…Edo Governor Being Honest – Insiders
…You Lied – Finance Minister
…Leave CBN Out Of Politics – Emefiele
…Obaseki’s Claim Wrong – Progressives Governors’ Forum
…FG’s Unpaid National Sports Festival Commitment To Edo, A Betrayal – Aide
By AMOS ESELE and SAM DIALA
Governor Godwin Obaseki of Edo State appears to be burning with righteous anger right now. After the glamour and glitz of one of the most controversial sports festivals in the nation’s history hosted by his state have faded into the backstage, his state’s account is totally in the red.
And that is the last thing an investment banker of repute like him would contemplate, particularly after he had personally declared earlier that Edo State would not be able to host the 20th edition of the National Sports Festival without Federal support.
THEWILL investigations revealed that a few weeks to the hosting of the sports festival, Obaseki had requested N2 billion naira from the federal government as a price tag to successfully stage the Games. This was as far back as January 26, 2021. That day, after the games had been postponed for the third time, the Main Organising Committee and the Local Organising Committee paid him a visit in his office. The governor told his visitors that the state did not have the resources to solely executive the Games.
According to him; “Since March last year, you know the financial strength of most states, sub-nationals and countries. For us as a state, we are ready to host but don’t have the funds at this point in time to host the Games; this is the plain truth.
“If the Federal Government, however, in its wisdom, decides to bring the funding for the Games, we will be too willing to host the country. We have to live with COVID-19 because it has come to stay; even with the vaccination, the virus will still be around. Cancelling the Games is not the solution to this issue. We have to sit down and look at all these issues critically before reaching a final decision.”
With that disclosure from the governor, the stage was thus set for a confrontation with the Federal Government. After postponing the festival twice due to the Coronavirus pandemic, the National Sports Festival, tagged Edo 2020, finally kicked off on April 3, 2021 in Benin-City, the state capital.
By this time, however, the cost of hosting the annual event had bloated and the host state, Edo and the Federal Government through the supervising Ministry of Sports and Youth Development, agreed to share the unanticipated extra cost incurred as a result of the postponement.
According to investigation by THEWILL, the Federal Government later pruned Obaseki’s N2bn request to a meagre N500 million to offset the extra cost incurred for maintaining and completing the facilities for the games.
According to reliable sources close to the development, a disagreement in picking a final date for the start of the games was the first sign that trouble was ahead. In the face of an increased budgetary cost and with no cash from the Federal Government as promised, even the N500 million that was eventually agreed on, Edo asked for a postponement yet again and suggested a firm date in May by which time it hoped federal funds would have arrived.
The Main Organising Committee, MOC and the Ministry of Sports, MoS, disagreed on further postponing the games and picked a date with a firm promise to deliver funding.With this firm commitment on cash and a new date, all the attendant drama and suspense but uncertainty were rested and the Games finally kicked-off on April 6.
DRAMATIC TURN OF EVENTS
However, three days into the festival, the events took a dramatic turn. The Project Manager, Media & Communications, Edo 2020, Mr Ebomhiana Musa, raised the alarm that the Federal Government was yet to redeem its pledge to support the host State financially for the cost of postponements. He therefore threatened that on Thursday, April 8, the Games would be shut down even as the State Deputy Governor, Phillip Shaibu, same day, ordered the closure of the offices of the local and central committees.
“The State cannot sustain the hosting of the fiesta alone after tomorrow, Friday, unless the Federal Government fulfilled its promise on funding,” he declared as he gave Abuja up till 12 noon of that Friday to redeem its pledge.
In its response, the Federal Government through the Ministry of Youth and Sports Development, issued a counter statement, saying “the 20th National Sports Festival, Edo 2020, is going on as planned with competitions going on as scheduled.”
According to the statement signed by Mr Ramon Balogun, Assistant Director, Press, at the Federal Ministry of Sports, “The Ministry and the MOC for the festival are unaware of any plans or threat by the Edo State Government to shut down the sports festival as there has been no official meeting or communication that relayed such information.”
THEWILL gathered that apparently alarmed by the turn of events, President Muhammadu Buhari, who was on medical vacation in the United Kingdom at the time, ordered the Presidency to pay the promised N500m agreed on before the start of the festival on April 6. Buhari, THEWILL, learnt spoke directly with Obaseki and re-assured him of his support.
One of the known supporters of President Buhari, Obaseki, was said to have taken the promise on its face value. Taking the President’s word for it, Edo therefore reneged on its threat to shut down the festival as it allowed the events to go on as scheduled.
According to LOC spokesman, Ebomhiana Musa, in a statement; “The Local Organising Committee, LOC, Edo2020 has just risen from another emergency meeting to review the Presidential intervention over the financial crisis threatening the National Sports Festival.
