Halting the collapse of state governments

June 10th, 2019

Recently, another distress alert was raised on the possible budget failure in states this year. It came from the Nigeria Extractive Industries Transparency Initiative (NEITI) which has declared that the 2019 budgets as already presented by 28 states cannot be adequately funded.

The warning was made more distressing by the revelation by the NEITI that even the combined net Federation Allocation Account Committee (FAAC) disbursements to each state would still not be able to save the budgets from failing.

NEITI which made this known in its latest Quarterly Review signed by its spokesman Dr. Orji Ogbonnaya Orji stated that “there is no state whose net FAAC disbursements in either 2017 or 2018 can adequately finance their budgets for 2019, net disbursements to states in 2017 as a percentage of the 2019 budgets ranged between 2.25 per cent (Cross River) and 43.1 per cent (Yobe).

“Also, net disbursements to states in 2018 as a percentage of the 2019 budgets ranged between 3.54 per cent (Cross River) and 57.7 per cent (Yobe). Thus, clearly, no state can finance its 2019 budgets solely based on FAAC disbursements,” the report stated.

NEITI explained that the gap in the ability of FAAC disbursements to finance state budgets has made it inevitable for most of the states to rely more on borrowing as against the urgency of embarking on creative measures to improve internally generated revenues (IGR).

According to the Quarterly Review, Lagos, Rivers and Ogun, are the three states with positive examples in IGR and identified Yobe as the only state that can fund its 2019 budgets from combined FAAC allocations for 2017 and 2018.

It also listed Enugu, Kaduna, Delta, Yobe, Lagos, Kano, Nasarawa, and Rivers among the states that can fund their budgets from their combined revenue for 2017 and 2018. The Report showed how huge sums were being deducted directly from FAAC allocations of some states to service their debt obligations.

“For instance, a sum of N7.27 billion was directly deducted from Osun state allocations while Cross River State has 53% similar deductions from its allocations”, prompting NEITI to caution the three tiers of government to exercise some restraint in their expenditure profiles and continuous dependence on oil revenues to fund budgets.

The alert/warning from NEITI must be taken serious by Nigeria because the weakening of the lower two tiers of government contributed a lot to the economic and social dislocation the country is witnessing for some years now. The story of the 3rd tier of government, that is the local government level, is nothing to write home about.

Rather than work out a solution to the crisis of relevance that besought local governments, Nigerians chose to forget about them and began to direct their attention to the states and the Federal governments. It was as if those who created that tier of government had nothing in mind in setting up local governments.

Nations that are alert at their problems do not neglect their local governments the way Nigeria abandoned the third tier of government. Called by various names –counties, mayoralty, municipal, etc, that level of government plays vital roles in the aggregate national development of countries all over the world because it is the closest level of government to the grassroots.

With the responsibilities of local governments transferred to states substantially, the state governments are now weak and the NEITI report is a danger signal which Nigerians must not ignore the way local governments became appendages of states courtesy of the faulty 1999 constitution that tied the funds of council areas to the states.

As mentioned in the NEITI Report, many states are resorting to borrowing to fund their operations. This should not have been the first line of reaction to the dwindling revenue. The acclaimed maxim that borrowing is good if the funds are to be wisely invested does not apply in Nigeria because governments in the country are not running transparently. That accounts for the lack of visible projects on which much of the previous borrowings by states have been invested.

All serious state governments must as a matter of urgency improve their internal revenue generation as well as show more accountability in the process and utilization of the IGRs. In a number of states, the intensity of the IGR drive far outweighs the amount usually declared by the states as their IGR raising fears that much of the IGR is diverted to fraudulent uses.

Another area of focus by the states should on the size of their bureaucracies. States are recruiting too many workers, far more than they need to run their governments. Most of the time, states and even the federal governments recruit as a means of reducing unemployment. Such actions weaken the governments more than they strength them as little or no funds are left to embark on infrastructure provision and other development projects. That is one of the reasons most states cannot pay their workers’ salary as and when due.

Perhaps the most critical action needed to save the states from failing is reduction in the number of unviable projects and corruption. In states, white elephant projects litter everywhere and there are many instances when the governors had whimsically deployed government funds on projects that are nothing but clear manifestations of personal aggrandizement. Sadly enough, the legislature at the state level have not demonstrated any capacity to offer the necessary checks for which the constitution created it.

We at The AUTHORITY fully appreciate the good work NEITI is doing especially in alerting Nigerians of the dangers facing the country, and we hope that the affected authorities would do the needful to halt the collapse.

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