States’ Request For Bail Out And Its Consequences

We the governors of  the progressive  party met today to review the state of  the economy…it has become so serious and urgent actions must be taken for a bail out for our states.   We have some challenges because of the drop in oil price and issues of oil theft….

– Governor Okorocha Rochas, June 16, Abuja, at a meeting of governors of All Progressive Congress.

“A precedent embalms a principle”, William Scott, 1745-1836.

(VANGUARD BOOK OF QUOTATIONS p 198).

INTODUCTION

The request by seven All Progressive Congress, APC, Governors, namely, Okorochas (Imo), Ambode (Lagos), Al-Makura (Nassarawa), Aregbesola (Osun), Masari (Katsina), Ganduje (Kano) and Ajimobi (Oyo) raise several questions before consideration of the content of the request itself, as well as the reasons adduced for it.

First, the seven governors don’t even form a majority of the APC governors in Nigeria. They certainly amount to just twenty per cent of the thirty-six governors in Nigeria. So, the issue of locus arises. Are they speaking for themselves, all the governors of APC or all the governors of Nigeria? A corollary question is: were they mandated by those absent to make the request on behalf of those absent? If not, do they expect the President of Nigeria to seriously consider their strange, to say the least, request?

Second, even the seven in attendance can be grouped into two – those on their first term (Ambode, Masari, Ganduje) and those on second term (Rochas, Aregbesoal, Ajimobi). The first-timers can convincingly argue that they were not in office four years ago when crude oil was selling for $118 per barrel, when the budget benchmark was $78 per barrel; and so they could not have saved for the rainy day. The second-timers can offer no such excuse. When a budget benchmark is set at $78 per barrel, all recipients of funds from that source are expected to save for the day when the price would go below $78. Failure to do so cannot be blamed on the Federal Government. The blame belongs to those who spent every kobo in the last four years.

Third, the monthly revenue allocation exercise, expected to be attended by all Commissioners of Finance, also assumed that the Commissioners would not leave their brains behind when coming. The slide in revenue allocated started from 2013. All the Finance Commissioners, if they were not incompetent, should have drawn the attention of their principals, the state governors, to the continuous slide, after three months. They should also have conducted medium and long term studies to determine the drift of revenue to be expected from Abuja. That is what planning is about. That leads to two questions: which state government received such a study from the highly-paid commissioners of finance and immediately drew up an action plan to deal with what had turned out to be continuous decline in federally-allocated revenue? Again, why blame the Federal Government for their poor governance?

Third, different states got into the problem in which they find themselves and the arrears of salaries owed to public servants range from three to nine months. Are the governors asking the Federal Government to pay all the arrears of all the states or part of it? Also, is the bail-out supposed to be in the form of grant (gift) or loan? If grant, should it be based on the equality of states (i.e the same amount for every state) or on other criteria? If other basis will determine the amount advanced, have they worked out and agreed on these modalities? Otherwise, the meeting at Abuja was a mere jamboree.

Fourth, not once since 1960 had the Federal Government been asked to bail out each of the federating units. And, there is no provision in the constitution for such a bail out. Obviously, this strange request, if granted at all, would establish a precedent which might be applied again in the future – if states recklessly misapply their funds. The question is: is this what we want; especially, when the governors are not also prepared to open their states for probe to determine if funds which could have been used to pay workers have not been mis-appropriated. We will return to this matter later.

Fifth, the presence of the Lagos State Governor, Akinwunmi Ambode, in the midst of “beggar” governors, must be embarrassing – not only to Lagosians, but to the entire country. Next to the Federal Government, Lagos State is the most viable state. In fact, the state might as well have its own mint to print all the money it needs for its operations – as long as the income is well managed. Was Ambode in attendance to share “solidarity” with his colleagues to avoid being regarded as snobbish or was the mistake inadvertent?   Just as Abuja represents our status as a nation, Lagos is the financial and economic capital of the country. The entire world is interested in Lagos. The governor of Lagos state cannot, deliberately or inadvertently create the impression that the state cannot manage its affairs as to default on salaries.

Finally, there is overwhelming evidence that states are in their various predicaments because fours groups of officials failed to perform their constitutional functions as required. These are, in order of culpability: the governor, the State House of Assembly, the Finance Commissioner and the Auditor-General. Recklessness in government, which is pervasive, insufficient oversight functions, collusion in mismanagement of resources and poor quality of individuals holding these offices account for the bulk of the problem. Generally, the Commissioner for   Finance in most states is no more than the Governor’s Bag Man – he holds the state’s funds in a bag into which the governor dips his hands at will; no questions asked.

