The New Bailout Funds

THE NEW BAILOUT FUNDS AND ITS INTRIGUING PART

     Be it an individual or a corporate body, no doubt, at some points, borrowing becomes a consequential and inevitable gesture or approach. For the umpteenth time, I have categorically made it clear that borrowing becomes necessary if the funds to be assessed would be utilized judiciously. We must acknowledge that if a certain borrowed fund is utilized judiciously, it would enable the borrower to become financially independent in the nearest future, thereby making him/it to steer clear of borrowing in subsequent time.

     The last time I checked, unequivocally, the best way a borrowed fund could be utilized is by investing it, or using it for capital expenditure. This implies that recurrent expenditure shouldn’t in any way warrant borrowing. One of the basic examples of recurrent expenditure in any society or nation remains payment of salaries or pensions. You can’t borrow in order to pay others or to enable you service some debts; such step is ridiculous and illogical.

     If you borrow in order to settle a certain debt, how do you intend to refund? Obviously, indulging yourself in suchlike practice significantly means that you will constantly continue to borrow, come rain come shine. Aside the economic implication of borrowing, the social implications are enormous. If you are reckoned to be a borrower, your colleagues or counterparts, as the case may be, would invariably stigmatize you; you might be treated like one who has leprosy. Of course, we are not unaware of the consequences that await someone who suffers from stigma.

     Meanwhile, this critique was necessitated by the current federal government’s intention to lend more funds to the various states, in addition to the ones received previous year by the prospective beneficiaries. According to the said benefactor, the kind move is targeted to salvaging the state governments that have been colossally ravaged by the crisis occasioned by the economic turmoil the country is currently faced with.

     It would be recalled that barely last year, the state governments received a total of #713.7 billion bailout funds from the Federal Government (FG) to enable them pay the backlog of salaries owed their respective workers; a fund that was deducted from the nation’s Excess Crude Account (ECA) otherwise known as National Wealth Fund. Unfortunately, merely a few months after, the various state governments are still grappling with the same challenges owing to the poor monthly federal allocation they presently receive, which was informed by the country’s ongoing dwindling oil revenue.

     To this end, the FG has decided to release another #90 billion fund, which is believed would immensely assist the states in their bid to be less-dependent on the monthly handout from the federation account. It’s noteworthy that, the fund in question is a loan and it’s fully repayable, although it has a secured tie against future dividends, revenues, or what have you, the FG might owe the states. At this juncture, any rational being that means well for Nigeria wouldn’t hesitate to inquire if these states would continue to receive bailout funds in order to pay their workers and pensioners, because such step is not unlike robbing Peter to pay Paul.

      However, the fascinating side of the FG’s gesture is that, apart from the fact that the loan would be given over a period of one year, the states must agree on a good number of conditions before they could assess it. It might interest you to note that among the total of #90 billion, #50 billion would be shared across the 36 states, coupled with FCT, for the first three months, and then #40 billion for the remaining nine months, which is an average of about #1.4 billion per state for the former and #1.1 billion for the latter. The Finance Minister, Mrs Kemi Adeosun disclosed that the idea is to tie states over for a year so that they can rebalance.

     Other uncompromising and laudable conditions to be reached by the states are, but not limited to, they are to individually: publish their audited annual financial statements within nine months of financial year end, comply with the International Public Sector Accounting Standards (IPSAS), annually publish state budget alongside its implementation performance report online, set realistic and achievable targets to improve independently generated revenue and ratio of capital to recurrent expenditure, implement a centralized Treasury Single Account (TSA), as well as establish a biometric capture of all the state’s civil servants to eliminate payroll fraud.

     Additionally, the states are to comply with the existing Fiscal Responsibility Act (FRA) and reporting obligations of the country, to include: no commercial bank loans to be undertaken by them (the states) and routine submission of updated debt profile report to the Debt Management Office (DMO). Meanwhile, the FG has already barred all the commercial banks in the country from giving loans to any state government regardless of the circumstance; the decision was taken in accordance to the Fiscal Sustainability Plan (FSP) of the former.

     Undoubtedly, if the above guidelines are to be strictly upheld by the government via the effort of the Ministry of Finance, Nigeria would be a better place to be soonest. Suffice it to say that the additional bailout funds will cause more good than harm in the long run contrary to the ongoing speculations from the members of the public. Ab initio, the plight with the Nigerian government has been the ability to proclaim a sound policy but failing to implement it as requested; hence, this very measure is as well liable to suffer same fate if the lingered political will the country is known for isn’t changed by the present administration.

     If the above conditions are fiercely safeguarded, it may deter most of the states from assessing the bailout funds, thereby persuading them to concentrate on the needful. In addition to the conditions, the various governors deserved to unequivocally be thoroughly investigated since it’s apparent that the previous bailout funds received by them weren’t judiciously utilized. It’s not anymore news that workers and pensioners in most of the states are still owed for several months.

     This is where the Economic and Financial Crimes Commission (EFCC) needs to come in toward ascertaining if the funds were truly used for what they were meant for. We can’t continue to live in the past amid an administration reckoned to be anti-graft.   

     The most appropriate step the states are individually required to take at this point is embarking on a massive Internally Generated Revenue (IGR) drive. In most of the states, the policies guiding the traffic sector that is meant to serve as a major revenue source are so porous for anyone’s liking. Similarly, many of them are tourism-oriented, but the governments have refused to look inwards toward revamping the sector; rather, they chose to rely solely on the federal allocation, which is currently wearing a pitiable physiognomy.   

     So, rather than depending on bailout funds from the FG or keep seeking for loans from the banks, I enjoin them to generate the funds by themselves. Let’s always take into cognizance that it pays to be a creditor instead of the reverse. The truth is that, if the various governors concentrate only on the needful, they would in no distant time see the ongoing economic meltdown as a blessing in disguise. Think about it!

Comr Fred Doc Nwaozor

(TheMediaAmbassador)

-Public Affairs analyst & Civil Rights activist-

Chief Executive Director, Centre for Counselling, Research

& Career Development - Owerri

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frednwaozor@gmail.com

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