LGs face bankruptcy as states sink deeper in financial want

There are strong indications that the 774 Local Government Councils in Nigeria may face bankruptcy as the monthly Federal allocations continue to slide downwards as a result of the unending decline in the price of crude oil at the International Market, especially against recent report credited to the IMF that the price of crude oil per barrel might fall to as low as between $5 to $20 in 2016, even as most of the Local Government Councils were yet to take advantage of their internally generated revenue potentials and are owing several months of staff salary arrears, investigation reveals.

At the backdrop of expected significant drop in revenue accruable to the three tiers of government from the monthly Federation Account Allocation Committee, FAAC, State governments may be compelled to seek fresh bailout arrangements as none of them have indicated plans to re-jig budgets in line with the emerging fiscal realities.

Report says to underscore this development, Katsina State Governor, Alhaji Aminu Bello Masari has said that some state governments in the country may find it difficult to pay workers salaries in the next three to six months as a result of the current economic hardship occasioned by falling oil prices.

The governor said this at the foundation laying ceremony for construction of three blocks of 12 classrooms, office block and a computer centre at Kadandani Community Secondary School in Rimi Local Government Area of the state by Continental Computers. “In three to six months time, some states will find it difficult to pay salaries due to fall in the price of oil in the market,” he stated in Hausa language.

Some of the state governments are already complaining that the recently settled issue of minimum wage may be revisited following the weakening of the revenue base. Some states are indicating that they would not review the minimum wage downward but they may be forced to retrench to reduce recurrent expenditure within available resources, otherwise the workers would be owed indefinitely

But the labour unions would not allow downward review of the wages, indefinite delay in salary payments or retrenchment, thereby setting an agenda for major labour crises next year. With the emerging scenario officials of the states are saying that they may resort to further borrowings with Federal Government’s guaranty since even the federal government is planning to fund its budget partly from borrowings.

FGN’s 2016 budget provided for a deficit of N2.2 trillion to be mainly financed through a combination of domestic borrowing (N984 billion) and foreign borrowing (N900 billion) both totaling N1.84 trillion. About 27 states received N560 billion bailout funds arranged by the Central Bank and the Federal Government to offset salary arrears in their respective states last year.

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