Monday, 15 June 2015

18 of Nigeria's states are technically bankrupt

"At the moment, about 22 of Nigeria's states owe their civil servants salary arrears, with some owing as much as a year's pay." Photo: Facebook

HOPES of the immediate payment of outstanding salary arrears which are owed civil servants across Nigeria appear bleak as recently released data showed that as many as 18 of Nigeria's 36 states are technically bankrupt.  

At the moment, about 22 of Nigeria's states owe their civil servants salary arrears, with some owing as much as a year's pay. With most of these states not economically viable and wholly dependent on federal government handouts to survive, they have borne the price of the recent collapse in oil prices. 

As government revenue fell, so too did the amount it allocates to the states, which has become wholly inadequate to find even basic costs such as salaries. In addition, most governors also used state allocations to fund recent election campaigns and as such have no means of paying their civil servants, especially teachers. According to a recent financial report, 18 of Nigeria's states are technically bankrupt because they have mortgaged their federation account allocations to contractors by signing irrevocable payment orders with various banks.

As a result, payment to contractors and other debt instruments are deducted at source and have become first line charge on their lean resources. States owing salary arrears according to the Nigeria Labour Congress include Abia, Akwa Ibom, Bauchi, Benue, Cross River, Ekiti, Imo, Jigawa, Kano, Katsina, Kogi, Ogun, Ondo, Osun, Oyo, Plateau, Rivers and Zamfara. In 2003, the then economic adviser to President Olusegun Obasanjo, Professor Charles Soludo, said that most state governments had signed away their future statutory allocations to contractors whom they owe.  

At the time, he warned that it would be impossible for such states to fund developmental projects, pointing out that after such deductions from allocations, they are left with little or nothing to operate with. As a result, most of the states are not able to perform their statutory obligations and at the moment, state governors are blaming the problem on a lack of funds. 

Most of these states then go into further indebtedness through heavy borrowing and undertaking projects they have no financial capacity to carry. Their biggest problem is this total dependence on the federal government as the internal revenue drive and generation are so weak that no state in Nigeria, apart from Lagos, can operate without a federal allocation or grant. 

Mounir Gwarzo, the director-general of the Securities & Exchange Commission, described the indebtedness as a bad omen, more so, as there is no infrastructure in place to underpin such debts. He urged the affected state governments to take advantage of equities, bonds or mortgage bond securities in the capital market to develop their infrastructure, saying it is better to borrow to meet infrastructural needs than to be content with just paying salaries. 

He said: “Indebtedness is not bad but what is bad is a situation where such funds are used for consumption. If there is commensurate infrastructural development on ground, there is no regret in borrowing."

Senator Ben Murray-Bruce of Bayelsa State has suggested that the federal government should pay the salary arrears and collect the money back from the states at source. He added that where states owe, the National Assembly intervene and enact laws empowering federal government to deduct workers salary at source before remitting state allocations.

Source : Nigerian Watch , Link: http://bit.ly/1IYrQp9  

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