Nigeria Is Half Bankrupt Due To Short-Sighted Borrowing Policies Of The State Govts

Considerable wage arrears in eighteen out of the thirty-six states in Nigeria are related to their technical bankruptcy. The state workers in Abia, Akwa Ibom, Bauchi, Benue, Cross River, Ekiti, Imo, Jigawa, Kano, Katsina, Kogi, Ogun, Ondo, Osun, Oyo, Plateau, Rivers and Zamfara haven’t seen their salaries for months due to short-sighted borrowing policies of the state governments.

Nigerians protest over unpaid salaries. Many state workers haven’t seen their money over 9 months
Photo: AFP

Weakening naira, plunging oil prices and short-sighted borrowing policies of the state governments led to the situation of technical bankruptcy in eighteen out of the thirty-six states in Nigeria. The state governments, who have to pay interests on previous bank loans, simply don’t have enough money to pay salaries – and that’s why they take new loans, worsening their own financial situation even more.

READ ALSO: Why Federal Government May Lose 25% of Revenue

The inability of states to pay salaries is resulting from their heavy dependence on federal budget allocations while state governments themselves are unable to find source of internally generated revenue.

READ ALSO: How Oil Crisis Can Destroy Nigeria

Oil revenues make up nearly 70% of Nigeria’s total revenue, so drastically falling oil prices result in reduction of allocations to the state governments from the federal budget.

READ ALSO: A MUST READ: How Nigeria Can Survive Without Oil

Meanwhile, weakening naira increases the external debt of the states, making paying off external loans harder. And that’s a huge problem considering the fact that they make up 25% of the overall debt stock in those states.

READ ALSO: Sanusi’s Article On Missing oil Money Breaks Twitter

Besides that, some state governors contribute to the problem, funding inappropriate expenses from the state budget instead of financing some capital projects which could contribute to their states’ economies.

READ ALSO: Nigeria Seeks Huge USD5.7bn External Loan

Earlier the Federal Government advised banks not to give out new loans to those states that already experience difficulties in servicing their existing debts.

While Senator of Bayelsa East Ben Murray-Bruce set out the way of solution to the problem of unpaid salaries on his twitter account.

I am deeply sad some state workers have not been paid for over 10 months. I think FG should pay them and collect the money back at source.

— Ben Murray-Bruce (@benmurraybruce) June 11, 2015

It might be a bit insensitive to continue with the generous pensions for ex-Govs at this time when 18 states are owing workers salary. — Ben Murray-Bruce (@benmurraybruce) June 12, 2015

Since its clear many states cant pay salary without FG allocation, should we consider merging states especially as oil revenue is reducing?

— Ben Murray-Bruce (@benmurraybruce) June 11, 2015

I think we are underestimating the issue of unpaid workers salary. It’s too widespread. If not checked it can ignite a kind of Arab Spring.

— Ben Murray-Bruce (@benmurraybruce) June 11, 2015

It is not a secret that stability in countries all over the world partly depends on fair salaries on time. Nowadays the country suffers from rising tension because there are a lot of incidents when workers don’t get their money.

You can see a lot of examples of it here.

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