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President
Muhammadu Buhari
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The federal government
should consider issuing bonds to raise the needed funds to settle salary
arrears and clear outstanding fuel subsidy payments, the APC transition
committee has recommended.
Although this is going to
increase the debt burden of the federal government, the inherited salary
and subsidy arrears are viewed by the committee as “short-term
liabilities” which should be addressed by President Muhammadu Buhari to avoid
“civil unrest”.
Federal workers are owed
over N400 billion in salary arrears while oil marketers are making claims in
excess of N200 billion following a cut in the pump price of petrol as well as
the devaluation of the naira before Buhari was inaugurated on May 29.
TheCable report continues:
The Ahmed Joda-led
transition committee, whose report is currently being studied by Buhari and is
expected to influence his policies, advised the federal government to fully
guarantee the bond issue — effectively placing the risk on Abuja rather
than the states.
As many as 20 states are
currently unable to pay salaries mainly because of a drop in federally
allocated revenue as a result of falling crude oil prices.
States are also to
benefit from the bond issue to clear the backlog of salaries, the committee
proposed in the report seen by TheCable.
Many of them also have
what many analysts consider to be an over-bloated work force meant to serve
political purposes rather than out of necessity.
The Joda committee said
that in bailing out the states from their economic hardship, “it is important
that strict conditionalities be applied”.
These include: no
increases in headcount while any borrowing remains in place; commitment to
biometric capture and fully automated payroll management within 6-9 months;
commitment to improvements in collection of internally generated revenue (IGR);
and establishment of a mechanism to mitigate risk of diversion of funds.
The committee also
advised the federal government to raise funds by blocking “leaks” in the system
through the enforcement of the Fiscal Responsibility Act (FRA) across all
ministries, departments and agencies (MDAs).
Under FRA, all
revenue-generating MDAs are allowed to retain only 20% of proceeds to meet
operational expenses, with the 80% balance being returned to the federation
account.
The advisory committee,
which submitted its final report and an 800-page summary to Buhari on June 12,
further suggested that leaks can be “mitigated” through the implementation of
the Treasury Single Account (TSA).
TSA was set up by the
Goodluck Jonathan administration to consolidate all information on revenue
accruing to the government for proper monitoring of the cash position.
The committee said
although funds from the excess crude account (ECA) can be used to meet part of
the liabilities, it could have an adverse effect on Nigeria’s credit rating,
which could in turn affect the country’s financial sector as well as the
prospects of foreign investment.
Governors, who are
agitating for a “bail out” package to meet immediate obligations, will meet
with Buhari on Tuesday to discuss the proposal — even though the federal
government itself is saddled with debts estimated at trillions of naira.
It is not yet clear if
Buhari will implement the recommendations of the transition committee.
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