1984 could be here again
On Tuesday last week, re-elected as well as newly elected APC state governors went to see the president-elect at Defence House in Abuja. After the meeting, the delegation leader Governor Rochas Okorocha said they complained to Buhari that many states are unable to pay their workers’ salaries. While a few are up to date, many […]
On Tuesday last week, re-elected as well as newly elected APC state governors went to see the president-elect at Defence House in Abuja. After the meeting, the delegation leader Governor Rochas Okorocha said they complained to Buhari that many states are unable to pay their workers’ salaries. While a few are up to date, many others are in arrears of between one to six months. The governors seemed to be suggesting that when Buhari takes over the Federal Government should arrange some kind of bail out for them.
I was wondering how Buhari could do that even if he wants to. To begin with the Federal, state and local governments essentially eat from the same bowl called Federation Account. If there is a serious shortfall in that bowl, as there is now, all of them will be affected so no one has any surplus to give to anyone else. Of course the Federal Government has some other revenue sources which are however a fraction of its takings from the Federation Account. The states too have what they call Internally Generated Revenue [IGR]. This is pretty hefty in a few states such as Lagos, Rivers and Kano but it is next to miniscule in most other states so it provides no easy fallback. The local governments too are supposed to have some IGR; I remember what a Local Government Treasurer once told me that in one month his council generated less than N10,000 because it’s only IGR source was gate takings at the town’s weekly market.
That is not the only problem. Even those states that have hefty IGRs are bound to see a decline occasioned by the collapse of oil prices. Many of the contractors that pay fees to state governments as well as most of the manufacturers and other service providers are essentially recycling oil money. In any case, the governors’ hope for a Federal bailout was sealed when Finance Minister Ngozi Okonjo-Iweala revealed last week that the Federal Government too has been borrowing money since the beginning of the year in order to pay salaries. The man who is himself in debt, which money does he have to give to someone else?
If things continue in this way, the states are likely to land around where their counterparts were towards the end of the Second Republic. I remember an interview I watched on NTA in mid 1983 when NTA reporter Chris Anyanwu interviewed a Northern state governor. She asked him to mention the most important achievements of his administration and he said, “I consider my government to be a success in every area. For example, I am going to pay workers’ salaries tomorrow.” It may sound laughable from afar that anyone would count salary payment as a major achievement, but in those days when so many states were not paying salaries it was indeed something to boast about. The trouble is we look set to return to that age.
Now, we could argue until the cows come home as to what caused the current crunch and the one of the Second Republic. The rulers will say today that since oil prices had dropped by more than half since last year, there is bound to be a crunch. The question is, all these years when oil was selling far above $100 a barrel, where is all the excess money? This excuse is not much better than the one offered by our Second Republic rulers. Dr Yusuf Bala Usman said in 1982 when the government imposed austerity that it was not because the government got less money than it did the previous year; it was because even though it got more, what it got was less than what it was hoping to get. He said, “It is like a man who got N50 last year saying you should sympathise with him because he was hoping to get N100 this year but he got only N70.”
Today we all see the native rural African wisdom of Chief Olusegun Obasanjo when he said at the time oil prices were sky high that we should not spend everything but must save for a rainy day. He created the Excess Crude Account and shoved into it any money above an artificial “benchmark” that he created. State and local governments fought this measure with all their power, saying [correctly] that the Constitution requires all the money to go straight into the Federation Account for sharing. That was very foolish of the Constitution and Obasanjo knew where native African wisdom should override the Constitution. Of course the governors kept putting pressure to get the money and the presidents also began to use the account as a political bargaining chip. If the president wanted the governors to do anything, all he had to do was to approve the sharing of a part of the excess crude account. So here with are, depleted Federation Account, no excess crude account.
So what are we to do? Anyone who finds himself in a position where he has trouble paying his bills has two options: to increase his revenue or to cut his expenditure or both. Since cutting one’s expenditure is easier than increasing one’s revenue, all governments in Nigeria could be looking in the direction of expenditure cuts from next month. The payroll is the inevitable first port of call.
In 1984 General Buhari’s military regime drove its military governors to shore up revenue and also cut their spending. They mostly did so in two ways; they retrenched workers and they imposed a string of new taxes. The retrenchment exercise of 1984 was qualitatively different from the “great purge” of the Murtala era. In 1975-76 the Murtala regime sacked tens of thousands of public servants not because it could not afford to pay them but because they were described as “deadwoods.” In most cases they were those who had disciplinary issues. In 1984 however, I remember seeing the NTA’s retrenchment template. For example it mandated all NTA stations to have only one Senior/Principal Current Affairs Producer. If a station had more than one, it must shed the rest whether or not they committed any offence. This is the formula that in later years some clever consultants sold to the government as “downsizing” which was later renamed even more cleverly as “right sizing.”
Side by side with retrenchment the state governments also revived long forgotten taxes such as poll tax and jangali. General Gowon had abolished jangali, which was paid by pastoralists per cattle head in his 1974 budget speech. During the Second Republic most state governors abolished poll tax as well. Poll tax was very difficult and inefficient to collect; a figure was imposed on traditional rulers who in turn divided it by all adults in their area whether or not you are engaged in any trade. General Babangida later replaced poll tax with the much more sensible and more efficient Value Added Tax [VAT], which taxes goods and services. Perhaps Buhari could start by doubling VAT.
The struggle by state governments to balance their books in 1984 led to sinister innovations such as the Imo Formula, which was invented by the state’s military governor Colonel Ike Nwachukwu and his Finance Commissioner Dr Kalu Idika Kalu. At the end of the month the government will tabulate the money it has, calculate it as a percentage of its wage bill, pay every worker that percentage and he or she forfeits the rest. I read a story recently that Kogi State Government is planning a 40% pay cut for its workers. Looks like 1984 is here again.