans obtained by state governments are deducted from the statutory allocations by the federal government. As for external debts, the federal government provides a sovereign guarantee.
One Economist says,
“Except the state government issues a bond or something along those lines, they can’t borrow from CBN. Even bonds are usually borrowings from the public or investors. State governments cannot obtain foreign loans without the instrument of the National government.
“The government usually guarantees those loans, that is why the repayment of those loans are placed on first-line charge, once statutory monthly allocation is due to those states. There are usually terms of deduction; it is the duty of the Accountant-General of the Federation and the minister of finance to deduct the loans that they have guaranteed.
He says, “For example, if they (states) are to be paid a certain allocation per month once allocation comes in they deduct it at first before they release the balance to the states”.
Data from the Federation Account Allocation Committee shows that Nigeria’s 36 state governments spent ₦3.6 billion servicing their external debt obligations in January 2020. This figure doubled in 2021 and could triple if the CBN insists on its move.
The states’ external debts, from multilateral and bilateral sources are from China Export-Import Bank, Japan International Cooperation Agency, KFW Development Bank, Euro-bond and Diaspora Bond, according to the Debt Management Office, Abuja.
Tambuwal who has tried to resolve the differences between the CBN and the Edo State Governor, Godwin Obaseki,
made the plea in Abuja during a panel session at the high level dialogue on financing safe schools and creating safe learning communities organised by the Federal Ministry of Finance, Budget and National Planning.
He pleaded with the finance minister and the CBN governor not to move to recover the debts, because, “Recovering the debts now from the states will make it impossible for the state governments to fund education in general and the safe schools project in particular”.
Meanwhile the CBN says it had yet to receive an official plea from the states on why the debts should not be recovered. Edo is one state that will suffer dire consequences if the CBN goes further.
As it were, in his 2021 budget, the state had a N153.4bn 2021 budget proposal made up of N94.8 billion for recurrent and N58.6 billion for capital expenditure. The N94.8 billion recurrent expenditure estimate for 2021 fiscal year represented a 24 percent growth from the N76.6 billion actual expected in the 2020 fiscal year. The state expects N153 billion from the FGN/FAAC, N71 billion; Internally Generated Revenue (IGR), N36 billion; Grants, N9.8 billion; Loans 15.3 billion; Capital Development Fund Receipts, 13.8 billion.
Besides a drop in its statutory allocation if the CBN hammer falls, it will mean Edo state cannot keep faith with a syndicated N25 billion from the private sector, which it denied taking; of which N13.8 billion will crystalize this fiscal year.
It is hoped that Tambuwal’s plea would pay off with the CBN and the Finance Ministry, with supporting beggers from the NGF. But it should not be without cautioning the nation’s empty barrels posing as Economic ‘experts’ to first look inwards before looking out#