Fiscal Crisis Imminent As States, LGs May Not Pay Sept Salaries


Ngozi-Okonjo-IwealaCivil servants in several of the states and local governments in the country may not be paid their salaries at the end of this month, as a fiscal crisis looms following the revenue shortfall in the Federation Account for distribution among the tiers of government.For the second time in a row, Commissioners for Finance and Accountants General from the 36 states of the federation who gathered in Abuja yesterday for the Federation Account Allocation Committee (FAAC) meeting left without their cheques, as there were insufficient funds to distribute among the three tiers of government.

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Apart from sharing the monthly federally-collected revenue for August, yesterday’s meeting was also aimed at clearing the backlog of arrears totalling about N140 billion.
The meeting was summoned by the Accountant General of the Federation, Mr. Jonah Otunla, at the instance of the Minister of State for Finance, Dr. Yerima Ngama, who chairs the meeting for the distribution of funds to the constituent parts of the federation.
The backlog of undisbursed arrears, which had in recent months ended with the commissioners walking out on FAAC meetings, it was learnt, was caused by a shortfall in projected revenue for the month of August.

The initial meeting, which was held a fortnight ago, was adjudged inconclusive partly because of the alleged failure of the Nigerian National Petroleum Corporation (NNPC) to remit to the Federation Account the revenue it had generated during the period.

The state Commissioners for Finance and their respective Accountants General were said to have been irked by the development, as they had expected that the backlog would have been cleared to enable the states and local governments meet their obligations.

Once more, their hopes were dashed yesterday at the FAAC meeting to share the distributable revenue.

To their consternation, the commissioners were informed shortly on their arrival at the Federal Ministry of Finance that the situation had not improved.

In fact, Ngama was said to have travelled to Egypt when the commissioners were summoned.

A frustrated Chairman, Forum of Commissioners for Finance of Nigeria (FCFN), Mr. Timothy Odah, informed journalists that they had earlier told the ministry not to summon a FAAC meeting until all the contentious issues had been resolved.

“We told them not to invite us until all issues are settled. Today (yesterday) by 8 am, the AGF called me to say that the minister asked him to preside.

“He said I should come with the commissioners. I made calls to some of them, we are just coming back from him (Otunla); in fact, he was more confused than anybody.
“He (Otunla) said he wanted to let us know that there was no change. We asked him why he had invited us and he said the minister asked him to do so,” he said.

“He was reminded that he has always been asked by the minister to chair when there is any problem. The minister said they could not dip hands into the reserves (Excess Crude Account), which made us believe that NNPC had brought in something.

“Today (yesterday), we have come for the second time within the month of September and the FAAC session has been stalemated. We were invited by Minister of State for Finance who is the chairman of FAAC but we have not seen him.

“The AGF addressed a few of our executives and told us nothing was available. We appreciate the efforts of the AGF but the minister has chosen the path of treating our case with levity. We have been slighted to the extent that the interests of our states and local governments are suffering.

“He (Ngama) has treated us with contempt and treated our states and local governments with contempt. One condition we gave was that we should not be re-invited until the situation improves,” he added.

Also, the forum last night issued a statement to condemn and express their disenchantment with the way and manner in which Ngama has been running FAAC with resolute recklessness, which it said “demonstrated absolute insensitivity to the financial problems of both the subnational and the local governments.”

It added: “That the minister has deliberately failed and or refused to sincerely brief President Goodluck Jonathan on both the accurate and informed realities of the states, local governments and the demands of the state Commissioners for Finance which include increased cost of funding security, pileup of projects and salary bills as well as other incidental debts.”

Continuing, the commissioners said: “The minister has displayed disdain and contempt for the FAAC members, with great bias against the state representatives, and needs to be addressed against this stance for a review of his attitude and negligent disposition on the administration of FAAC.

“In the circumstance thereof, we hereby state as follows: That we, as our state governors’ representatives, have no contrary instruction to pass the August 2013 FAAC Account until the outstanding N336.0 billion accrued and arrears of augumentation and FAAC budget benchmark differentials are cleared.

“That we shall not attend any subsequent FAAC meeting until and unless Their Excellencies, our state governors, meet and resolve either for or against this stand.

“That we reject and condemn the abortive rescheduled FAAC meeting which the minister flew as a kite and vamoosed from the scene without any attempt to implement, improve or ameliorate on our previous and subsisting demands as a condition for subsequent FAAC meetings.”

One of the governors who was appraised with the situation in Abuja confided in THISDAY yesterday that the NNPC was responsible for the shortfall in the Federation Account because it had not been remitting proceeds from crude oil sales on time.

He said, last week, a team, headed by Delta State Governor, Dr. Emmanuel Uduaghan, who chairs the Security Strategy Committee on Pipeline Vandalism, had met with NNPC officials to find out reasons for the delay in remitting crude oil sales proceeds to the Federation Account, which has caused the shortfall in funds distributable to the three tiers of government.

The governor further disclosed that it was established at the meeting that crude oil theft, which is often cited as the reason for the shortfall in revenue from crude oil sales, was not enough to impact negatively on Nigeria’s finances, given that oil prices have been selling at over $100 per barrel throughout the year and oil theft in recent months had declined.
Revenue from crude oil sales in the 2013 budget was anchored on a projected production figure of 2.526 million barrels per day (mbpd) while the oil benchmark price was set at $79.

The Uduaghan committee, the governor added, had tried to find out why the corporation was not remitting proceeds from crude oil sales as and when due, but NNPC officials told the members some convoluted story about having to deduct 445,000bpd from the budgeted production target for refining and that it is the balance that is sold and the proceeds remitted to the Federation Account.

NNPC could not however explain to the committee why it was not remitting the net proceeds in a timely manner, the governor said.

He added that the situation was so critical that some states have a backlog of two months unpaid salaries and by the time payment for September is due, most of the states and local governments would owe their workers three months’ salaries.

He explained that even if the federal government is able to pay its workers for the month of September, it would experience funding challenges meeting its obligations for capital projects.

The governor warned that an economic crisis, which the dire fiscal situation portends, is worse than a political crisis because it will affect the ability of government to pay critical workers and this could have grievous implications for Nigeria.

He said with the revenue shortfall for August, the states and local governments are currently owed over N400 billion.

“We were owed over N300 billion as at last month, but following today’s meeting, the backlog will exceed N400 billion,” he said.

However, in a bid to douse the tension arising from the stalemated FAAC meeting yesterday, the federal government said it had provided N548.393 billion as the statutory revenue for sharing among the three tiers of government.

The figure represented an improvement over the N497.984 billion made available at the previous FAAC meeting.

Reacting to the stalemate involving the state Commissioners for Finance over an outstanding N75 billion expected from NNPC, the Office of the Accountant-General of the Federation (OAGF) said efforts were being made to resolve the outstanding issues.

The OAGF, in a statement by its spokesman, Mr. Charles Nwodo, said FAAC had received assurances from NNPC that the issue was being dealt with dispatch and that a positive outcome was being expected soon.

The statement said: “Government is exploring all avenues to end the shortfall in revenue caused by oil theft and vandalism as soon as possible.

“It will be recalled that the committee for the mitigation of oil theft headed by the Delta State Governor, Emmanuel Uduaghan, has been working hard on securing key pipelines in a sustainable way as a strategy for fixing the problem of oil theft and vandalism.”

Babatunde Akinsola
Babatunde Akinsola
Babatunde Akinsola is aNaija247news' Southwest editor. He's based in Lagos and writes on the Yoruba Nation political issues, news and investigative reports

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