By rolling out several bailouts to save the states from financial ruins, the administration of Muhammadu Buhari has saved the state governments from insolvency more times than any other administration. Assistant Editor NDUKA CHIEJINA reports
For the eight years of Muhammadu Buhari administration, the government has provided several bailout funds to state governments to help them overcome and address financial difficulties. For example, in 2015, the Federal Government provided a bailout package of N338 billion to state governments to help them pay salaries and offset other debts. In 2016, another tranche of N90 billion was given to the states as budget support.
In addition to the bailout funds, the government also implemented other measures to help the states, such as the Paris Club refund, which was a refund of over-deductions from states’ accounts for the repayment of the Paris Club debt. The refunds were made in tranches, with the first tranche of N516.38 billion released in December 2016. It’s worth noting that these bailout funds and refunds were provided to state governments as a one-time solution to their financial challenges, and the Buhari government also encouraged the states to implement measures to improve their revenue generation abilities and improve on fiscal responsibility.
COVID-19 bailout
The Buhari government provided financial support to the states during the COVID-19 pandemic to help them respond to the economic impact of the scourge. Some of the support includes:
Presidential taskforce: The Buhari government established a Presidential Task Force on COVID-19 to coordinate the national response to the pandemic. The task force worked with the states to provide guidance and support for their COVID-19 response efforts.
Economic sustainability plan: The administration launched an Economic Sustainability Plan (ESP) in 2020 to mitigate the impact of the pandemic on the Nigerian economy. The ESP included a number of measures to support state governments, such as the creation of a N500 billion COVID-19 Crisis Intervention Fund to support the states in their response efforts.
Budget support: The government provided budget support to the states as part of its COVID-19 response. In May 2020, the Federal Government approved a N614 billion loan facility for the states to help them address the economic challenges posed by the pandemic.
Conditional grants: The Federal Government also provided conditional grants to the states to support their COVID-19 response efforts. For example, in June 2020, the government announced a N2.3 trillion stimulus package, which included a N100 billion grant to states to support their healthcare and education systems.
Tax relief: The government also provided tax relief to businesses and individuals to help them cope with the economic impact of the pandemic. The tax relief measures included a reduction of the import duty on medical supplies and equipment, as well as a 50 percent reduction in the minimum tax rate for small and medium-sized enterprises.
The Buhari government provided significant financial support to state governments in Nigeria during the COVID-19 pandemic to help them address the economic challenges posed by the pandemic.
Recession bailouts: The administration faced two recessions, the first in 2016 and the second in 2020, both caused by external shocks to the Nigerian economy. During these recessions, the government implemented several measures to help the states survive the economic downturns. These include bailout funds to state governments to help them address financial difficulties during the 2016 recession. The government also provided budget support and conditional grants during the 2020 recession.
There was the infrastructure spending assistance. The government increased spending on infrastructure projects to stimulate economic activity and create jobs. For example, the government launched the Presidential Infrastructure Development Fund (PIDF) in 2018 to fund critical infrastructure projects such as roads, railways, and power plants. There was a tax relief package the Buhari government provided to businesses and individuals during the recession to encourage spending and boost economic activity. The tax relief measures included a reduction in the import duty on food items and critical medical supplies.
The government launched several agricultural support initiatives like the Anchor Borrowers’ Programme to provide financing to smallholder farmers, and the Presidential Fertilizer Initiative to increase access to affordable fertilizer. There was also the economic diversification programme in which the government implemented policies aimed at diversifying the Nigerian economy away from oil, which is vulnerable to external shocks. The government launched the Economic Recovery and Growth Plan (ERGP) in 2017, with the aim of diversifying the economy and promote private sector-led growth.
The Buhari government implemented a range of measures to help the states survive the recessions. These measures were designed to stimulate economic activity, create jobs, and support the states during the economic downturns. During the Buhari administration, some state governments received bailout facilities from the federal government to help them offset their salary arrears and meet other financial obligations. The bailout funds were expected to be repaid by the states over a period of time.