WHEN RECKLESSNESS IS CONSIDERED A VIRTUE

“Nor should we listen to those who say ‘The voice of the people is the voice of God’; for the turbulence of the mob is always close to insanity”, Alcuin, 735-804.

Elected officials, and those appointed to offices covered by law are supposed to provide leadership – not pander to the whims and caprices of the “masses”. True leaders are a breed apart; they don’t, or should not think like the masses. That was why Lao-tsy, 6th Century AD, said that they are “not so good when people obey and acclaim [them]”. (VANGUARD BOOK p 124). Below are examples from the past and the present, of expenditures made in various states, which were acclaimed at the time, and which have now become drains on resources without yielding any, or very little income to the states. Readers should bear in mind that in economics reckless spending, with public funds refers to expenditure made which confers no economic benefit to the people. This is important because defenders of the state governments will soon flood the airspace with gibberish as “explanations”.

1.       Two states, one in the Northeast and the other in the South West embarked on airport projects. The NE state’s airport was completed and is now in use, the SW airport was started but contractors have abandoned the site. Only one flight a day lands in the NE airport, whereas it requires at least six flights for it to be viable. In each case monthly deductions are made at source for the Governors follies.
2.     Again, in the NE, a governor had four “first ladies”, and in addition appointed 1,000 Special Advisers, all paid the going rate for such offices. Again, in the SW a former governor declared by “Executive Order” that people over 70 years in the state would receive N5,000 monthly. Over 250,000 people were qualified to receive the windfall.
3.         We race to the South South, where a former Governor embarked on the nation’s Tourist Attraction; he borrowed recklessly, received rave reviews for his foresight and, on the basis of it, was even persuaded to run for the Presidency in 2007. Today, the place is not only sorry sight, it is draining millions in loan repayment by the state. Next door, a former governor also embarked on the construction of an 18-storey hotel and entertainment centre which would employ thousands. He left office after eight years and the hotel is not, and might never be, completed.
4.     The last two governors of a state in the South East apparently have been competing on who can acquire more expensive cars at state expense. According to informers, the former governor had 48; the present has 52 in their fleets.
5.         The governor of the poorest state in the Southwest, and the fourth poorest nationwide, spent more on advertisements to support the presidential candidate of his party than governors of states collecting three times his own. That is not governance; it is worse than recklessness; it is gambling. And no governor is elected to gamble with public funds. Is Buhari supposed to bail out the perpetrator of this fiscal lunacy also? And why?
6.         Meanwhile, an immediate past governor of a North West State claimed to have run the state without borrowing a kobo. He was faced with the same economic challenges as his over-glamorized compatriots in other states. Therein lies the difference between real leadership and pretension backed by media hype until it backfires.

There is no need to list seriatim all the examples demonstrating that state governors are the chief culprits with respect to wasteful spending in their states.

States’ Houses of Assembly come next. There is probably no former, or current, Speaker of the State’s Assembly, or member, who had not compromised his office and allowed the Governor to get away with reckless spending. When a state governor acquires an aircraft, probably not included in the budget, and state legislators keep quiet, they invariably have opened the flood gates to other financial indiscretions.

Most Commissioners of Finance, might as well be called “Cashiers”. Their equivalents in the United States, whose constitution we copied and bastardized, are not just engaged in revenue collection and sharing. They undertake short, medium and long term perspective studies aimed at ensuring the viability and sustainability of their states. They are responsible to the people. Nigerian Commissioners of Finance “don’t give a damn” about the people. Ask for a long-term study regarding the state’s finance and you draw a blank.

The defenders of one of the “beggar” governors attending the meeting admit that the state services debt with N700 million a month, against Federally-allocated revenue which dwindled to about N1.2bn last year and wage bill of N3.4bn. But, like most unrepentant people, they cannot even admit that the government of the state was responsible for the debts, not Okonjo-Iweala. They also fail to acknowledge that virtually all the projects for which huge loans were taken would fail to generate any income to the state. That is the classical definition of “reckless spending”.

And, even a bail-out, if at all provided, will not solve the state’s financial problems. That particular state will be back again requesting for bail-out within two months. And then what?

What most of the states have in common is the tendency of state governors to seek cheap popularity by embarking on projects which benefit a few thousand people – while everybody in the state pays the price – including the project price inflation. The two airports will never be viable, the tourist attraction will increasingly attract only weeds and as more people reach 70, the state will need more funds to sustain the ill-conceived idea. Yet, their spokesmen and other defenders will point to the acclaim and the international awards that were received when the projects started. The problem with the “Award Factories” in Nigeria and abroad is that they never return to visit the projects when they run down!!!

