Editorial
Loans Refund: Need For Prudence
Towards the end of November last year, President Muhammadu Buhari, took another bold step to provide direct stimulus to cash-strapped states groaning under harsh economic conditions occasioned by the crushing recession in the country by approving a total of N522.74billion disbursement to states as reimbursement for over-deductions on external debt service. Earlier in the administration, the President had rolled out bailout funds in government spending to enable no less than 28 States settle arrears of outstanding salaries of civil servants and allowances of pensioners, who were being owed between four and 14 months of their entitlements.
A statement by the Minister of Finance, Mrs. Kemi Adeosun, said the debt service deductions amounting to some $4billion were in respect of the Paris Club, London Club and multilateral debts of the federal and state governments. Signed by the media aide to the minister, Mr. Festus Akanbi, November 21, 2016, the government said the reimbursements would be effected in tranches.
It would be recalled that the Federal Government reached a final agreement for debt relief with the Paris Club in October, 2005, during the Presidency of Chief Olusegun Obasanjo. The former Minister of Finance, Dr Ngozi Okonjo-Iweala, was said to have overpaid the financial institutions when Nigeria cleared debts owed the foreign creditors in 2005. But before then, accounts of some States had already been overcharged.
Following the realisation, some state governments had last year submitted to the Federal Government, claims of over-deductions for external debt service between 1995 and 2002 as a result of allocations on First Line Charge deductions from the Federation Account Allocation Committee (FAAC). In response to the request for refund, Buhari directed that the claims be subjected to verification by the Debt Management Office.
Consequently, a team was established and given the mandate to scrutinise the claims and reconcile them with available records. The committee, having reached the conclusion of over-deductions in the accounts of aggrieved states, the President convened a meeting with governors of the states on December 2, 2016, during which an agreement was reached to pay 25 per cent, over the next 12 months, after due diligence and thorough scrutiny, the amounts claimed subject to a cap of N14.5 billion to any given state. The President also promised that balances due any state thereafter would be revisited whenever fiscal conditions improved. On account of that, the first and second tranches amounting to N388.304billion have already been credited to 35 States as at December 27, 2016, with the balance of N134.44 billion soon to be accessed.
Given the experiences in the past when extra-budgetary funds released to stimulate the economy, including the bailout funds to the states were diverted without regard for accountability and the due process, Buhari’s predication of the present disbursements on a viable structure, is indeed, commendable. Under the current structure, the President told the governors that his overriding concern is the welfare of the Nigerian people, considering the fact that many states are owing salaries and pensions, thereby causing considerable hardship on the populace.
He, therefore, directed that releases must be credited to an auditable, especially BVN-linked and verifiable accounts, from which payments to individual creditors would be made. He also pleaded with the governors to ensure that a minimum of 50 per cent of any amount disbursed be dedicated to payment of salaries and pensions while the remaining 50 per cent can be expended on pro-people projects and programmes.
And since the reconciliation process is still on-going with the final outcome likely to show an under or overstatement of claims, the Federal Government got the governors to sign undertaking, with a declaration that in the event that the amount already paid exceeds the verified claim, the surplus would be deducted directly from affected states’ monthly FAAC allocations.
Having taken such proactive steps, we urge the Federal Government not to see the current arrangement as a mere gentleman’s agreement but to monitor its implementation to the letter. We agree that as a federation, the Federal Government is not expected to interfere in the affairs of the states; however, nothing stops it from seeking to ensure that the released funds are not frittered away by state governments.
Now that more than half of the refund has been released, we demand that any state government that still fails to comply with the gentleman’s agreement should be denied the last tranche of the disbursements. The Tide also urges the leaderships of Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) to take special interest in the terms of agreements guiding the disbursements, and ensure they assist state governments to achieve judicious utilisation of the refunds.
In addition, we appeal to the state governments to utilize the reimbursements for over-deductions on external debt service as agreed, and not squander same as free money to fund unrealistic projects initiated to massage political egos of ruling parties and politicians. We agree that paying the salaries of civil servants and allowances of pensioners will enhance their spending power and lubricate the economy, thus, cushioning the effects of the recession on the entire citizenry.
We further advise the state governments to monitor the projects on which 50 per cent of the released funds will be expended very diligently. If for nothing, majority of Nigerians whose confidence in government is already fading are bound to respond positively to projects with direct bearing on their lives. We also urge state governors to shun the temptation of initiating unviable projects while ignoring those initiated by their predecessors for political reasons.
Governance is a continuum and the times demand patriotism and focus, not grandstanding. This is why we expect high level of transparency and accountability on the part of state governors, on what they intend to do or have already utilised the money on, simply because they owe the general public a duty to account for all their activities while they superintend the affairs of the states. This is our take!
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