Can Nigerian States Go Bankrupt?

 

It is unthinkable that wisdom should ever be popular”, Johann Goethe, 1749- 1832, “The Chairman Fiscal Responsibility Commission, Chief Victor Murako, has warned of a possible shutdown by some states of the federation in the next six months unless they find creative ways of handling their dwindling allocations from the federation account.” PUNCH, November 24, 2015. You bet they can; and at least two are technically bankrupt now.
 

Those offering them credit do so at considerable risk. One of the saddest things for an economist deeply loyal to his country is to observe as calamities foretold to his countrymen

unfold. Chief Murako’s wake up call comes in the nick of time as the Nigerian Labour Congress is once again getting ready for a show-down with governments.

Unfortunately, Murako’s warning will fall on the usually deaf ears of officials. Below, I reproduce excerpts from two warnings issued in 2011 and 2014 respectively to public officials and those aspiring to public office. The most pathetic are those who recently got elected – they have, individually and collectively landed in political hell. Read on.

MW: WHY GOVERNMENTS CAN’T AND SHOULDN’T PAY

“We have no problem with labour; everything is clear, but we cannot go against the law. The only way we can raise money is through budgeting. Another budget season is around the corner, so that we can commence the implementation of the law from 2011”. Anyim Pius Anyim, Secretary to the Government of the Federation on Minimum Wage.

Preamble

If anyone had told me I would be defending President Jonathan and all the 36 Governors as well as the Local Government Chairpersons a few weeks ago, it would have appeared to me as total lunacy. Yet, here we are, at a national cross road on the controversial issue of Minimum Wage implementation and each of us is called upon to take a patriotic stand.

Let me start by stating that President Jonathan and the National Assembly, NASS, should not have signed the bill under duress as they did in March of this year. The Nigeria Labour Congress had threatened “No Minimum Wage; No Elections”. And government had caved in without conducting due diligence on the financial implications of the bill. That was weak leadership; especially, when the 2011 Appropriation Bill itself had not been sorted out by the two branches of government at the time of signing.

If the President had taken time out of his busy campaign schedule to take a look at the budget before the NASS, he would have noticed that the estimates for wages and entitlements were based on the wages existing in 2010 with a minimum of N7,500. No provisions have been made for the 150% increase which N18,000 represented.

The same is true of the state and local governments. And, let me again exonerate the President and Governors for not “pro-actively” including the increase through a “Contingency provision” in their budgets. Nobody provides for 75% increase in expenditure during the coming year. So, they are totally blameless in that respect.

The question can fairly be raised: Is the government not morally obligated to pay once the President had signed the bill? This, it must be confessed presents an ethical dilemma. This writer had carpeted the President several times for not upholding agreements. So, why is it difficult to ask him to redeem this one?

For me, the dilemma is resolved by pointing to the threat by labour to disrupt an election on which the government had invested over N100 billion. Jonathan was blackmailed! And he did what any sensible leader would do under the same set of circumstances. He signed a contentious bill. Now the controversy confronts us. And, for once, we should stand by the President.

Back to basics

“Nor should we listen to those who say, ‘The voice of the people is the voice of God’, for the turbulence of the mob is always close to insanity’. — Alcuin, 735-804. We have tried everything else, in our discussions on the Minimum Wage Act of 2011, we might as well try the truth. Senator Anyim finally admitted what, to highly discernible individuals, was known to be the truth but which sentiments and the noise of the ignorant minority, the only beneficiaries of the Minimum wage Act will not allow to be said or heard.
 

The Secretary to the Federal Government has not only told all of us why government can’t pay. But, he had also, perhaps deliberately and diplomatically, confirmed some of the reasons why they should not pay. And this applies to governments at all levels – Federal, States and Local Governments. The Nigerian Labour Congress, NLC, and their supporters, including most of my colleagues in the media, would be well advised to look forward to the wage increase starting 2012.
 

Right now, there is no money to pay as the SGF has rightly said. Permit me to briefly explain, even at the known risk that this is not going to be a popular view. That is fine by me. Not all decisions can be made by simple majority – especially when the majority is largely ignorant about the subject. It is fact that few Nigerians have studied economics, public finance and budgeting. Yet these are the crucial issues at stake.
 

That was in 2011. This was followed in 2014 by another article pointing to the dangers ahead – the dangers which now stare all the state governors in the face. I know at least two which are now on the brink. Read on.


SO YOU WANT TO BE GOVERNOR IN 2015?
 

NOTE:
Back in May of last year, a warning was issued on these pages to those wanting to succeed incumbent governors about the financial disasters ahead. Few took notice. As you read the column again, several states owe staff salaries, some up to four months and the calamity is just unfolding. The drop in the price of crude oil, which was then mentioned as a possibility, is now a certainty and it is worse than anybody could have imagined and will last longer than imaginable.
 

By May 2015, hardly any state will be able to fulfill its obligations to its workers. Hundreds of thousands of civil servants will be retrenched at Federal, State and Local Government levels and by the private sector. Please read on. “Looking from the fact that the funds from the Federation Account are not judiciously utilized by the states and they are not accountable to the people and the state legislature, our concern is that even if they get money from bonds and it is not invested, the state will be left with a huge debt burden , which will hurt in the long term.” Dr Usman Muttaka, Head of Department of Economics, Ahmadu Bello University, Zaria.

(culled from vanguard)