By Vincent Kalu
Former Finance Minister, Dr. Kalu Idika Kalu, has said that it was irresponsible for the Federal Government to give bailout funds to states. Kalu, who once aspired to be president of the nation on the platform of the Peoples Democratic Party (PDP) in this interview also spoke on the burning issue of restructuring Nigeria. Excerpts:
About 28 states can’t meet their statutory obligations of paying salaries to their workers, why is it so?
This has to be understood from the macro economy as distinct from partial analysis. When you inherit a financial situation such as we had, where the terms of trade dropped by over 70 percent, that is, the difference between your export price and your import price. Our export dropped by over 70 percent, that is the equivalent of about four to five percent of our GDP.
The first question you should ask yourself is, even in a federation, there are ways of mitigating the unavoidable loss in revenues. On the domestic front, you would take so many actions, including plugging of leakages, enhancing compliance in terms of taxation, adjusting rates, tariffs and duties; expanding the base and all of these should contribute to increasing revenue to mitigate the shortfall that you have inevitably suffered because of the sharp drop in the price of our major revenue like oil, and the impact this has on receipts from balance of payment standpoint, from government revenue standpoint, from transfer from abroad standpoint. It affects so many of these things because incomes are diminishing across board.
But in adjusting these rates whether you are talking about VAT, or other taxes etc, you have to also mind the fact that you do not want to damage the economy more than it has been damaged by that shortfall. The issue is not just to raise these rates or non-oil revenues, where somebody wants to talk about as hanging fruits; you have to realize that those hanging fruits, or easy sources of making up the revenue are hanging from a tree and that tree is the economy and if the economy has been damaged, you have to mind that the economy is healthy enough to take on the additional rates, taxes and incomes you want to levy.
You look at the external side, there are facilities out there, whether ADB, World Bank, IMF and other institutions, they know what we have suffered like other countries too, but explicitly enough, you have to work out your shortfalls – your balance of payment shortfalls, your budget shortfalls and you try to make the most, first by availing yourself through your visitations to these organisations to get those things that you don’t have to pay anything for. For example grants; from there you move on to very concessional rates like other facilities that you don’t pay interest, but you pay servicing charges and then you have to pay back after so many years; after a particular grace period.
Now, the relevance of that is that by the time at a given point in time, you maximize what you can get. It is easy for funds to now be fungible, some of it would be retained at the federal level, some would go to the state level, and some would go to the local government level. So, you are enhancing the ability of each of these levels to undertake what they could undertake under that general shortfall that has befallen the whole economy. So, you mobilize domestically, you mobilize internally and you look at what you have, then you can see how you allocate.
So, the issue is not just waking up one morning and say, states are not paying salaries. What have you done to do what I just described? It is a very intricate thing, but that is the work of government; that is the work of economic management; that is the work of budget and planning; the Presidency and others who can advise them.
How does the federal mobilse grants, mobilse concessionary funds, and the important thing is that when you have done this…, yes, we know we have to reduce, but you don’t have to reduce to the extent that you just shut yourself up and just focus on the fact that your money has dropped and so you are going to cut down parastatals, you are going to reduce employment, you are going to reduce this and that, but because of the facilities you have provided, you might find out that it is easier for you to overcome what could have been a recession. As you recover, may be within two years and you still have five years grace period to start paying back those you have to pay back, while others are grants that you don’t have to pay back, others also don’t have interests.
Now, the industries that you funnelled resources to are producing again and providing services. That is the answer; there is nothing outside my advice. It is the ability of government to see through this, so that when they are talking, may be what they thought was 100 percent, and what they had was 60 percent and now they are able to mobilse up to 90 percent. After you have mobilsed up to 90 percent, it is your responsibility to now say, ok, let us look at over capacity; over employment given the resources, then you know where you have to prune and adjust and when you are doing that, everybody can see that you have done your best; you have availed yourself with the maximum resources at a given point in time, you already see what you can get to sustain yourself while you are waiting for oil price to improve or while you are waiting for other things to take the place of oil, whether is gas or other non-oil export; and of course, in the medium and long term, you could be adjusting your economy so that you are moving towards those areas. Whether you call it diversification, we already have this but we didn’t pay attention, it is not a new thing to say you wanted to diversify; you needed to mobilse the way I just said in crisis and non-crisis times, and funnelled some of the funds to produce things that are outside the oil sector or that when oil was going from $70 to $80 and $100, we should have devoted the funds not into buying more jeeps for staff, buying more luxury house, we should have used it to develop the non-oil export, agriculture, crafts, manufacturing etc, that is what diversification should mean.
It is said that the lifestyle of these governors is a contributing factor to their inability to pay salaries?
