Be it an individual or a corporate body, no doubt, at some points in your existence, borrowing becomes a consequential and inevitable approach.
For the umpteenth time, I have categorically made it clear that borrowing becomes necessary if the funds to be assessed would be utilized judiciously; if the funds would be channeled only to the needful.
We must acknowledge that if a certain borrowed fund is utilized judiciously, it would enable the borrower to become financially independent in the nearest future, thereby making him/it to steer clear of borrowing in subsequent time.
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The last time I checked, unequivocally, the best way a borrowed fund could be utilized is by investing it, or using it for capital expenditure. This implies that recurrent expenditure shouldn’t in any way warrant borrowing.
One of the basic examples of recurrent expenditure in any society or nation remains payment of salaries or pensions. You can’t borrow in order to pay others or to enable you service some debts; such a step is ridiculous and illogical. Read my lips!
If you borrow in order to settle a certain debt, how do you intend to refund? Obviously, indulging yourself in suchlike practice significantly means you will constantly continue to borrow, come rain come shine.
Aside from the economic implication of borrowing, the social implications are enormous. If you are reckoned to be a borrower, your colleagues or counterparts, as the case may be, would invariably stigmatize you; you might be treated like one who has leprosy. Of course, we are not unaware of the consequences that await someone who suffers from stigma.
Meanwhile, this critique was necessitated by the recent gesture displayed by the Federal Government of Nigeria (FGN) in respect of its apparent soft spot for the various state governments within the shores of the country.
Just a few years back, the President Muhammadu Buhari-led FGN graciously lent more funds to the states, in addition to the ones received in the previous years by the prospective beneficiaries.
According to the said benefactor, the kind move was targeted to salvage the state governments that have been colossally ravaged by the crisis occasioned by the economic turmoil the country was faced with.
It would be recalled that previously, the state governments received a total of #713.7 billion bailout funds from the FGN to enable them pay the backlog of salaries owed their respective workers. It’s noteworthy that the said fund was deducted from the nation’s Excess Crude Account (ECA) otherwise known as National Wealth Fund.
Unfortunately, merely a few months after, the various state governments were still grappling with the same challenges, perhaps owing to the poor monthly federal allocation they were receiving, which was informed by Nigeria’s dwindling oil revenue.
To this end, the FGN decided to release another #90 billion fund, which was believed would immensely assist the states in their bid to be less-dependent on the monthly handout from the federation account.
It’s worthy of note that the fund in question was given in form of a loan, hence fully repayable, although it had a secured tie against future dividends, revenues, or what have you the FG might have owed the states.
At that juncture, any rational being that meant well for Nigeria didn’t hesitate to inquire if these states would continue to receive bailout funds in order to pay their workers and pensioners, because such a step was not unlike robbing Peter to pay Paul.
However, the fascinating side of the FG’s gesture is that, apart from the fact that the loan was given over a period of one year, the states were meant to agree on a good number of conditions before they could assess it.
It might interest you to note that among the total of #90 billion of the second phase of the bailout, #50 billion was shared across the 36 states, coupled with FCT, for the first three months, and then #40 billion for the remaining nine months, which is an average of about #1.4 billion per state for the former and #1.1 billion for the latter. The then Finance Minister, Mrs. Kemi Adeosun disclosed that the idea was to tie states over for a year, so they could rebalance.
Most other uncompromising and laudable conditions meant to be reached by the state governments were, but not limited to, they are to individually: publish their audited annual financial statements within nine months of financial year end, comply with the International Public Sector Accounting Standards (IPSAS), and annually publish state budget alongside its implementation performance report online.
Others were: set realistic and achievable targets to improve independently generated revenue and ratio of capital to recurrent expenditure, implement a centralized Treasury Single Account (TSA), as well as establish a biometric capture of all the state’s civil servants to eliminate payroll fraud.
Additionally, the states were to comply with the existing Fiscal Responsibility Act (FRA) and reporting obligations of the country, to include: no commercial bank loans to be undertaken by them (the states) and routine submission of updated debt profile report to the Debt Management Office (DMO).
Hence, the FGN barred all the commercial banks in the country from giving loans to any state government regardless of the circumstance; the decision was taken in accordance to the Fiscal Sustainability Plan (FSP) of the former.
Undoubtedly, if the above guidelines were to be strictly upheld by the government via the effort of the Ministry of Finance, Nigeria would have been a better place. Suffice it to say that the additional bailout funds would have caused more good than harm in the long run contrary to the ongoing case or situation whereby it is observed the funds ended up constituting greater quagmire in the various states.
Ab initio, the plight with the Nigerian government has been the ability to proclaim a sound policy but failing to implement it as requested. Hence, this very measure was also expected to suffer same fate if the lingered political will the country had been known for wasn’t changed by the present administration.
If the above conditions were fiercely safeguarded, it must have deterred most of the states from assessing the bailout funds, thereby persuading them to concentrate on the needful.
In addition to the conditions, the various governors deserved to unequivocally be thoroughly investigated since it’s apparent the previous bailout funds received by them weren’t judiciously utilized. It’s not anymore news that workers and pensioners in most of these states are still owed till date for several months, if not years.
This is where the Economic and Financial Crimes Commission (EFCC) needs to come in toward ascertaining if the funds were truly used for what they were meant for. We can’t continue to live in the past amid an administration reckoned to be anti-graft.
The most appropriate step the states are individually required to take at this point is embarking on a massive Internally Generated Revenue (IGR) drive. In most of the states, the policies guiding the traffic sector that is meant to serve as a major revenue source are so porous for anyone’s liking.
Similarly, many of them are tourism-oriented, but the governments have refused to look inwards toward revamping the sector; rather, they chose to rely solely on the federal allocation, which is currently wearing a pitiable physiognomy.
So, rather than depending on bailout funds from the FG or keep seeking for loans from the banks, they are enjoined to generate the funds by themselves. They possess all it takes to do so, thus must learn to walk the talk.
We must always take into cognizance that it pays to be a creditor instead of the reverse. The truth is that, if the various governors concentrate only on the needful, they would in no distant time see the ongoing economic meltdown as a blessing in disguise.