Bailout again! ……. NATION

•Stringent as the conditions may be, interested states must comply to benefit

Two bailouts after and some 27 states still in arrears of salaries and pensions running into several months, and with indications that many more will suffer the same fate barring a rescue plan – the Federal Government last week rolled out another financial package – the third – for the states. This is a N90 billion bond with nine percent interest tied to the states’ being able to meet the 22 conditions contained in the fiscal sustainability plans of the Federal Government.

Among others, such a state must implement a centralised Treasury Single Account (TSA); ensure that it starts publishing its audited annual financial statements by December each year; set realistic and achievable targets to improve independently generated revenue and favourable ratio of capital to recurrent expenditure; review all revenue-related laws and update of obsolete rates/tariffs;  ensure biometric capture of all their civil servants to eliminate payroll fraud; adopt the International Public Sector Accounting Standards (IPSAS) compliant software to be put to use in their respective states and local governments; establish a Capital Development Fund to ring-fence capital receipts and adopt accounting policies to ensure that capital receipts are strictly applied to capital projects and prohibition of commercial bank loans.

Other conditions are – that total liabilities do not exceed 250% of total revenue for the preceding year while monthly debt service deduction is not to exceed 40% of the average Federation Account Allocation Committee (FAAC) allocation for the preceding 12 months; they are also expected to publish, quarterly, the budget implementation performance report online.

While the nation may have gone past the phase of doing nothing – which we noted in an earlier editorial – is not only unrealistic but carries the grave risk of social upheaval, we certainly understand where these measures are coming from, and why they have become inevitable. From the two previous bailouts, we have heard such grave charges about some states treating the lifeline as a freebie to be used as they pleased; others reportedly couldn’t care if a sizeable chunk went into the sink hole to pay ghost workers and pensioners, just as many have not shown inclination to change their profligate ways.

But even if these were not the case, we would still have found nothing extraordinary in the Federal Government asking the states to clean up their books, overhaul the machinery for revenue collection and generally improve their accounting processes to qualify for the bailout package. If anything, the measures, particularly the strict conditions spelt out in them, substantially align with our expectations of making the cost of fiscal irresponsibility very steep.

The point is, the Federal Government cannot afford an interminable cycle of bailouts in the event that oil prices have shown very modest signs of recovery. The states in the circumstance must see themselves as part of the solution to the current financial crisis. Theirs is to ensure that every kobo of government is not only made to count but made to deliver maximum value; to ensure that every revenue due to the government is collected and accounted for; to eliminate corruption and waste to the barest minimum and to re-align the current grotesque relationship between recurrent and capital expenditures.

While measures underlying the latest bailout may not have necessarily addressed the whole gamut of issues such as the poor choice of priorities, fiscal recklessness, weak governance structures and corruption, which are at the heart of the current fiscal crisis facing the states, they would seem inescapable and sure in the quest for improved governance.