Revenue body says most states broke
GOVERNORS of the states in the South-South geo-political zone yesterday described the criticisms of the 13 per cent derivation funds due to the Niger Delta states by their northern colleagues as misplaced.
They said it was wrong for the northern governors to go the extent of blaming the crisis in the North on the derivation funds.
According to the governors, what the South-South region needs now is an upward review of the derivation principle and the introduction of fiscal federalism.
In a four-page statement issued at the end of the First Ordinary Session of the Bayelsa, Rivers, Akwa Ibom, Cross River, Edo, and Delta (BRACED) Commission’s Council 2012 yesterday in Calabar, the governors regretted the attempt to link the increasing insecurity in parts of the country to the 13 per cent derivation fund and considered it unfortunate and misplaced.
The Chairman of BRACED and Governor Liyel Imoke of Cross River, the Director-General Ambassador Joe Keshi, and the other five governors of the region, who signed the statement, said: “The issue to be addressed is the environmental degradation and pollution in the Niger Delta occasioned by oil exploitation, which has adversely affected fishing and farming activities.
“This makes it imperative for an upward review of derivation principle and introduction of fiscal federalism.”
The governors questioned the rationale of not exploiting other mineral deposits in different parts of the country while depleting the oil and gas reserves of the South-South.
They argued that the introduction of fiscal federalism and resource control would encourage the states of the federation to control their resources and develop accordingly.
They reaffirmed their support for the position of Nigerian Governors’ Forum (NGF) that higher revenue allocations for the states would facilitate their rapid development. .
On the security challenges facing the country, the governors appealed to the Federal Government to explore more avenues to end the avoidable destruction of lives and property.
The worrisome financial position of the 36 states of the federation came up again in Abuja yesterday as the Chairman of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), Elias Mbam, said their external debt now stands at $2.165 billion. .
Mbam told the Senate Joint Committee on National Planning, Finance, Appropriation and States and Local Governments that most states are distressed with some of them collaterising their monthly financial allocations from the Federation Account.
Responding to questions from the committee chaired by Barnabas Gemade, Mbam said: “Records available to the commission from the Debt Management Office (DMO) show that as at December 2011, the total external debt stock of all the states (multilateral) stood at $2.165 billion while that of the Federal Government was $3.501 billion and a domestic stock of N5.622 trillion for the Federal Government alone. The commission considers this debt profile as high.” .
The figures of the debt presented to the committee showed Lagos owes $491.847 million, Kaduna ($182.261 million), Cross River ($107.532 million), Ogun ($94.573 million), Oyo ($78.085 million), and Katsina ($74.138 million).
Others are Borno ($12.957 million), Delta ($15.404 million), Taraba ($20.396 million) and Akwa Ibom ($62.648 million).
He expressed the concern over the huge domestic debt profile of the states, noting that, “most of them are highly indebted to local banks in short-term borrowing and are substantially exposed to the capital market.
“Most of these loans are tied to the Irrevocable Standing Payment Orders (ISPOs) issued to the Accountant-General of the Federation to deduct directly from their monthly statutory allocations.
“The implication is that these debt overhangs weigh heavily on the monthly allocations due to the states thereby preventing them from meeting their minimum basic obligations to the citizens.
“Deficit budgeting has become a serious challenge for most states. Even though deficit budgeting is tolerable within an acceptable limit, its endless application has endangered and forced the state governments to resort to excessive borrowing in order to meet their basic expenditure demands even where they have no capacity to pay back,” he stated.
According to him, the desperation of the states over the sharing of the Federation Account was an indication of the poor state of their finances. His words: “The regular sharing of the Excess Crude Account is an indication of the desperate financial position of the state governments to get funds in order to meet costs of governance. For instance, the sum of $1.5 billion was shared in three equal instalments from the Excess Crude Account in 2011 alone, of which the states received $400.800 million.”
Mbam advised that states should be compelled to keep to their limit of 20 per cent of their monthly allocations, adding that the borrowing should be for economic projects.
He also canvassed strict compliance with the relevant provisions of the borrowing by the Public Bodies Act.
The RMAFC chief said the process that would bring out a new revenue sharing formula had begun.
“We have commenced review of the revenue allocation formula. We believe we should define the responsibilities of all the tiers of government.”
Gemade, who expressed the concern of the committee over the revelation, said “the situation where the bulk of the revenue of most of the states in the country is financing salaries of civil servants who constitute less than 40 per cent of the population is not healthy.”
Deputy Senate President Ike Ekweremadu, who represented Senate President David Mark, said the exercise was timely because of the demands for creation of more states.
The Senate has also passed a resolution urging President Goodluck Jonathan to direct the release of all withheld federal statutory funds for the local councils where state of emergency was declared following attacks by Boko Haram sect. This followed a motion moved on the matter by Ahmed Lawan representing Yobe North.