Friday 6 May 2016

Federal Government rules out more bailout for states

bailout funds for state governments
The Federal Government on Thursday ruled out the possibility of providing bailout funds for state governments to meet their financial obligations, including the payment of salaries of workers, due to declining allocation from the Federation Account.

It insisted that rather than providing fresh funds for the states to run their operations, the state governments must restructure their finances in line with the current economic realities.

The Minister of Finance, Mrs. Kemi Adeosun, who stated these during an interview on Channels Television’s Sunrise Daily, noted that unlike in the past when state governments had a lot of allocation from the Federation Account, the drop in oil prices had made it imperative for the governors to reduce the cost of governance.

She said with states and local governments having about two million workers, any delay in the payment of salaries would have a negative effect on their respective economies.

The minister said if the Federal Government could restructure its finances through the establishment of the Efficiency Unit to drive down the cost of governance, the states had no excuse for not adopting a similar measure.
She said, “What this (drop in oil prices) has done now is that every Nigerian is now sober. The governors have realised now that this can happen and that oil price can plummet from $110 to $28 within a short period of time, and that we can be so exposed that we can’t even pay salaries.
“So, there is a sobriety that has come in. So, we are working with the states government and we are not bailing them out. We have said to them that we will have a fiscal restructuring plan.
“Whatever we are doing now will be conditional. You must go away and drive efficiency, do biometric capturing of your staff, know who you are paying and put in place efficiency units.”
Adeosun added, “We have done it at the Federal Government level and we are seeing the number of savings. So you (state governments) must sign onto a fiscal restructuring plan; and if you don’t want a restructuring plan, we will not help you in anyway, and that was the agreement from the National Economic Council last week headed by the Vice President and the governors.”
On whether the sacking of workers was an option for the reduction of cost of governance, she said it would be difficult for the government to sack workers without conducting a proper analysis of its payroll.
The minister stated, “To address an economy takes time; a government cannot just come up and sack people. These are human beings and these are people who have responsibilities. So, if you want to gradually reduce the headcount, there is a way to do it and the first thing is who are you even paying? Do you even know who your staff are?
“We’ve done this and we know there are ghost workers. So, you have to look at your internally generated revenue; is it sustainable and do I have enough allocation from the Federal Government to meet my expenses? These are what is expected.”
She also restated that the administration of President Muhammadu Buhari inherited an empty treasury, adding that the Federal Government had been borrowing to pay salaries.
Adeosun added, “We inherited a fairly empty treasury and the President has said this and that is the truth; we inherited an empty treasury and crude oil prices have declined; so, we didn’t have the opportunity of recovery.

“Oil prices went from $110 to as low as $28 (per barrel). So, we are borrowing to pay salaries and the Federal Government is owing contractors.”

Credit: Punch

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