The recurring dispute between the Federal and the state governments over the Paris Club refund will soon be over with the disbursement of the last tranche of $2.68bn to the states. The refund represents over-deductions from each state by the Federal Government prior to Nigeria’s exit from the London/Paris Club of creditors. Nigeria reached a final agreement for debt relief with the Paris Club in 2005.
It is a welcome development that the government is disbursing the last tranche of the refund. However, the payment of the refund will be in phases based on the states meeting some conditions. For states to access the refund, they must give priority attention to liquidating arrears of workers’ salaries, show commitment to the repayment of budget support loans of N28bn granted them in 2016 and pay the amounts due to the Presidential Fertilizer Initiative.
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Besides, the state governments must show complete commitment to pay matching grants to the Universal Basic Education Commission (UBEC) and access funds to improve primary education and learning. These conditions which may bar some states from accessing the final tranche of the Paris Club refund may look stringent considering the fact the refund was the over-deductions from their allocations by the Federal Government, nevertheless, the conditions are necessary because most of the state governors have not been transparent in the management of their states’ finances.
It is, therefore, important that any state that fails to meet the set conditions should not be trusted to adequately utilise the refund for the good of the people. We recall that the state governments had earlier received 50 per cent of the Paris Club refund in two tranches totaling N760.17bn between 2016 and 2017.
It was part of the government’s fiscal stimulus to ensure the financial health of the state governments, leaving a balance of 50 per cent or $2.68bn. The approval of the final payment of the Paris Club refund by the Federal Government fulfils President Muhammadu Buhari’s promise to the state governors in December 2017.
It was in response to the claims of over-deductions by the governors that President Buhari directed the Debt Management Office (DMO) under the supervision of the Federal Ministry of Finance, to reconcile the claims. It is heartening that the reconciliation process has been concluded and conditions set for the final payment of the Paris Club refund. We reiterate that the conditions are in order because many of the states that benefited from the last tranche and previous bailouts were alleged to have misapplied the funds, as workers and pensioners are still owed arrears of salaries and pensions.
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Displeased with the development, the President flayed the attitude of some governors and said that their action could defeat the essence of releasing the fund. It is this concern that prompted the Finance Minister, Mrs. Kemi Adeosun, to say that further release of the outstanding refund would depend on current and projected cash flow of the federation as well as the outcome of the independent monitoring and compliance with terms and conditions attached to the earlier disbursements.
We want to believe that there will be no further dispute regarding the conditions laid out before the states can be paid the refund. We say this because during the disbursement of the second tranche last year, the states denied signing any agreement with the Federal Government upon which the payment of the final tranche will be based.
Although some Nigerians have argued that the Federal Government has no powers to dictate to state governments how to use the funds that belong to them, as this negates the spirit of true federalism, it is appropriate that state governors realise that funds accruing to states should be used to address critical issues such as workers’ salaries and development projects.
Transparency and accountability may be the first casualties if state governments are not held in check on how not to use the refund, principally because of the financial recklessness of some of the governors. With next year’s general election fast approaching, some governors may be waiting for the refund to arrive. That is why releasing the money in phases is a good idea.
We urge the Federal Ministry of Finance, the Central Bank of Nigeria (CBN) and other related agencies to ensure that the state governments comply strictly with the conditions before payment is made.