“At the end of the meeting presided over by the Chairman/Deputy Governor, Edo State, Rt. Hon. Comrade Philip Shaibu, the LOC decided that the games have to continue. The LOC agreed that the Presidential intervention is a very strong and direct commitment which we must all respect, honour and take seriously.
“We strongly believe and respect commitments from the Presidency. We take them by their words. It’s a strong message to us that they are strongly committed to redeeming their pledge to support us for the losses suffered arising from the three postponements of the games.
“The LOC appreciates President Muhammadu Buhari, the Vice President, Prof. Yemi Osibanjo; the Secretary to Government of the Federation, Boss Mustapha; the Chief of Staff to the President, Prof. Ibrahim Agboola Gambari and indeed the Governor of Edo State, Mr. Godwin Obaseki, for his high level of commitment to work with the Federal Government for the success of the Festival, Edo2020.
“Wishing the athletes and officials from across the 35 States and the FCT a memorable stay in Edo as the games last.”
A FAILED PROMISE
THEWILL however gathered that, that was all as even the presidential intervention and promises ended up as a mere statement and empty promise. Until the games ended on Wednesday, April 14, the Federal Government did not pay a dime.
In fact, Edo State Government, it was learnt, had become suspicious of the Federal Government’s support when, at the last minute, Vice President Osinbajo, who was supposed to declare the event open on Tuesday, April 6, abruptly called off the trip to Benin- City and the supervising Ministry of Sports had no concrete thing to offer in terms of funds.
Governor Obaseki, THEWILL learnt, was miffed by the Federal Government’s chicanery.
“He felt used and dumped, tricked and lied to,” a top government source in Benin City told THEWILL.
According to the source, who craved anonymity, “Now the government is financially stressed, some states had refused to host the event in the past, so Edo would not have been the first to do so, but we felt we had to honour our word.”
STIRRING THE HORNET’S NEST
But a tactical disclosure by Obaseki about the true situation of the country’s economy, especially as it affects Edo State, as well as others, was to later trigger a torrent of reactions. The initial thought was that, partly for patriotic reasons and partly to get back at the Federal Government, the governor had to fire the salvo with the controversial revelation that the Federal Government ‘printed’ between N50-N60 billion to share as part of federal allocation in March, a claim which the Minister of Finance has disputed.
“When we got FAAC for March, the Federal Government printed an additional N50-N60 billion to top-up for us to share. This April, we will go to Abuja and share. By the end of this year, our total borrowing is going to be between N15 and N16 trillion. Imagine a family that is just borrowing without any means to pay back and nobody is looking at that, everybody is looking at 2023, everybody is blaming Mr. President as if he is a magician,” Obaseki had said.
But THEWILL gathered that the Edo Governor made the disclosure during a closed-door engagement with members of the state’s transition committee as he tried to explain the dire straits the country has found itself presently with the implications for the states. Disclosing that the Federal Government was so broke, as still is, Obaseki, whom THEWILL gathered, was about to constitute his cabinet, which had been long overdue, was said to be complaining bitterly about the economy of the country, and by extension, Edo State.
THE ENSUING FIREWORKS
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed.
But the Federal Government’s reaction was immediate as the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, described the governor’s statement as untrue. Speaking with State House Correspondents in Abuja, she said: “The issue that was raised by the Edo State Governor, for me, is very, very sad,” adding “Because it is not a fact.”
According to the minister, “What we distribute at FAAC is revenue that is generated and, in fact, distribution of revenue is public information. We publish revenue generated by FIRS, the Customs, and the NNPC and we distribute at FAAC. So, it is not true to say we printed money to distribute at FAAC, it is not true.”
Apparently miffed by the Finance Minister’s reaction to his honest disclosure about the true situation of the nation’s economy and the paucity of funds to even run the government, Obaseki, who is more of a technocrat than a politician, fired back at the Minister, advising the Federal Government to “Stop playing the Ostrich.” He also called for urgent steps to end what he described as the country’s “current monetary rascality,” so as to prevent the prevailing economic challenge from degenerating further.
THEWILL reports that the federal government and most of the states have seen their external and local debts hit the roof within the last 10 years with barely nothing on ground to justify these borrowings. Edo State for instance grew its external debt to $280 million from $42.5 million where it stood in 2011. Its domestic debt stood at N80.7 billion as at December 31, 2020. Obaseki had served as the Chairman of the Edo State Economic and Strategy Team inaugurated by his erstwhile mentor, former Governor Adams Oshiomhole in March 2009. From that role, he successfully ran for Governor of the State and was sworn in on November 12, 2016.
