By Tunde Oso
The combination of global low crude oil prices and weak global demand, caused partly by the Coronavirus pandemic COVID -19, is hitting Nigeria hard. Although the oil sector represents less than 10 per cent of the country’s gross domestic product (GDP), it accounts for half of the government revenues and over 90 per cent of foreign exchange.
The Minister for Finance, Budget and National Planning, Mrs Zainab Ahmed recently stated that Nigeria experienced a 65 per cent decline in projected net revenues from the oil and gas sector, due to the price drop and the Organization of the Petroleum Exporting Countries (OPEC) production cuts. This has automatically affected federal allocations to the 36 states in the country, who now are gasping under the financial burden of paying workers’ wages and discharging their other statutory responsibilities. Sunday Vanguard, therefore, sought the opinions of some economic experts on the options before the states.
States should rejig institutions, systems to collect more IGR – Onyekpere of CSJ
Lead Director, Centre for Social Justice Limited by Guarantee (CSJ), Eze Onyekpere said the states are in a cash crunch because their finances have been mismanaged over time. The finances have not been managed in an accountable, transparent and value for money manner.
If you check the publication by the National Bureau of Statistics of state Internally Generated Revenues (IGRs), it will be clear that with the exception of a few, the IGRs are understated as state government use of revenue consultants and contractors underestimates the collections, which are turned to private use without being declared to the public. Many of the governors are intellectually lazy and have no leadership qualities. They simply wait for the end of the month to collect Federation Account Allocation Committee (FAAC) revenue from Abuja.
The governors know what to do and they are deliberately failing in doing that. They should open up the system and account for every kobo they receive and more revenue shall come their way. However, they need to rejig their institutions and systems to collect more IGR and account for the same to the people.
Short, long –term comparative economic planning, the way out – Gimba, lecturer
Economist and lecturer at College of Administration and Management Technology, CAMTECH Potiskum, Yobe State, Ahmad Suleiman Gimba said the World Bank had recently noted that the Nigerian economy is the worst hit in four decades. It is facing the worst recession in four decades especially with the general fall in oil revenue, coupled with the worldwide COVID – 19 pandemic.
Nigeria’s only way out of oil dependence’s recurring destruction, so many economic experts have counselled, maybe to plan a managed oil sector decline that allows the country to see a future for itself after oil. Gladly, this present Federal Government of President Muhammadu Buhari has taken this path by diversifying aggressively into agriculture.
Regrettably, however, many states have refused to key into this and continued in the financial profligacy of the past as if nothing has changed in the global economic landscape. The states, therefore, have to go back to the drawing boards to look away from federal allocations to engage in short and long –term economic planning on its area of comparative economic advantage to raise and generate revenue to become self-sufficient.
Many state governors are now in a dilemma about the way forward, after getting immersed in the issue of cash crunch confronting them. Governors must also necessarily make use of a think tank to plan a quick way out, especially with monitoring in budget performance, maximizing the reduction in capital expenditure and utmost control in recurrent expenditure.
However, the governors have primarily one important option left open for them. They have the opportunity of having a crucial meeting with Mr. President to seek two things, i.e. (i.) extension of time limit for the payment of the CBN bailout, (ii.) request for a bi-monthly payment of their loans as against the monthly payment. This will also help augur their financial imbalances.
As we study the major functions of the Central Banks, one discovers that the CBN is a lender of last resort as well as banker, agent and adviser to the government. Therefore the CBN is in a very good position to completely remove or further reduce the financial stagnation of the States in Nigeria.
The state governors should also set up committees to further engage the Federal Ministry of Finance on one hand and the CBN on the other, to maximize efforts and see how the matter could be simplified in a multilateral perspective.
Major matters of concern, however, are the Poverty Index Rate currently yielding serious discomfort to many states. For instance, according to the World Bank, anybody who earns less than N138, 000 in Nigeria or lives below three hundred and sixty-one dollars ($361) per month, is automatically in poverty. With this assertion, many Nigerian states are tied to poverty.
Half of Nigeria states, i.e. eighteen (18) states have a poverty index rate of fifty per cent (50%) and above. These are followed by seven (7) more states with a thirty to forty-nine per cent (30% – 49%) poverty index rate. The CBN is therefore systematically challenged as a banker to the government to advise the state governments and also make moves by taking appropriate steps to cushion their financial difficulties and economic burdens.