THE conditions given by the Office of the Minister of Finance for the release of the second tranche of the London-Paris clubs debt refunds to state governors to clear the backlog of their workers’ salaries and pensioners’ entitlements have thrown up new debates. But, we consider the conditions necessary, to ensure compliance with the terms for the release of the funds, and to avoid the controversy over the alleged misuse of the first tranche of the funds disbursed to state governors in December 2016.
Among the conditions given for the release of the funds by the Finance Minister, Mrs. Kemi Adeosun, is the conclusion of the ongoing verification and reconciliation between the states and the Federal Government. President Muhammadu Buhari, who directed the release of the funds about a fortnight ago, had said that the order should be carried out “appropriately and with dispatch”.
The widespread allegations that the first tranche of the refunds released last December was neither used to clear up the backlog of workers’ and pensioners’ entitlements, nor ploughed into infrastructural development of the states, justify the demand for a verification and reconciliation of the disbursements by the Finance Ministry.
This is more so as much of the refunds were alleged to have ended up in the private pockets of the state governors. It is, therefore, apparent that accountability will be the first casualty if fresh refunds are released to the states without the conclusion of the verification and reconciliation of their claims on the earlier disbursements.
There is merit in the position of the Finance Ministry that the release of the funds will be contingent upon the “current and projected cash flows of the federation as well as the outcome of the independent monitoring of the compliance with terms and conditions attached to the previous releases”.
These fresh conditions should not be seen as flouting the directive of the President, but needful steps in adherence to due process. They are in line with the president’s directive to the Finance Minister and the Governor of the Central Bank of Nigeria, Godwin Emefiele, to act “appropriately” in releasing the refunds to the states, to ease their financial hardship.
But, the CBN and the Finance Ministry have an obligation to expedite the process of the verification and reconciliation to meet up with the president’s directive that the funds be released with dispatch.
The Federal Government had in December 2016 approved the sum of N522.84 billion 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.
It is important to recall that Nigeria reached a final agreement on debt relief with the Paris Club in 2005. However, some states were reportedly overcharged. In January this year, the sum of N388.3bn was disbursed to the 36 States, leaving a balance of N134.44bn.
It is commendable that the Federal Government has taken cognizance of the plight of workers and pensioners, and directed that the refunds to the states be used to pay their salaries and pensions. It is crucial to avoid a repeat of the problems of the earlier disbursements which were not fully applied to the clearance of the outstanding salaries and pensions.
The initial disbursement kicked up a lot of dust following allegations that N19bn from the tranche was paid into two accounts of the Nigeria Governors Forum (NGF) as commission to a consultant, Mauritz Nigeria Limited. But, the NGF denied the allegation, which the anti-graft agency, the Economic and Financial Crimes Commission (EFCC), is reportedly now investigating.
We are aware of the argument that the ideal thing under a federal system is the release of the money to the states, which should be at liberty to use it as they deem necessary, based on their priorities. But, such an argument may not stand because, as the Finance Minister stated, the disbursement was subject to an agreement by state governments that the money would be used for the payment of salaries and pensions.
In addition, the state governors were said to have given an undertaking that any excess payments would be recovered from the Federal Accounts Allocation Committee (FAAC).
It is, however, an open secret that many state governors are not fiscally responsible with public funds. Therefore, the inability of some of them to meet their workers’ salary obligations is not in consonance with Federal Government’s economic stimulus programme. Since the states based their requests for reimbursement on unaccounted deductions on Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) Report on the Reconciliation of State Governments’ External Debts, Vol. I, May 2007, verification and reconciliation have become expedient. This is not a matter for the State Houses of Assembly to meddle into.
It will be recalled that the Debt Management Office (DMO) had initially requested a period of 22 months to complete the reconciliation and facilitate disbursement. However, considering the plight of salary earners and the need to reflate the economy, President Buhari directed last year that the exercise be completed within one year. That period is yet to run its full course.
Nonetheless, the best way forward is for the Finance Minister and the CBN Governor to comply with the President’s express Anticipatory Approval for the release of up to 50 percent of the claim of each state, pending final reconciliation. This is necessary in the overall interest of workers and retirees.
Altogether, in due course, we urge the Ministry of Finance and other related agencies to undertake independent monitoring of compliance with the terms and conditions of released funds. That is the right step to take to ensure transparency and accountability on the use of the funds.