PBA Editorial: Nigerian States Must Stop Borrowing To Pay Salaries

At a time when there is a N540 billion increase in the amount shared between the Federal Government, states, and Local Government Areas, it is confounding for state governors to go a-borrowing to the tune of N46.17 billion just to pay salaries between January and June 2023. The sub-national governments secured the facilities from Access Bank, Fidelity Bank and Zenith Bank Group as revealed in the half-year 2023 financial statements of the financial institutions.

This is happening at a time when 28 states of the federation failed to attract any foreign investment. It is hard to see how there can be capital importation to such states considering where they spend the lifeline which borrowing is to them. Borrowing for a recurrent expenditure such as the payment of salaries will only further impoverish the states rather than turn around their fortunes. It shows that if some of these federating units were to be companies, they would be bankrupt already what with the World Bank projecting that states’ debts would rise above 200 per cent of the revenue generated in 2022 and 2023.

As things stand, the states are already heavily indebted with data from the Debt Management Office (DMO) showing that the 36 states and the Federal Capital Territory have N5.82 trillion domestic debt and $4.35 billion external debt. It wouldn’t have been much of a worry if these borrowing were deployed to productive sectors of the economy but for them to be used in paying salaries makes no sense. It is common for people to assume that the salaries in question are those of poor civil servants in the states. It goes beyond the bureaucracy into catering for political officeholders and their appointees.

Indeed, if it was just to pay the salaries of workers in their civil service, these states wouldn’t have cause to borrow because their cumulative pay wouldn’t amount to much. Lagos and Rivers state governments pay the highest wages in the country. Nevertheless, level 8 salary in the Lagos Civil Service is between N50,000 to N55,000 after tax deductions while that of Rivers State is between N47,000 to 50,000. Across the country, the average pay for top civil servants is N100,000. Yet most of these states are in default and owe a backlog of salaries.

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It then means that these borrowings are essentially cornered by fat cats in the state government and their cronies. Barring any review, remuneration approved by the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) entitles each special adviser to N380,241.76 monthly and N4.6 million annually. This means that in Kano State where Governor Abba Kabir Yusuf reportedly appointed 197 Special Advisers, Senior Special Assistants and Special Reporters, the state would be paying N74.9 million monthly.

Then in Yobe State, where the governor, Mai Mala Buni, appointed 642 aides, nothing less than N244.11 million would be spent on their salaries monthly. In Niger State, Governor Umar Bago appointed 90 women as Senior Special Assistants to fulfill his campaign promise of women’s inclusion in his administration. This amounts to N34.22 million monthly in salary payments. Now, the foregoing does not take into consideration the appointees’ other allowances like accommodations, furniture estacodes, medical, severance gratuity, leave and motor vehicle loans.

It also does not take into consideration the staggering amount it costs states to maintain commissioners each of whom based on RMAFC template is expected to earn N406,739.25 every month. On this basis, a state like Ebonyi with 35 commissioners will be spending N14.24 million on them per month. These spendings are actually what push states into debts that further impoverish the people and deny them of highly needed government intervention. It is disheartening that in view of current realities, rather than these states to implement pay cuts for political appointees or cutting down on their numbers, the opposite is the case.

This newspaper recently reported that Governor Godwin Obaseki appointed 186 aides from one senatorial zone alone in Edo State with a promise to appoint more! Talk of behavior similar to those of drunken sailors aboard a sinking ship. These states of the federation must be told in no uncertain terms that they are meant to be centers of production, not consumption centers. They should be challenged by the strides of regional governments in the First Republic. Before blaming the extant Constitution for castrating them, the states should know that there are aspects of the concurrent and residual lists they can leverage to turn around the fortunes of their states.

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Prime Business Africa therefore calls on the states’ chief executives to task themselves and their team on creative and ingenious ways to raise funds rather than the easy recourse to borrowing. At least, the retinue of appointed aides and their jumbo pay should be of some value to the states. The Governors should set Internally Generated Revenue (IGR) targets for their commissioners and aides while monitoring to ensure that they deliver on those targets. Additionally, civil servants in the states for whose sake governors drag their states into huge debt, should compensate by being diligent, and punctilious and stop the truancy. They must do away with the mindset that the “government job is nobody’s job”. They must discharge their responsibilities like their counterparts in the private sector.

In the final analysis, it is our considered opinion that rather than go a-borrowing, governors must look inwards and conserve funds by cutting the over-bloated cost of governance. The fact that these borrowings happened when there was an increase in federally allocated revenue to the states shows that it is a matter of appetite that must be reined in. If at all these states must borrow funds, let such instruments be tied to infrastructural development and the funding of projects with direct bearing on the lives of people, not borrowing to service debts or for recurrent spending.

Prime Business Africa cautions commercial banks in the country that are quick to lend funds to profligate state governments to be more circumspect and adhere to provisions of the Fiscal Responsibility Act (FRC) 2007. They must be guided by Sections 41, 44 and 45 of the FRC Act when receiving, processing, approving and disbursing loans to the subnational government. The debt profile of the states cannot continue to mount as Nigeria cannot afford to continue kicking the can down the road.

Prime Business Africa Editorial

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