The governor, in a statement by his Media Aide, Crusoe Osagie, on Thursday, said: “While we do not want to join issues with the Federal Ministry of Finance, we believe it is our duty to offer useful advice for the benefit of our country.
“The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, should rally Nigerians to stem the obvious fiscal slide facing our country.
“Rather than play the Ostrich, we urge the government to take urgent steps to end the current monetary rascality, so as to prevent the prevailing economic challenge from degenerating further.”
He added: “We believe it is imperative to approach the Nigerian project with all sense of responsibility and commitment and not play to the gallery because, ultimately, time shall be the judge of us all.”
Obaseki’s “candid advice,” however, triggered a lot of controversies, with condemnation from government circles, especially for daring to open a can of worms and saying what has become obvious but was considered a no-go area for any government official.
The Progressive Governors’ Forum (PGF), a group of governors elected on the platform of the All Progressives Congress (APC), has flatly refuted Obaseki’s claim by releasing the sum shared by the FAAC in March.
Chairman, Governor Abubakar Atiku Bagudu of Kebbi State, said the claim was wrong and did not reflect the true position of things.
The PGF said the impression it got was that it was an impromptu remark made in a private meeting, but it was however “shocked to see yet another response from our colleague to the rebuttal by the HM Finance insisting that the March 2021 FAAC was augmented via the printing of money.”
“As a trained economist who has been a governor since 2016, Mr. Obaseki is aware of all the support states have received from President Buhari in coping with the shocks that have resulted from the COVID-19 pandemic and resulting economic recession,” the forum said.
The Forum said, given the significance of the statement from a sitting governor and the possible negative impact it has brought to the credibility of both the federal and State government in managing government finances, it is obliged to set the records clear that to the best of its knowledge.
“The total distributable statutory revenue for the month of March 2021 was N596.94 billion. Due to the shortfall in gross statutory revenues by N43.34 billion compared to the previous month, an augmentation was made in the sum of N8.65 billion from the Forex Equalization Fund Account, which brought the total distributable revenue to N605.59 billion.
“Federation revenues distributed monthly primarily consist of mineral revenues from the sale of oil and gas, as well as non-mineral revenues from customs and excise duties, company income tax, and value added tax.”
The PGF admits that there are periods when the country experiences significant fiscal shocks in federation revenues, but says the shocks are offset by other savings serviced from the federation account, including distributions from the domestic excess crude proceeds and the foreign excess crude savings account.
“These payments started since 2008 when the country first experienced fiscal shocks from the fallouts of the global financial crisis of 2008 – 2009. As a trained Economist who has been a Governor since 2016, Mr. Obaseki is aware of all the support states have received from President Buhari in coping with the shocks that have resulted from the CoviD 19 pandemic and resulting economic recession.
“Not only have we received budget support, bail out support to meet salary obligations and infrastructure refunds to all states, this was implemented in the overall public interest without discrimination on the basis of party affiliation. This is why it’s unfortunate and disingenuous to allege preferential treatment of APC states when PDP governed states are even greater beneficiaries of all the support”, said the PGF.
It said there was nothing exceptional in this current review of economic orthodoxy because “almost every Central Bank in the world is taking steps to support their government in coping with the effect of Covid 19 pandemic on the national economy. This has become the norm rather than the exception as all countries grapple with the deleterious effect of economic recession.
“This unfortunate and inaccurate assertion by Governor Obaseki becomes even more worrisome when juxtaposed with the official statement released after the meeting of PDP Governors last week, calling for restructuring and greater devolution of powers to the States. It would appear that matters that require the collective resolve of all leaders are now being turned into purely partisan, point scoring claims.
“Every discerning Nigerian knows that the APC’s position on restructuring and devolution is clearly articulated and accurately captured in the report of Governor Nasir el-Rufai’s committee on True Federalism. And the APC Governors Forum has since made representation to NASS in furtherance of that position. However, since there are constitutional boundaries, we cannot usurp the responsibilities of the NASS on the constitutional reform process, having made our position known.
“These are challenging times for the country. The COVID-19 pandemic coupled with the recent macroeconomic challenges, has had a significant impact on government finances, however, both the federal and state governments are working assiduously to confront the challenge through greater collaboration to increase independent government revenues, rationalize non-essential spending and improve the efficiency of public spending.
“Indeed, we are beginning to see the positive impact of these initiatives given the country’s exit from recession in the first quarter of 2021.”
TORRENTS OF REACTIONS
Reactions are also coming from within the state.
Mr Bright Omokhodion, a former Commissioner for Finance in Edo State, told THEWILL that the “statement by Governor Obaseki can take an economy to a level of depression.”