The repayment of the bailout facilities by the states has been mixed. Some states made significant progress in repaying the funds, while others struggled to meet their repayment obligations. Some states have fully repaid their bailout facilities, while others have made partial payments. However, there were still some states that are yet to make any significant repayment. It is worth noting that the federal government has been putting pressure on the states to repay the bailout facilities, and has also been withholding some of their monthly allocations to ensure compliance. The success of the repayment efforts by the state governments has been mixed, and there is still work to be done to ensure that all the funds are repaid as required.
States’ Fiscal Transparency Accountability and Sustainability
There was the popular States’ Fiscal Transparency Accountability and Sustainability (SFTAS) programme of the World Bank and Federal Government of Nigeria under which a total of N351,650,867,450 was disbursed to state governments since the beginning of the programme in 2018. The Sustainability (SFTAS) programme, which was designed to strengthen the fiscal transparency, accountability and sustainability in Nigerian states as a way of improving their revenue base, increasing fiscal efficiency in public expenditure and reducing debt overhang.
Under the programme, there were two disbursements of $750 million grant to the state governments that successfully met the Disbursement Linked Indicators (DLIs), bringing the total SFTAS disbursements to $1.5 billion. From the first $750 million grant, SFTAS disbursed N262 billion to the state governments to encourage transparency and accountability in the state governments budgeting processes and financial management. Before leaving the position, the National Programme Coordinator of SFTAS, Mr. Stephen Okon, said “no clear position has been taken on its extension but because of the impact on the states and public finance management, it’s not impossible that such considerations may be explored moving forward.” The programme, he said, “achieved so much in building transparency, accountability and sustainability amongst the states particularly in terms of accountability.”
The SFTAS programme, he added, has now made “all the states publish their budget and their end of year account on a timely basis and we also have had all the states improve their internally generated revenue.” He went on to say that “in terms of building a basis for comparison among the states, we have all the states currently on the same page in terms of matters that relate to the TSA, matters that relate to procurement law, matters that relate to audit law, almost all the states in the federation now have all these in place and it has really promoted accountability and transparency amongst the states of the federation.”
Mr. Okon noted further that “as part of its strategies to ensure the sustainability of fiscal reforms, the SFTAS Programme Coordination Unit, Federal Ministry of Finance, Budget and National Planning is engaging stakeholders on the demand side like the CSOs who can ensure that fiscal transparency and accountability are sustained in state PFM activities.” To access the SFTAS facility, the federal government reeled out conditions state governments must meet before they can benefit from the two US$750 million International Development Association (IDA) credit facilities extended to the Nigerian Government by the World Bank.
The 36 states of the federation bought into the programme with some states eagerly drawing from the facility. To qualify for the facility in 2022, state governments were expected to first achieve Disbursement Linked Indicators (DLIs) in 2021. For the states to meet the DLI II in 2021, the federal government demanded that “citizens’ inputs from formal public consultations are published online, along with the proposed FY22 budget and citizens’ budget based on approved FY21 state budget published online by end April 2021 with functional online feedback mechanisms.”
The state governments were also required to create the Citizens Accountability Report (CAR) based on audited financial statements/reports published online for FY20 no later than end September 2021”.
To assist the state governments meet these requirements, the federal government through the Open Government Partnership (OGP) and the World Bank organised a workshop for state governments to learn how to develop their individual state’s Citizens’ Accountability Report (CAR).” The state governments were allowed to use “the template developed by the OGP Secretariat in collaboration with FCDO/PERL, and the various processes involved in achieving the Disbursement Linked Results (DLRs) as well as collect information from the participants on how to make the template more user-friendly.”
Mr. Okon the National Programme Coordinator of SFTAS advised the state governments to learn how to develop their states’ Citizens’ Accountability Report (CAR), and be able to publish the report on the their websites. “The CAR is designed as a SFTAS DLI with incentives to enable the government to report the utilization of public funds in the last completed fiscal year in a manner that could be digested by the citizens and used to engage the government for improved results. The idea behind the CAR is to present the audited financial statement and fiscal performance, in a way that is understandable to the public by condensing the information contained in the ‘Auditor General’s Report, highlighting the key issues that the citizens would be interested in, and seamlessly creating an opportunity for informed engagement and participation,” Okon advised.