The current cash squeeze suffocating the expenditure of many states across the country today is mostly self inflicted. What with unrealistic capital projects; over reliance on federal allocation based on oil rent; profligate spending and years of unwillingness to institute fiscal discipline. Many states are now hooked on life support provided by federal government bailout funds. While the situation appears bleak, there are reasons why the current scenario could be reversed to put states in better financial standing, writes NICK UWERU.

These days, being a state governor requires a nerve of steel. With federal allocations to state dropping in the last three years on account of the slump in oil prices in the international market, state governments have had to scrap at the very bottom of their purse to pay salaries, do capital projects and run governance. The public is well aware. But they are also impatient because they have bills to pay, too. By figures from Nigerian Labor Congress, NLC, 27 states out of the 36 states owe backlog of salaries. Going by development across the country, the situation may well have begun to spiral out of control.

Ilorin, Kwara State capital on Thursday, Muslim prayers for the Eid-el-Kabir festivity was brought to an abrupt halt when Senate President, Bukola Saraki, made entry into the ground along Unity Road. Most of the workers hadn't been paid their salaries, one of the fall out of the cash squeeze that has hit the states. Though state governor, Ahmed AbdulFatah, had begun paying some workers, the state workers say it was not enough. But with the recent trial of Saraki at the Code of Conduct Tribunal, CCT, over the alleged undeclared asset of the Senate President, the belief is that many Kwara workers were at a tipping point, needing little provocation to flip.

But the Ilorin debacle is just one out of the many acts of protest over the unpaid salary situation in the states. Last week, secondary school students in Osun State trooped to the streets on a Tuesday to protest the recent decision of the state governor, Rauf Aregbesola, to re-introduce Development Levies payment by students. In Osogbo, Osun State capiytal, secondary school students staged a protest against the government's policy. The students, apart from protesting the new fees, claimed that government asked students to produce their parents' tax clearance before being allowed to school.

They insisted that such requisition was unacceptable. Students of Osogbo High School trooped out in hundreds and trekked from their school, through the Ogo Oluwa area to the Governor's Office singing anti-government songs. Armed with leaves, the students were joined on the roads to the Governor's Office by their colleagues in other schools. The Head Boy of Osogbo High School 1, Taiwo Oyewole, said the students were protesting because most of their parents who were government workers had not been paid for months, making it impossible for the parents to pay N4,500 for tax clearance. The students called on the state government to pay the salaries of their teachers and parents without further delay so that everything would go back to normal.

Addressing the students, Mr. Lawrence Oyeniran, the permanent secretary of the state ministry of education, stated that the tax scheme was introduced so that the parents could pay their taxes. He urged the students to go back to their classrooms with the assurance that the matter would be resolved. Parents and critical stakeholders are also miffed by the policy decision of the state governor. Aregbesola has been in dire strait over the state government's apparent insolvency since last year. Huge tranches of salary arrears are being owed; most construction works, where it has not been halted are moving at slow pace.

For many observers, it was only a matter of time before the acute financial squeeze spirals into other critical social infrastructure like education. Though with a robust and ambitious education policy meant not only to drive schools enrolments bust also ensure quality education, Aregbesola's plans, like other state governors, was hit the global economic recession that saw to the slump in oil prices in the international market.

Like Osun, Ekiti State has had to reintroduce the same measure on the face of cash crunch crippling its economy. Attributing its decision to be a part of the resolutions arrived at during its recently held Education Summit, the Ekiti State government announced that students of public secondary schools would pay what it described as "a token" of N1, 000 per term towards educational development in the State. It added that that a sum of N500 proposed for primary school is yet to be approved.

