Matters arising from Paris Club refunds to states – The Sun

The controversy over the management of the Paris Club refunds to the state governments was reignited last week by President Muhammadu Buhari when he played host to some prominent traditional rulers at the Presidential Villa, Abuja. Apparently displeased with the inability of some state governors to pay workers’ salaries and pensions of retirees, President Buhari decried the way some of the affected governors might have misapplied the funds.

He said their action defeats the essence of releasing the funds, noting that the civil servants and pensioners depend on such unpaid salaries and benefits for their upkeep and that of their families. We share the concern of Mr. President over the plight of workers and retirees across the country. We recall that the Federal Government had on May 4, 2017, released details of the second tranche of the Paris Club loan refunds to the states totaling N243.795 bn.

However, a new twist was added to the controversy following the denial by the Nigeria Governors’ Forum (NGF) that the President rebuked some state governors over how they managed the funds.

In a statement last week, Head of Media and Publicity of the NGF, Mr. Abdulrazaq Barkindo, said, while the governors were doing their best to mitigate poverty some “ elements” were working hard to obliterate their efforts. The statement noted that the Paris Club refund was not a borrowed money, but an over-deduction for states’ repayments of loan which the Federal Government is now repaying to states that were “ erroneously debited”.

The argument of the NGF is valid. The refunds are the legitimate entitlements of the states which they reserve the right to use as they deem necessary. Even though we are operating a federal system where the states ought to have full control over their funds, it is only proper that the governors use such finances to pay backlog of salaries and pensions.

Though the states insist they never signed any agreement with the government that the refunds will be used to pay outstanding workers’ salaries and pensions, we urge the affected governors to give priority attention to workers’ salaries and payment of pension to retirees.

The way forward is for the Federal Government to dialogue with the state governments to prioritise their needs and ensure that workers and retirees receive their entitlements without delay. Perhaps, this is the right time to review the current revenue sharing formula in favour of the states considering their numerous financial challenges. Unarguably, the present revenue formula is not consistent with the principle of fiscal federalism.

Moreover, these challenging times call for the states to look inwards on how to diversify their economies and revenue base rather than the present dependence on the monthly federal allocation that is fast declining due to fluctuation in oil prices in the international market.

We also believe that transparency and accountability may be the first casualty if the state governments use the funds the way they deem fit, considering the financial recklessness of some of them. That was why we had earlier supported government’s position that verification and reconciliation of the claims by the state governments should be concluded before disbursement would commence. Besides, the Minister of Finance, Mrs. Kemi Adeosun, maintains that the overriding consideration for any further releases will be contingent upon the current and projected cash flows of the federation.

Prior to the release of the second tranche, President Buhari had directed the Minister of Finance, Mrs Adeosun, and Governor of the Central Bank Nigeria, Godwin Emefiele, to act “appropriately” and with “dispatch” in releasing the refunds to the states in order to ease their financial hardships. Government had in December 2016, approved the sum of N522.84bn to be paid to the 36 States as part of the reimbursement for over-deduction on the loans and multilateral debts of the Federal and State governments.

Nigeria reached a final agreement for debt relief with the Paris Club in 2005. However, some states were reportedly overcharged. But, in January this year, the sum of N388.3bn was disbursed to the 36 States, leaving a balance of N134.44bn.

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