27 states face bankruptcy
•Abia, A’Ibom, Anambra, Jigawa healthy
•Senators urge merger of states
From ADETUTU FOLASADE-KOYI, Abuja
Daily Sun, Lagos. Friday October 28, 2011
From the Senate came the gloomy news yesterday that the financial accounts of 27 states are in the red as some of them have been declared either “distressed” or “gloomy.”
Only Abia, Akwa Ibom, Anambra and Jigawa states were given a clean bill of health. The six states that are in financial distress are: Kano, Sokoto, Niger, Zamfara, Katsina and Osun.
Those deemed critical are: Ekiti, Plateau, Benue, Edo, Borno, Adamawa, Cross River, Enugu, Taraba, Ogun, Kogi, Yobe, Ebonyi, Ondo and Kaduna.
In the unhealthy cadre are: Oyo, Bauchi, Bayelsa, Nasarawa, Gombe and Rivers while Imo, Kwara, Lagos, Kebbi and Delta were given the ‘tolerable’ tag.
The data was sourced from the Nigerian Governors’ Forum (NGF) Labour Policy Report, 2011 as contained in a motion titled: Looming danger of bankruptcy in states: The need for fiscal evaluation, sponsored by Senator Olubunmi Adetunmbi (ACN, Ekiti North).
To forestall the looming catastrophe, the Senate advised the Federal Government to expeditiously review the revenue sharing formula in favour of states and local governments. The Upper Legislative Chamber also directed its Committees on Finance, National Planning; States and Local Governments to study the situation and submit remedial measures to avoid total collapse of the economy of the affected states. Senator Adetunmbi had alerted the Senate of the “great fiscal challenge and looming danger of insolvency as well as bankruptcy facing the states as a result of growing wage-bill associated with the implementation of the minimum wage and other recurrent responsibilities of the states.
“A recent research by the NGF revealed that 20 states face the prospect of unstable and unfavourable financial standing, given the high percentage of their wage-bills to the total revenue accruable to them. Armed with the data, Adetunmbi noted that in most states, the private sector is weak and unable to generate economic growth and jobs that are required, thereby making the states and local governments the largest employers of labour with attendant fiscal imbalance.
“The bulk of the revenue of these states is currently financing payroll of the civil service which constitutes less than 4% of the total population in all states; if this trend continues, many of the states would become financially insolvent and increasingly handicapped to finance real sectors and drive economic growth, job and improved livelihoods,” he said.
He told the Senate that “most state governments now rush to the capital market to raise long-term bonds to finance development projects”, which if misused, would spell doom for their future and the financial quagmire of states.
Some of the state governments that have taken this route of funding between 2002 and 2011 are: Lagos (series 1-N50bn; series II-N57.5bn), Imo (N18.5bn); Kwara (N17bn); Niger (N6bn); Bayelsa (N50bn); Kaduna (N8.5bn); Ebonyi (N16.5bn); Ogun (N50bn); Delta (N5bn) in 2007); Kebbi (N3.5bn) in 2006; Lagos (N15bn) in 2002 and Yobe (N2.5bn) in 2002.
Adetunmbi called for urgency in the review of the revenue sharing structure among the federal, states and local governments in view of the “financial quagmire” of affected states. Contributing, Senate Leader Victor Ndoma-Egba, canvassed a merger of states and slammed the practice of state governments going cap in hand to Abuja for revenue, adding that, “there is federalism more in name than in practice.”
Also, Chairman of the Niger Delta Committee, Senator James Manager, re-echoed the call for merger of states and asserted that “all the states are distressed. Something has to be done. So many states are not supposed to be states because they have nothing to offer, they are burdens on Nigeria. Those not viable should be merged with the viable ones, hence, the imperativeness of fiscal federalism.”
Minority Whip Ganiyu Solomon noted that the revenue formula is long overdue for review, adding that there was too much concentration of power at the centre. Corroborating Solomon, Senator Ahmed Lawan submitted that the states were not getting their own fair share of the revenue, stressing, “it is totally unfair that the Federal Government should continue to get 53 per cent; it is not justifiable”.
Senator Sola Adeyeye queried the rationale for having “a Federal Ministry of Agriculture when there are no federal farms; communication, aviation, industry and housing when all the properties have been sold to the private sector.”
Thereafter, senators canvassed a review of the sharing formula from the Federation Account to further enrich the states and local governments as well as compelling the Federal Government to transfer some of its responsibilities to the lower tiers of government
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