Thread by @FinPlanKaluAja1

Let me list out the Federal Government of Nigeria interventions to States.

1. July 2015: N804.7b Intervention package
2. April 2016: N10.9b Deferred Obligations
3. September 2016: N40b Budget Support loan

The question is

1. How much has the FGN paid into the Sovereign Wealth Fund?

2. How much has the FGN paid into the Retirement Savings Accounts of their own civil servants?

These questions are rhetoric…what I am really asking was there really no better use for N855.6b?

When these bailouts were announced, I warned its won’t work and it will create a moral hazard. The justification is that states workers need to be paid, I agree, but was this sustainable?

Nigeria Federal Government took the NLNG dividends and paid to states to pay salaries. Previously the NLNG dividends were put in a special account and used to reinvest in NLNG Trains 3 to 6 without recourse to the Federation.

As shareholders of NLNG, when the FGN reinvested her dividends back to the company, the company grew, sales grew, thus dividends grew. That’s why the FG was able to extract that dividend in 2015 and bailout states.

In 2015, Nigeria FG broke that reinvesting chain.

The most sustainable way to support states is for the FGN and States to sponsor a constitutional amendment to devolve some fiscal measures to states, not bailouts…. certainly not unsustainable bailouts.

If States retained a greater share of VAT other taxes, that will be a start.

The FGN has also issued the states a 22-point plan to get their accounts in order, it’s an impressive and extensive list, well thought out.

The challenge today is to get the states to accept and implement that list.

The FGN must stop bailing out the states, the states must restructure….that really is the only solution.