IT WAS a problem waiting for him even before he assumed office on May 29. One way or the other, he has to address the matter, especially as the governors are speaking with one voice on it. Many of the governors are hard pressed; their states are facing a cash crunch never before experienced. They cannot pay salaries – in a state or two, workers have not been paid for 11 months. It sounds incredible, but it is true. This is the new face of the Civil Service, a sector where many scramble for job because of the security..
Last Tuesday, the governors poured their hearts out to President Muhammadu Buhari on what they have been going through. As chief executives of their states, they have to make provisions for capital and recurrent expenditure. For now, many of the states do not have the wherewithal to execute capital projects. Is it a state that cannot pay salary – a recurrent expenditure – that will think of embarking on capital projects, such as building roads and hospitals? Where will the money come from in these lean times?
Didn’t the Federal and state governments have a contingency plan for a day like this? They did. In order to avoid this kind of problem, both tiers of government resolved to establish the Excess Crude Account (ECA). The ECA was created to hold the excess from the price of crude oil, which is the benchmark for our budget. For instance, if the budget is based on $65 per barrel and the price of oil in the international market is $80 or $90, the excess, which will be either $15 or $25, will automatically go to the ECA. It was tagged by our economic experts as saving for the ‘’rainy day’’.
Ironically, it is raining today in many states, but the cash in the ECA cannot save them. They cannot draw on the ECA because the account is overdrawn. There is virtually nothing left in the account to bail out the distressed states. $2.078 billion is said to be left in the ECA. Because he was on his way out, former President Goodluck Jonathan chose to ignore the states’ cries for help. Was it that he ignored them or that he could not do anything in the circumstance because his administration was in the same morass? Under him, the government was borrowing to pay workers, because unlike the states, it had the facilities for obtaining such loans.
Now, the chickens have come home to roost. The Federal and state governments are in dire straits. Though the Federal Government’s case may be a bit better because it has what it takes to weather the storm, but the same cannot be said of the states, many of which are today seeking a bail out from Buhari to meet their obligations. Did the states find themselves in this quagmire because of their financial recklessness? How come the states cannot today find succour in the ECA, which we were made to believe would be the cure-all for such financial distress?
The problem is the ECA was killed before the states ran into trouble. It was killed instalmentally by the Federal and state governments through ad-hoc withdrawals. Whenever they ran short of cash, they ran to the ECA for bail out. See where that has led the states. Since ECA is a political arrangement, the Federal and state governments should have been more prudent in utilising the funds; they weren’t because they saw it as free money. What did they use the cash for? Did they not use the money to plan for their states’ future?
Does it not defeat the purpose of ECA if states cannot draw on it when in dire need? Yet, the ECA’s mandate is to act as a stabilisation fund, close budget deficits that are products of oil price volatility and to potentially fund domestic infrastructure investments. The falling oil price exposed the ECA’s Achilles’ heels. If oil price had continued to rise, the Federal and state governments would have continued to live a false life, believing that the good times will continue to roll. Where did all the money collected from the ECA go? The Federal and state governments should be able to tell us what they did with the billions of dollars they shared before the distressed states can ask for bail out.
Where do they want Buhari to get money from? The same ECA, which Jonathan and his Minister of Finance Dr Ngozi Okonjo-Iweala said was empty because everything had been shared? As the saying goes, you cannot have your cake and eat it. Having exhausted the ECA, the states should devise means of generating funds instead of running to the Federal Government cap in hand, begging for a life-line. I pity the states, but honestly, they cannot be absolved from the misspending of the ECA by the Jonathan administration. They cannot; they are as guilty as that government.
The states should not burden Buhari with their cash crisis early in the life of his administration. They should allow the administration to settle down and face the huge task ahead. The president has his own problems, which he inherited from Jonathan; so we should let him face squarely the task of revamping the economy and not tie him down with the mess the states created for themselves. ‘’With a virtually empty treasury’’, which Buhari said he inherited from his predecessor, where do the states expect him to get money to give them? Ask the Central Bank of Nigeria (CBN) to print money and cause hyper-inflation?
The lesson in all of this is that we should not lend ourselves to illegality. Was there any need for ECA? The answer is no because the Constitution in Section 80 (1) provides for a Consolidated Revenue Fund (CRF) as a special purpose vehicle for keeping excess funds. And the CRF could only be drawn from with the National Assembly’s approval. This provision may have been made to avoid an abuse of the fund. But the Federal and state governments found a way to beat the provision by creating ECA, which they could draw from at will. But see who is crying today! Unfortunately, our poor workers are being made to pay the price for their leaders’ profligacy.