by Usman Alabi
The Paris Club refund is a fallout of the debt relief package negotiated by the Federal government in 2005 which is approximately $18bn. $12bn was expected to be paid by the Nigerian government within a specified period of time, but the Federal government wrongfully made deductions from State governments’ allocation in the process of paying the country’s foreign debt to the Paris Club. Hence it is a product of the Federal government’s over-deduction from the states’ allocation in 2005.
The governors recently prevailed on the federal government to refund the states after several calls by previous governors since 2005 to compel the Federal government to refund the monies.
The first tranche of the Refund, N522.7bn representing up to 25 per cent of the claims was paid in December. Disbursement was however subject to an agreement by state governments that 50 per cent of any amount received would be used for the payment of salaries and pensions. According to the ministry of finance “The Federal Government’s disbursement process is transparent and targeted at the attainment of specific economic objectives. The inability of some sub-national governments to meet salary and other obligations was considered inconsonant with the Federal Government’s economic stimulus programme” thus necessitating the payment of the money.
But the challenge here is the inability to track the use of these Refunds, the amount gotten by each of the states is contained in the info graphics below.
Despite the amount issued as Refund to most of these states, They are unable to account for the funds, not only that, tracking the funds is especially difficult because none of them has disclosed what the Refund was spent on. We have every reasons to believe that only few of the states stick to the agreement they had with the Federal government to spend 50 per cent of whatever they got on payment of salaries and pensions.
In Osun State for example, the state is said to have be paying some categories of its work force half salaries since 2015, the Nigerian Medical Association and the Council of Academic Staff Union of Osun State-owned Tertiary Institution have recently called on the state governor to pay the arrears of their half salaries with the Paris Club Refund. In January, the Nigerian Labour Congress, Jos chapter claimed that the State owes retired workers N12 billion gratuity. There are also cases of other states especially when it comes to pension and gratuity.
It is however important that these states use the Refund in tandem with the agreement they had with the federal government, and not consider it as another wind fall that should be squandered. This is also important for easy tracking, if we can be sure that 50 per cent of the fund is spent on salaries and pensions, then the remaining should be tied to specific and strategic projects that are capable of lifting the the economies of most of these states, it is important because the Federal government would not complete the total refund in the second tranche since the first payment of N522.7 bn is just 25 per cent of the total claims, especially given the report that the second tranche is also within that range, possibly another N500bn.
The President on March 16 has however directed the Minister of Finance, Mrs Kemi Adeosun, and the Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, to commence the process that would lead to the release of the second tranche. But If we must be able to track this Refund, then it behooves on the state governors to spend the monies judiciously and the ready to account for it without the usual suspicion political blackmail and witch hunting.
Governors should carefully make plans on what they want to dedicate the Refund on, make the process transparent for all to see, this is especially important at a time when the country is battling with recession and corruption.