AFTER a long lull, the row over the financial state of the states resurfaced yesterday.

The Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) said most of the 36 states are under financial stress; others are bankrupt.

RMAFC boss Elias Mbam, an engineer, stated this in his presentation at a public hearing on the “Looming danger of bankruptcy in states – the need for fiscal evaluation”, organised by the Senate Joint Committee on National Planning, Economic Affairs and Poverty Alleviation, Finance, Appropriation and States and Local Governments in Abuja.

Mbam said the dangerous trend could only be stemmed, if the National and State Assemblies enact appropriate legislation to peg the power of states to borrow from external sources.

He noted that if the states must be allowed to borrow, it should not exceed 20 per cent of their monthly allocations.

The total external debt stock of all the states, as at December 2011, is $2.165billion (about N346.4billion).

The Federal Government’s debt profile at the same period was $3.501billion, in addition to a domestic stock of N5.622trillion.

The RMAFC considers the debt profile as high.

According to Mbam, there have been various signs of distress in the finances of the states over the past few years.

He said: “Before and after the passage of the National Minimum Wage Act in 2011, there were series of outcries by the states and local governments over their lack of financial capacity to pay the new workers’ wage and at the same time provide minimum services to the citizenry.

“This is a critical sign that the finances of most states and local governments were unhealthy.

“Today, most states have not been able to implement the new minimum wage.

“From media reports, most state governments have very huge monthly wage bills, to the extent that it is being alleged that they now use the funds of the local governments to run their states.

“The challenge has made state executives to call for the review of the revenue allocation formula in favour of the states.

“Equally, they have also called for the removal of fuel subsidy, which they also believe would enhance the revenue accruing into the Federation Account and, invariably, the statutory allocations to their respective states and local governments.”

Mbam observed that there were huge deductions from the allocations of most of the states to settle their external and domestic debts and bonds.

The implication, he said, are enough indications that most of the state governments have collateralised their share of the monthly Federation Account receipts to service such debts.

The persistent nature of these deductions, according to him, “is worrisome as it portends danger for the fiscal capacity of some of the states.”

“The Commission has observed with concern the huge domestic debt profile of the states as most of them are highly indebted to various local banks in short-term borrowing and are substantially exposed to the Capital Market.

“Most of these loans are tied to Irrevocable Standing Payment Orders (ISPOs) issued to the Accountant-General of the Federation to deduct directly from the monthly allocations due to the states, thereby preventing them from meeting their minimum basic obligations to the citizens.

“Deficit budget has become a serious challenge for most states. Even though deficit budgeting is tolerable within an acceptable limit, its endless application has endangered and forced the state governments to resort to excessive borrowing in order to meet their basic expenditure demands even where they have no capacity to pay back.

“The regular sharing of Excess Crude Account is an indication of the desperate financial position of the state governments to get funds in order to meet costs of governance. For instance, $1.5billion was shared in three equal instalments from the Excess Crude Account in 2011 alone out of which the states received the sum of $400.800million.

“The National/State Assemblies should consider appropriate legislations limiting the total exposure of states to external and domestic borrowing to not more than 20 per cent of their monthly allocations from the Federation account. In addition, such borrowing should be for economic projects. Furthermore, there should be strict compliance to the relevant provisions of the borrowing by Public Bodies Act (CAP.B10, LFN, 2004).”

Figures presented by the RMAFC boss shows that the highest amount of N47,608,580,436.11 was deducted from Bayelsa State’s allocation of N58,756,863,268,.89 between January 2009 and December 2011.

The deduction represents 81.03 per cent of the total allocation for the period.

Delta State followed with N14,859,658,105.28 from a total allocation of N55,624,245,350.56, representing 26.71 per cent.

Imo State’s deduction is the third highest, with N15,982,313,156.72 out of a total allocation of a N64,766,054,092.45 allocation, representing 24.68 per cent.

Borno State has the lowest deduction - N1,273,275,887.78 of N90,310,545,138.25 representing 1.41 per cent.

Joint Committee chairman Barnabas Gemade noted that it was regrettable that instead of energies being directed towards a development agenda to free people from poverty, “resources are being wasted on populist programmes aimed at attracting cheap but transient popularity for future re-elections.

“In some cases, large resources are being misdirected outright to private interest,” Senator Gemade added.

He noted that the Senate is worried with a situation where the bulk of state revenue is used to finance the salaries of civil servants, who constitute less than 40 per cent of the total population.

“The aim of this public hearing is for us to collect and aggregate divergent views and opinions from all stakeholders… with a view to come up with far-reaching recommendations to correct the anomaly,” Gemade said.


http://www.thenationonlineng.net/2011/index.php/news/39864-n346-4b-debts-cripple-states.html

Peter Obi was right after all. I dey laf for Nigeria

The states are highly indebted to local banks and exposed to the capital market through bonds, yet there's little or nothing on ground to show for the massive borrowing in terms of infrastructure. Most of the loans, IGR, and even federal allocations have ended up in private pockets through millions of ghost workers, inflation of contracts, other fraudulent activities and outright waste.

In spite of this, they are asking for a review of the allocation formular, removal of fuel subsidy, and creation of more states (begging centres) that will become unviable and bankrupt. Instead of developing the capacity of their states to generate funds and develop, they unabashedly line up at Abuja every month, cap in hand, to ask for their entitlement without which most of them would crumble and crash.

At the end of it all, the people suffer and the politicians get richer and stronger. It's a sad, sad story.

Time for the IMF to enter the equation;

[b]Time for the IMF to enter the equation;

[/b]Time for the IMF to enter the equation;

This is exactly why we must revert to REGIONALISM. A word is enough for the wise!!!

nigeria must opractice regionalism and go back to true feeralism all regions can survive on their own with or without oil.

So much figures but few results.

Tony Spike: This is exactly why we must revert to REGIONALISM. A word is enough for the wise!!!

Let me even pretend that you are on to something there. How does Regionalism solve this particular problem or better yet, how does regionalism act as check against this now or in the future?

Tony Spike: This is exactly why we must revert to REGIONALISM. A word is enough for the wise!!!

Let me even pretend that you are on to something there. How does Regionalism solve this particular problem or better yet, how does regionalism act as check against this now or in the future?

At the #Occupy time; when I told people that it was the most brainlessly irresponsible thing to do, some took it as an insult.
When I described the state governors and LG chairmen as awuf loving phucks, many reacted as if their kids had been executed.

Most people think that their LG's and states are there for decoration, elected just to share awuf oil money without generating a dime. Most peoples whole focus is on the FG and free oil money, while our states and LG's generate fuckall. It is deeply frustrating to talk to most Nigerians, what comes back at you from their lips is a low self esteemed and soul destroying blizzard of ethnic bigotry, spiced up with levels of ignorance that will shock the sane to baldness.

What can we do to save our people? The people and the shocking ignorance on the streets are the problem. What can we do to lift our people?

People, please match out there and #Occupy your state governor and LG boss. It is the only way forward.

"The fault is not in our stars, but in ourselves" Neither big wage bill nor state creation is our problem. Infact more states, if properly managed will serve as growth poles, developing her perculiar resources & talents of her citizenry. Our problem is systemic corruption & high level of managerial inneficiency.

I can't help but scream at Bayelsa's debt profile. Delta is ok but Imo shouldn't have been in that list. Ohakim really dealt with my State.

i have crutches i can lend nigeria

when they were all leveraging their states with state IPO..and in the end, squander the money on themselves

i am not suprised, the states have to pay back their loans and interest on IPO's