IS THE REQUEST CONSTITUTIONAL?

“The [President] himself ought not to be subject to [men] but subject to God and to the law; because the law makes him [President]. Bractor, 13th Century, philosopher. (VAGUARD BOOK p 120).

For President Buhari, and the rest of us, the first thing to consider is the question: is this request constitutional? And, even if it is, has the request followed the proper procedure or are we dealing with a bunch of desperate individuals grasping at straws? Incidentally, “the rest of us” do not include the governors spokesmen and camp followers, as well as their Halleluya Chorus groups. Some of them have already sent scripts to the media emanating from the same propaganda machines – especially in a SW state. For those unthinking people their governor can do no wrong. The reference is to those who have not packed their brains in poly bags.

To begin with, Governors’ Forum, either of APC or PDP or National, is not one of the bodies recognized by the 1999 Constitution. At best, it is a mere “Association of Friends”; at worst, it is irrelevant. That is being polite. As such, on what grounds are these people appealing to the President for relief? Second, as occupants of positions of great responsibility, one would have expected them to answer the question by pointing to the part of the constitution that empowers them to make the request. But, so far, they have not demonstrated the degree of sense of responsibility expected. Furthermore, they have not stated where in our constitution Buhari, or any President, can invade the Central Bank of Nigeria, CBN, and authorize the payment of billions of naira as bail-out to states without a bill presented to, and passed, by the National Assembly. Some of the governors are lawyers, or should have lawyers. So, one would expect them to avoid any public action which can be characterised as a “bloody waste of time”. But, so far this is what has happened.

Given space constraints, it will not be possible to go into all the constitutional impediments standing in the way of this bizarre request by the APC Governors’ Forum.

WHY BUHARI MAY (OR SHOULD) NOT ENTERTAIN THE REQUEST.

“For the sins ye do two by two, ye must pay for one by one.” Rudyard Kipling, 1865-1936. (VANGUARD BOOK p 228).

For reasons too numerous to list, the state governors have not justified the request for a bail out.

But, two, inextricably linked, reasons will be sufficient. That is where the States’ Assemblies come in again; and the Auditor Generals of the states. For public servants perception is vital. Once the impression gains ground that the people are governed by crooks, a situation in which civil servants are owed several months salary induces no sympathy among the citizens. In my travels, which had taken me to 28 states in the last one year, three statements are made everywhere.

First, nobody knows how much the government generates every month. Two they don’t want us to know the truth. Three, the top people steal most of it leaving very little to develop the state. State governors are their own worst enemies. They have fostered nationwide cynicism about government everywhere. None is exempted. The request for bail-out is often interpreted by the people as a demand for more funds to embezzle since there is often no control by the legislature and no audit of any kind. The only crooks punished in states are those not part of the syndicate.

Furthermore, the states are also defaulting on debts to contractors; most of the projects have been abandoned. Once granted a bail-out, the request for hand-out to pay contractors might follow. Where will the begging end?

To the general feeling, one more reason must be given for opposing bail-out. States are very careless about collecting what is due to them. They don’t levy and collect taxes, they play Father Christmas (Stomach infrastructure) all over the place and they don’t execute budgets. The current Chairman of the National Governors’ Forum, Abdullazeez Yari of Zamfara, recently disclosed that the Federal Government of Nigeria owes all the states from N10bn to over N50bn for projects carried out on behalf of Abuja. So, what is the point of crawling in front of a debtor to ask for a loan? That amounts to borrowing your own money.

CONCLUSION

That last point takes us back to where we started. Most Nigerian Governors and their Commissioners of Finance don’t know the basic principles of financial management. They just collect and spend. With that attitude, this bail-out will not be the last. Instead, it will become the precedent for bail-outs in the future.

The state ranked 20th on revenue collection had accumulated the fifth largest debt stock to finance projects which are now grounded. That summarises the absurdity of the situation in which beggar states find themselves. If bail-out is granted to prodigals, what will be the reward for prudence? It can’t be nothing.

Buhari should send the governors back to their people. Let them explain to their people how they got into the mess, agree to forensic   audits, appoint real finance managers as advisers, stop elephant projects, like unviable airports in poor states and set good examples with their life styles. No poor state’s governor should operate any aircraft.

Then, may be, bail-out can be considered. It is doubtful if many of them will survive the audit and ordeal of full-disclosure.

Source: Vanguard Ngr