The cost of state bailouts

So to date, the taxpayers have funded the states with N855.6billion to “pay salaries” ….(yes some are CBN renegotiate loans but its still a cost).

Let me add there is an extra N50b of FGN negotiated loan still available to states by the FGN
The question is this…

1. how much has the FGN paid into the Sovereign Wealth Fund?
2. how much has the FGN paid into the Retirement Savings Accounts of their own civil servants?

These questions are rhetoric…what I am really asking is this was there really no better use for N855.6b?

When these bailouts were announced, I warned its won’t work and it will create a moral hazard. The justification is that states workers need to be paid, I agree, but is this sustainable?

We have taken the NLNG dividends and paid states to pay salaries. Previously the NLNG dividends were put in a special account and used to reinvest in NLNG Trains 3 to 6 without recourse to the Federal Government. Understand this, as shareholders of NLNG, when Nigeria reinvested her dividends back to the company, the company grew, sales grew, thus dividends grew. That’s why we were able to extract that dividend in 2015 and bailout states.

In 2015, we broke that reinvesting chain.

The most sustainable way to support states is for the FGN and States to sponsor a constitutional amendment to devolve some fiscal measures to states, not bailouts…. certainly not unsustainable bailouts.

If States retained a greater share of VAT other taxes, that will be a start. The FGN has also issued the states a 22-point plan to get their accounts in order, it’s an impressive and extensive list, well thought out.

The challenge is to get the states to accept and implement it.’

The FGN must stop bailing the states, the states must restructure….that really is the only solution.

It’s out problem, we can fix it…