Oil price fall States struggling to pay salaries

States of the Federation are now struggling to pay worker’s salaries and finance capital projects because of crash in price of crude oil that has been unstoppable in the last four months, Daily Trust investigations have revealed.Oil is the main revenue earner for Nigeria and the country has lost over a third of its income […]

States of the Federation are now struggling to pay worker’s salaries and finance capital projects because of crash in price of crude oil that has been unstoppable in the last four months, Daily Trust investigations have revealed.
Oil is the main revenue earner for Nigeria and the country has lost over a third of its income from oil since August when prices began to tumble almost on a daily basis.
Oil revenue constitutes nearly 90% of federally collected monies, which are shared among the three tiers of governments on a monthly basis.
Nigeria has seen its oil earnings “evaporate” as crude oil price has continued a down ward spiral from $100 a barrel in August to $64 last Thursday.
As the decline continues the government was forced to review the bench mark for the Medium Term Expenditure Framework from $78 to $73 and then again to $65 a barrel.
With the price of crude falling below the budget bench mark again, the government may well have to undertake another review once more.
Daily Trust exclusively reported last December that only Lagos can pay salaries with its internally generated revenue (IGR).
The remaining 35 states generate only a fraction of funds they require to settle their wage bills monthly.
The implication is that, without federal funds, these states cannot afford to pay salaries of bloated bureaucracies, not to talk of executing any projects.
Recent data released by the Debt Management Office (DMO) shows that states may not afford to service their domestic debt stocks of N1.445 trillion.
Some of the states have raised alarm over the continuous fall in oil revenue, saying they may end up unable to pay salaries.
‘31 states struggling’
Only last month, Niger State Governor Babangida Aliyu declared that 31 states have been finding it difficult to pay their wages and meet other expenses due to the shortfall in the federal allocation.
Earlier, some states like Zamfara had decided to augment their revenue by selling off N24 billion worth of its shares at the Niger Delta Power Holding Company (NDPHC).
The Zamfara State Commissioner for Information Ibrahim Birnin Magaji told Daily Trust that the decision became necessary so as to enable it finance development projects including the construction of over 300 km  of roads.
For the month of October, Zamfara got a total of N5.7 billion from the federation account while it pays monthly salaries of N1.1 billion.
Apart from the wage bill and capital projects, the state must also service its N24 billion domestic debts, of which its entire federal allocation and its paltry N3billion IGR per annum cannot pay.
Benue State also reportedly sold N7billion worth of shares in Dangote Cement in Gboko.
Nasarawa state’s capital projects such as the ongoing Mada water works, building of general hospitals in major towns, Karu market construction, rural road constructions, among others, may also suffer because of paucity of funds.
Nasarawa government and the13 councils collected N5 billion as federal allocations for the month of October.
But of this amount, the state’s wage bill consumes about N2.5 billion monthly, leaving the rest for capital project and servicing of its N28.8billion domestic debt. The state’s IGR is N4.1 billion annually.
Dwindling FAAC allocations
The FAAC allocations have been dwindling since July as a result of crashing oil prices. The federal, states and local governments shared N654.6bn for the month of July, N611.8 (August), N603.5 bn (September) and N539.3 bn (October).     
An analysis of the October FAAC allocation shows that some states can only pay salaries but with little else to finance projects or service local debts.
Daily Trust obtained information on states’ wage bills and drew comparisons with data on their internally generated revenues (IGR), published by the National Bureau of Statistics (NBS). It showed that only Lagos State can pay salaries by solely relying on its IGR.
None of the 19 Northern states has this much financial muscle. They all depend on federally-allocated subventions.
Other components of the federal allocation, shared between the three tiers of government on monthly basis include taxes collected by the Nigerian Customs Service and the Federal Inland Revenue Service.
The data published by the bureau for statistics showed that in 2011 and 2013, only eight and 13 states respectively had IGR in two-digit billions. Lagos is the only one with a three-digit figure, while the remaining states had single digits.
