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- Create Date 10th June 2019
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TROUBLE WITH THE STATES
The economy is under performing and revenues are dwindling.
As the economy continues to falter on a larger scale, more trouble is brewing at the state level and the danger ahead gives real reason for concern.
In recent times, we have been inundated with cries from states about their inability to pay salaries, which unfortunately form the bulk of their recurrent expenditure.
Even with the recent Federal Government bailout, a lot of states could still not pay all outstanding salaries. The sad news however, is that such bailouts are not sustainable and with dwindling oil revenues and disappearing reserves the situation looks set to remain the same.
In addition to the dwindling allocations accruing from the Federation Accounts Allocation Committee (FAAC), a lot of states had borrowed heavily to fnance non-income generating projects and in most cases exhibited poor sense of judgement in prioritizing their developmental needs. The accruing interest charges on these loans collected at commercial bank rates (i.e. 20%p.a. and above) has introduced another burden for the states as in most cases, the banks have well documented Irrevocable Standing Payment Orders (ISPO’s) that empower the CBN to charge and debit the state allocations upfront on behalf of the lending banks