State governments that could not pay workers’ salaries can now heave a sigh of relief. The federal government has stepped in with a relief package that would enable them to pay salaries. On July 6, President Mohammadu Buhari directed that N413.7 billion, which is sourced from the recent proceeds from Liquefied Natural Gaspaid to Federation Account, be shared by states and local governments in the country. The President further directed that the Central Bank of Nigeria (CBN) should provide a special intervention fund of N300 billion to the states while the Debt Management Office (DMO) should restructure states governments’ commercial loans of N660 billion and extend their repayment dates.
There were indications that states and local councils are to share $1.6bn from the Excess Crude Account.
It is believed that by extending the repayment dated for the commercial loans, more funds would be available to the state governments which otherwise would have been removed at source by the banks. “The federal government will use its influence to guarantee the elongation of the loans for the benefit of the states,” said a source close to the Presidency. According to the source, “the over $2b which is sourced from LNG proceeds to the federation account would be shared among the states using the revenue allocation formula, the CBN will also make available the special intervention fund to states and then negotiate the terms with individual states.”
The steps taken by the President is in line with his speech when he inaugurated the National Economic Council (NEC) last week. He asked the council to consider how to liquidate the unpaid salaries of workers across the country; a situation he observed has brought untold hardship to the workers.
At the NEC meeting, the relief measures were extensively discussed between the state governors and top officials of the federal government, including the CBN governor, and the Permanent Secretaries from Ministries of Finance and Petroleum Resources. Other agencies actively involved in the process include the DMO and officials from the Office of the Accountant General of the Federation.
Not fewer than 12 of the 36 states of the federation are facing difficult times as the salaries they owe their workers are approximately well over N110bn. This represents the salaries being owed by governments of 10 of the states of the federation. They include Osun, Rivers, Oyo, Ekiti, Kwara, Kogi, Ondo, Plateau, Benue, and Bauchi states.
The bailout package elicited commendations from some eminent Nigerians. Professor Itse Sagay described the bailout as a welcome development. “Since they are owing salaries and all states have a share in the excess crude oil account and because they are in a desperate situation, I think it is a welcome decision.”
The legal icon, however, dismissed the notion that the bailout is a sign of weakness on the part of the President. “People believe in extremism but to be strong does not mean that you have to be extreme. It does not mean that you have to lack any feelings for people. He (Buhari) must be thinking of thousands of workers, who have not been paid for six months.”
Similarly, Professor Pat Utomi said the bailout for states is imperative for the economic survival of the country. “It is important to recognize that without such bailout, the economy will be in danger as there will be no spending going on while those offering services will be unable to offer anything. The bailout is very important for the economy. This development should now make government impose conditionality that will stop mismanagement and unnecessary spending,” he said.
By Dike Onwuamaeze