Senate Warns, Say States May Collapse

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…Ask FG To Increase Allocation To States, LGs

ABUJA, October 27, (THEWILL) – The Senate Thursday warned over an imminent collapse of the 36 states of the federation due to the overweight of overhead cost.

It therefore advised the Federal Government to expeditiously review the Revenue Sharing Formula in favour of States and Local Governments in the spirit of true federalism.

To give effect to the resolution, the Senate directed its Committees on National Planning; States and Local Government and Finance to study the situation and submit remedial measures to avoid total collapse of the economies of affected states.

The resolutions were sequel to a motion sponsored by Senator Olubunmi Adetumbi, (CAN, Ekiti) on the ‘Looming Danger of Bankruptcy in States: the Need for Fiscal Evaluation’. Leading the debate, he 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.

Citing a statistical data, indicating the overall revenue profile of each state which was sourced from the Nigeria Governors’ Forum (NGF), Adetumbi 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 employer of labour with attendant fiscal imbalance. He further noted that most state governments now rush to the capital market to raise long term bonds to finance development projects, which if misused, will spell doom for their future and that the financial quagmire of states further highlights the urgency of a review of the revenue sharing structure between the Federal Government, States and the Local Government Areas.

According to him; “the Bulk of revenue of these states is currently financing pay roll of the civil service which constitutes less than 4 percent of the total population in all states. Under this development, 6 states are approaching distress. Kano will spend 127 %, Sokoto 62 %,Niger 56 %, Zamfara 54%, Katsina 50%, and Osun 50% of their gross annual revenue on civil service personnel costs. 14 states will deploy 30-49% of their total revenue on personnel; 6 states will deploy 20-29%, 5 states will deploy 15-19%, while only Abia, Akwa Ibom, Anambra and Jigawa will spend less than 15% of total state revenue on personnel.

“If this trend continues, many of the states would become financially insolvent and increasingly handicapped to finance real sectors and drive the economic growth, jobs and improved livelihoods.

“Most state governments now rush to the capital market to raise long term bonds to finance development projects. Without an appropriate frame work, misuse of such funds could spell doom for the future of the states.

“Some of the states governments that have taken this route funding between 2002-2011 are Lagos (series1-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.

“The continued centralization of labour and wages legislation without reference to resource endowment of states is antithetical to the basis of true federalism in Nigeria. Such unitarist policies are unhealthy to the development of a competitive labour market in Nigeria,” the senator stated.

Some senators however, queried the figures as presented in the lead debate, arguing that they are not concurrent with the realities on ground. They also highlighted corruption and inefficiency as major reasons for the current condition of the states.

Other Senators who spoke chiefly in support of the motion joined in the call for a review of sharing formula from the Federation Account to further enrich the states and local governments as well as, making the federal government transfer some of its responsibilities to the lower tiers of government based on their proximity to the people.

The senators also called for enthronement of fiscal federalism with a view to making the states more responsive to the welfare of their citizens, gain some measure of independent and improve on their internally generated revenue.

Speaking in favour of the motion, Senate Leader, Senator Victor Ndoma-Egba (PDP, Cross River) frowned at a situation where state governors go to Abuja to share money adding that there is more to the true practice of federalism than sharing allocation.

Senator Ndoma-Egba declared that it is high time consideration was given for possible merging of states, just as the calls for creation of new ones are ongoing.

On his part Senator Ganiyu Solomon (ACN, Lagos), while supporting the motion, called for a review of the existing sharing formula every five years as enshrined in the constitution.

Senator Solomon who is the minority whip advocated for devolution powers as most of it are concentrated at the centre.

Cautiously supporting the motion, Sen. Ifeanyi Okowa, queried the figures contained in the data saying the figures are not concurrent to reflect the current realities. He also decried a situation where states employ beyond their revenue might.

Other senators who also contributed to the debate included, Pius Ewherido, James Manager, Bello Tukur, Esther Nenadi-Usman, Datti Baba-Ahmed, Nkechi Nwaogu and Abdulkadiri Jajere.