Most states have had to take short-term bank loans to settle wages whenever there were delays in the monthly disbursements by the Federation Accounts Allocation Committee (FAAC).
A revenue advocate told Daily Trust that the dwindling oil prices have exposed the federal government’s claim that the economy has been diversified and can do without oil revenue.
The Coordinator of the Revenue Watch Institute Mr Dauda Garuba said “the reality today is that with the dwindling oil prices, the citizens have seen all the lies our leaders have fed us with, and they would need to stand up to them and demand for a change that works.”
High wage bills, low IGRs
Lagos generated N382 billion in 2013, five times its annual wage bill of N76.5 billion.
States that generated more than N10 billion in 2013 are Akwa Ibom, Bayelsa, Edo, Enugu, Kwara, Ondo, Delta and Rivers.
Rivers generated the second highest IGR of N88 bn in 2013, but has an annual wage bill of N96 bn.
Delta made N50 bn revenue in 2013 but is weighed down by a wage bill of N28 bn yearly, Edo generated N18.8 bn though it pays N22 bn wages annually.
Kano, which has the highest IGR in the North, generated N24 bn in 2012, short of its wage bill of N36 bn yearly.
Kaduna, the second highest internal revenue earner in the North, garnered N11.5 bn in 2012 but that is less than half its N27.4 bn annual wage bill.
The situation with the remaining states is worse, as their annual wage bills are several times larger than their internally generated revenues.
For instance, Zamfara’s IGR is N3 bn in 2013, while its annual wage bill is N13.2 bn; Yobe generated N3 bn but has a yearly salary bill of N18 bn; while Adamawa’s N23 bn wage bill is five times higher than the N4.6 bn revenue generated in 2012.
Bayelsa State generated only N10 billion in 2011, but pays N48 billion in salaries yearly.
Nasarawa made N4.1 bn in 2012 but spends N24 bn yearly in salaries; Sokoto generated N3.8 bn in 2010 and spends N16.8 bn on annual wages; and Kogi got N3.7 bn in 2013 but its workforce soaks up N44 bn yearly.
Kwara (salaries, N11 bn; revenue, N13.8 bn), Benue (salaries, N8.3 bn; revenue, N34.8 bn), Katsina (salaries, N14.4 bn; revenue, N6.8 bn), Bauchi (salaries, 26 bn; revenue, N4.9 bn), Ondo (salaries, N48 b; revenue, N10.4 bn), Plateau (salaries, N20.7 bn; revenue, N7 bn), Kebbi (salaries N12 bn; revenue, N3.7 bn), Niger (salaries N31.2 bn; revenue, N4.1 bn), and Gombe (salaries N14.4bn; revenue, N3.7 bn).
Others are Abia (salaries, N30 bn; revenue, N16 bn), Akwa Ibom (salaries, N33.2 bn; revenue, N15.3 bn), Anambra (revenue, N8.7 bn; salaries, N16.3 bn), Borno (salaries, N20.7 bn; revenue, N2.4 bn), Delta (salaries, N50 bn; revenue, N85.2 bn) and Ebonyi (salaries, N16.8 bn; revenue, N14 bn).
There are also Ekiti (salaries N24 bn, revenue N3.7 bn), Imo (salaries N6.8 bn, revenue N22.8 bn), Jigawa (salaries N33.5 bn, revenues N1.4 bn), Osun (salaries N22.8 bn, revenue N5 bn), Oyo (salaries N49 bn, revenue N14 bn), Taraba (salaries N3.3 bn, revenue N21.6 bn).
‘Our leaders have been exposed’
Garuba said the falling prices of oil have exposed our leaders who have been claiming that the country can survive without oil revenue.
“We seriously need to diversify the economy away from oil, especially as it is now obvious that oil can no longer sustain us as a country. Our leaders should lead the way to increase Internally Generated Revenue (IGR).”