President Muhammadu Buhari’s bold step penultimate week to rescue states which are neck deep in debt, particularly over the backlog of unpaid workers’ salaries, has been described as an unprecedented gesture by analysts.
However, there is the issue of how the President will raise about N2.2 trillion to fund his likely agenda of welfarist capitalism. The issue is even made more poignant when the funding of the two major social programmes he promised Nigerians during his campaign come up – payment of unemployment benefits and free school feeding.
Worried by the accumulated workers’ salaries in 18 states, Buhari approved the release of N713.7 billion intervention funds for states as he promised after the first meeting of the National Council of State in the life of this administration.
“A lot of investors looking at Nigeria haven’t realised the significance of this – it is major,” Manji Cheto, a London-based vice president at consultancy Teneo Intelligence told Bloomberg.
“The breadwinner in a lot of families tends to be someone who works in the public sector. On average you’d probably have 20 to 30 people that depend on that one person. You realise how much of a disaster it is on a micro level.”
Cheto, however, said the package may only provide temporary relief, as the Nigerian economy continues to haemorrhage due to low revenue from crude oil, Nigeria source of 80 per cent of its revenue and over 95 per cent of its foreign exchange.
“This is the first time since 1999, since the end of military rule, that we have had the widespread non-payment of salaries that requires a bailout,” said Ayo Teriba, chief executive officer of Economic Associates Ltd., a Lagos-based consultancy. “It’s unprecedented in the democratic era and the gesture is a clear pointer to the direction this government is headed.”
The bailout was part of a three-pronged relief package that will end the workers’ plight. While N413.7 billion represents special intervention funds, the balance of about N250 billion to N300 billion is a soft loan to states. Also, N413.7 billion ($2.1 billion) is sourced from the recent Liquefied Natural Gas proceeds and the remaining N300 billion is a Central Bank-packaged special intervention fund. The Debt Management Office is expected to assist states to restructure over N660 billion commercial loans crippling their economies.
With the development, Buhari has stopped the deduction of monthly allocations to states at source. Instead, the Federal Government will “use its influence to guarantee the elongation of the loans for the benefit of the states.”
But the beneficiaries of the relief package include workers in federal Ministries, Departments and Agencies who have remained unpaid for several months. However, informed sources said the Finance Ministry and the Central Bank of Nigeria may have pegged the amount needed to settle outstanding public workers’ salaries at about N250 billion.
According to the sources, the President took the decision to boost the purchasing power of Nigerians, especially average and low-income earners, as well as to reinvigorate the economy.
The proponents of ‘Buharinomics’ further argue that Nigeria’s fourth president in the Fourth Republic is focused on running an administration with the social welfare of the citizens as his major economic policy thrust. This is even as the Federal Government penultimate week inaugurated a 12-man ministerial committee to develop a blueprint for affordable housing for Nigerians.
This, Sunday Telegraph learnt, is aimed at reducing Nigeria’s estimated 17 million housing unit deficit. According to a statement signed by the Director, Public Affairs, Federal Ministry of Lands, Housing and Urban Development, Mr. Adedeji Ajibade, on behalf of the Permanent Secretary, Mr. George Ossi, penultimate week in Abuja, the committee was set up due to the concern of the government over the wide gap in the sector. He noted that the delivery of adequate and affordable housing in Nigeria as enshrined in the 1999 Constitution has yet to meet the desired expectations.
This, he said, has resulted in inadequate stock as a minimum of one million housing units yearly was still being expected in order to reduce the deficit and avert a housing crisis by 2020.
Ossi stated that about 600,000 housing units are currently being developed annually through the Public Private Partnership (PPP) arrangement and another 240,000 affordable houses by the Federal Housing Authority; 240,000 low cost housing units under the prototype housing scheme as well as the development of new towns and cities in the states of the federation. This is coming as Vice-President Yemi Osinbajo has reiterated the commitment of Buhari’s administration to implement one of its campaign promises that it will pay N5,000 each to the poorest Nigerians across the country monthly.
Osinbajo, who spoke at the 10th Anniversary Lecture of Crescent University, Abeokuta, Ogun State entitled, ‘The Nigerian Economy and the Future,’ said government is “currently evaluating the best ways to collapse existing cash transfer and social welfare schemes to ensure consistency and alignment.” He said, “Once this is completed, we will implement the first phase of this programme, using recognised identification platforms and transparent payment solutions.”
While deploring the pervasive poverty in the country, Osinbajo expressed displeasure about the pervasive poverty in the country. He said, “About 112 million (66 per cent of Nigerians) are deemed extremely poor, measured by the World Bank parameter of those living on less than US$1.25 per day.” She added that it links to much of the Nigerian situation because it affects all aspects of life. This includes why over a million Nigerians die yearly of preventable diseases.
Out of the 112 million extremely poor Nigerians, no fewer than 25 million of them are believed to be unemployed. To pay N5000 per month to that number of people, the sum of N125 billion will be spent to service this policy every month.
An estimated N1.5 trillion will be spent on this policy alone every year. The second major social programme promised by the President during his campaign is a daily meal for primary school pupils. Nigerians debating the programme on Nairaland, an online platform, said that if the government spends an average of N100 per child in about 200 days the child would be in school in a year. With an estimated 32 million children enrolling in primary schools across the country every year, the government would spend about N700 billion on the policy yearly. Gross annual estimated cost for both programmes is N1.5 trillion pus N700 billion, which equals N2.2trn.
There is the general opinion that the problem is not about increasing the nation’s recurrent expenditure by N2.2 trillion.
The main concern is that even if the government removes the subsidy on petrol and kerosene and scraps SURE-P, this will only yield only N166.5bn. If Buhari also decides to spend zero naira on capital projects and funnel the N700bn capital appropriation to the welfare programme, he will still not have up to half of the N2.2trn.
Therefore, the question remains: How will Buhari raise the money to fulfill this social welfare pledge?
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