“N60 billion cannot fund the Federation Account. Oil prices have gone up for some time now and we therefore cannot discountenance the inputs into the FAAC from the receipts of the Nigeria National Petroleum Corporation, NNPC,” he said.
He thinks that as a member of the Federal Economic Council, like other governors, Obaseki stands in a position to give advice to the fiscal committee of the government.
“If the Federal Government finds a fiduciary base to print money, they would do so. Hypothetically speaking, if a government sells bonds and prints money to back it up, would it go about announcing that it printed money? Obaseki’s statement was flippant. As an investment banker, he ought to know that investment is based on value,” the former Commissioner said.
Restating the negative implications of the governor’s statement for the economy, Omokhodion called for more caution and circumspection.
THE FINANCIAL DYNAMICS
By conventional wisdom, the central bank (or fed/reserve bank) is referred to as the government’s bank, bankers’ bank or lender of last resort. As the government’s bank and lender of last resort, it has a principal responsibility to support the government in building and stabilizing the economy by focusing on price, interest and exchange rate stability. This it achieves through its various monetary policy instruments while the government is concerned with fiscal policies.
In playing this role, central banks control the volume, value and circulation of money to ensure there is price stability and inflation brought under control. It is important that money is printed (or minted) in proportion to the value of the central bank reserve. The reserve, on the other hand, is a function of the value of goods and services produced in the country at any given time, called gross domestic product (GDP).
As the institutional authority with the traditional responsibility of ensuring that financial markets function smoothly and in a stable manner, printing money goes beyond producing or minting currency notes or coins. This is because the central bank has a responsibility to protect businesses from difficulties that could arise from financial or macroeconomic challenges.
As the authority that monitors and controls the nation’s reserves, the central bank can print money in the proportion of the value of the reserves. It can also print money above the value of the reserves in anticipation of a near-future boost in the value of goods and services to equal the “volume” of money in circulation. This is why the central bank can take measures to mop up excess money in circulation, or to boost money supply when it is considered inadequate. The aim is to ensure price stability.
In Nigeria, the central bank has been giving the federal government a huge over overdraft to avoid a situation where the government cannot discharge its obligations such as paying salaries. At the beginning of President Muhammadu Buhari-led government, the federal government provided the states with “bail-outs” worth billions of Naira to enable them to pay salaries and meet other obligations. The argument was that the drop in the price of oil in the international market in 2014, led to a drastic decline in government revenue which affected the states in the payment of salaries.
Of course, this obligation was undertaken by pumping more money into the system through these interventions which all the States have not serviced for obvious reasons.
The government has also sold bonds and treasury bills as a means of borrowing from the public.
Throwing light into this matter, the Central Bank of Nigeria governor, Godwin Emefiele, who accused Obaseki of playing politics with the CBN’s bailout to states and the federal government said that printing money is part of the responsibility of the apex bank. He said no central bank would watch its government crumble when the bank is in a position to sustain government business and to ensure it plays its governance roles.
“Printing of money is about lending money; that is our job. It is inappropriate to think that printing of money means printing money to distribute in the streets. It is about lending to the government. It is inappropriate for people to give some colorations to the word ‘printing of money’ as if it is a foreign word coming from the sky,” Emefiele said while briefing journalists in Nasarawa during the groundbreaking ceremony for a sugar manufacturing plant in the state.
He recalled that in 2015/2016, the CBN extended a bail-out facility to the states to enable them to survive the turbulent times that were not even as bad as what the country is currently undergoing. “All the loans remain unpaid until now and we are going to insist on the states paying those loans going forward, since they are accusing us of giving them loans, that is what they are saying.”
Emefiele explained that most countries of the world are confronted with the health and economic challenges of COVID-19 and their government banks are taking steps to rescue the economy.
“What I keep saying is that, it will be irresponsible for the Central Bank of Nigeria or any central bank, or any Fed to stand idle and refuse to support its government at this time. And what is being done is being done in any clime.”
Emefiele said Nigeria is in a very bad situation and that the central bank is doing everything it can to ensure that the economy is stabilized. He said Nigeria is doing anything different from what the advanced countries of the world are doing to rescue their economies.
Emefiele then dropped a threat, saying the CBN was going to recover intervention loans extended to state governors.
“It’s important for me to put it this way that in 2015/16, the kind of situation we found ourselves in, we did provide a budget support facility to all the states of this country.
“That loan is still unpaid up till now. We are going to insist on them paying back the money since they are accusing us of giving them loans”, he said, adding, “Central Bank will call back loans issued to state governments which could perhaps mean deducting the loans from the monthly Federal Allocations shared between the States and the Federal Government.”
*** This report has been updated to include the reaction of the Progressives Governors’ Forum. An earlier version was published in Sunday’s print edition of THEWILL newspaper.