We should not be picking easy targets. You can’t pick out governors. You talk about the Presidency, you talk about the ministers, you talk about those heading federal parastatals, you talk about the executives at the state level, the legislature, you talk about those at the local government level, where we are told they just go and share the money.
It is a national malaise. If it is just to pick on governors, just count me out.
But they are the ones that should pay salaries?
We are talking about the distribution or the share of income. All these are coming into question if we are going to do a thorough analysis. We have to do a thorough analysis. They don’t pay salaries out of woods. They are paying salaries out of the structure of the economy. By giving that global picture above, you can see what I’m talking about. I was a commissioner in Imo State and we were supposed to pay salaries. Mbakwe’s administration owed 11 months salaries to workers. People don’t remember that. I had to sit down and work out something, which my governor then christened, ‘Imo Formula’. I said whatever you are doing, paying salaries or not, government has to run, secondly you have to revitalise the economy instead of laying off the workers, so, whatever we got, we have a scheme for giving a little to all these businesses every month when we checked what government was owing them. We set aside what would keep government running, we set aside what we would give to the businesses, and they began to recall all their workers – individual entrepreneurs, small businesses and by the time they added up, the economy was coming up. Then the balance of our current receipt, if it could pay our salary we paid; if it was more than that, we moved it to our capital receipt to fund capital projects.
I didn’t have to think hard about this because I have had much more bigger experience working on star performers like Japan, Korea, Taiwan and Hong Kong.
We can’t be asking blind question, that they are supposed to pay salaries. How would they pay salaries if they don’t have the wherewithal? Part of getting the where withal is for them to realize that security votes are there, over staffing of their offices and commissioners and that also applies to the federal. I don’t want this gambit of picking on governors. It is the same thing at the federal level. It is mindboggling the over bloated bureaucracy we are running at the federal, at the state and at the local government.
The local government is very annoying because at the minimum, there are supposed to be grading roads as they may not have the money to tar, clear the bush around our areas and create small credit facilities to help people through the local banks, and that is why community banks were set up. By giving little credits, the farmer can increase up to five times what he used to do and employs more labour to help him in the farm and his outputs would increase; the council is also to provide access roads to the farms, provide rural electrification. What do they do? Go and see their salary, it is ridiculous for the level of the economy and the level of the economy has to do with the provision of basic needs. I’m as mad as other people with the governors, but the whole system is messed up.
Because of this inability to pay salaries, the issue of state creation comes to mind as it is said that some of the unviable states werecreated to pacify some political interests, would this not call for restructuring?
I was going to raise this issue of restructuring at the National Conference but I didn’t go. We are shouting so much about restructuring.
What type of restructuring is going to make sense?
Let us go back to the viability of the basic units, which is the local government. It may not be the same number we have today. Let us give a range, about 650,000 to 700,000 people for each local government and if you divide this by our population, you get the number of local governments, it may be far less than 774, it may be between 300 and 400. Then you give guidelines as to those who would be manning those local governments. They must attain certain level of education. So, we can use very well trained people to be at the helm. Let us use 350 local governments from the swamps of the Niger Delta to the semi arid in the North. It is not a matter of area; it is number of people who can form the tax base, economic base, and productive base. After you got this, you can now decide how many states by readjusting what we have now, we can even come down to 25 or 30 that would be viable, instead of the 36. Remember, we are not restructuring for next year or two years time, we are restructuring in a way that 50 years from now, you have a modern nation, where the productive base is at the local government. Those that live there whether indigenes or non-indigenes are citizens of the country; they are bona fide full citizens of those local governments; they can vote and be voted for as chairman, mayor etc, and that local government would be almost self sufficient. From the 30 states, we can decide the number of zones we want, we can retain the existing ones or create more. You can see that the level of relevance diminishes as you move towards the centre in terms of the basic power, but not external relations or defence. We can start from local government police, and move to another level. You want to restructure and may be move to another level of a strong and a modern nation as we see in America or in other countries.
This is the time for us to do it. It is myopic and unfair to say restructure means to just take the six zones and say everybody go and create the number of local governments that you want, you are just postponing the problems. There would be protestations here and there, but this is a great idea for those who are talking about restructuring for development.
By the time you restructure, the local governments, all those who reside in them would feel good contributing to the development of the nation. When it comes to cultural affairs, ethnics would still do their cultural things.
By this arrangement, wherever you come from, you begin to feel a certain identity of the local government. Those local governments would now develop their revenue base, small, medium, large scale industries in concert with other investors. The grouping of those local governments would give you your states, and those states would give you your provinces, zones, or regions.
Unless we go back to restructure at that level, then we are restructuring in vain, and just papering over existing problems.