The State Commissioner for Education, Science and Technology, Mr Jide Egunjobi, in a press statement issued in Ado-Ekiti on Tuesday, said that all stakeholders in the education sector, including parents and teachers consented to the introduction of the Education Development Levy. But the commissioner insisted that the state government was only formalising what was already in practice. "Before now, secondary school students were paying N100 as PTA levy, N300 for Extra Lesson and N600 as Examination Fee while primary school students were paying N100 as PTA levy, N300 for Extra Lesson and N200 as Examination fee, making N600 per term," said Egunjobi. Apart from the Educational Development Levy (EDL) of N1,000, Secondary school students will pay N500 as Parents Teachers Association (PTA) levy, N600 for Examination, N300 for Extra Lesson, making a total of N2, 400 per term while it is proposed that Primary school students will pay N100 as PTA levy, N100 for Extra Lesson, N100 for Examination, a total of N800 per term.

There are 178,263 students in the 879 public primary schools; 48,960 in Junior Secondary Schools and 55,677 in Senior Secondary Schools in Ekiti State, in all, 282,900. The commissioner reiterated government's commitment to the restoration of the state's lost glory in the education sector, saying; "Ekiti State recorded 36.5 percent performance in WAEC this year as against 25 percent last year and that only happened because strict measures were introduced and teachers were greatly motivated and encouraged.

In Oyo, the scenario is similar. Ishaq Ajimobi, state governor, to the chagrin of most parents and other stakeholders cancelled government sponsorship of the final examination of the Senior Secondary Students. In its stead, it introduced N3, 000 levies for students desirous of writing the WAEC in Oyo State. The decision caught many parents unawares and expectedly, it drew anger. Opposition politicians have also been quick to use it to score political points.

Not only has the governor stopped WAEC fees, but also, the state governor re-introduced tuition fees in public secondary schools. These policies were last witnessed during the military administrations in Oyo State. In the new arrangement, primary school pupils will be paying N3,000 Education Development Levy per session, which will be paid in three instalments of N1, 000 per term.

In the face of this hardship, Federal government made bailout funds available for states. Fon instance, in line with the decision of the National Economic Council, NEC, recently, a total of 19 out of the 27 states affected by cash squeeze have so far benefitted from the workers' salary bail-out package which is meant to enable them effectively pay the backlog of workers' salary arrears.

According to Central Bank of Nigeria, CBN, spokesman, Mallam Ibrahim Mu'azu, the money would be made available with 20-year tenure except Ogun which opted for 10 year tenure.

Earlier, states like Kwara, Zamfara, Osun, Niger, Bauchi, Gombe, Abia, Adamawa, Ondo, and Kebbi had applied for and received various sums from the bail-out facility. Other states include Ekiti, Imo, Ebonyi, Ogun, Plateau, Nassarawa, Sokoto, Edo and Oyo which were granted in the week.

But the problem with the facility, according to some experts is that most of these states are already neck deep in debt to commercial banks. Most of these debts in bonds are heavy and as result, the states may resolve to use some of the bailout facilities to offset the debit. Before the last governorship election, no less than seven states were heavily indebted to commercial banks with others still owing sizeable loans to banks. For instance, Kwara owes about N17 billion, being a carryover from when Saraki was governor.

Before and after the election, the bond was major talking point in both policy and political debates.The scenario in Kwara, largely typifies the ding-dong in most states where the chief executives have opted for loan facilities from the credit or bond market. In Ogun State for instance, controversy over the propriety of obtaining loan facilities from the bond market has led to massive crisis. In 2010 under former Governor Gbenga Daniel, there was a stand-off between the executive and a section of the law makers when Daniels sought to float N100 Billion.

Tunji Egbetokun, then speaker of the state assembly insisted that there was no need t obtain the loan when the previous debt incurred by the state has not be fully paid. He was not only impeached as result of his opposition, he was, as he later claimed, hounded out of the state. Interestingly, Daniel's successor, Ibikunle Amosun, then under the platform of ACN, joined in the fray, taking Daniel to task on the bond matter.

Ironically barely two years after, Amosun was back on the same path threaded by his predecessor. He made overtures to the state assembly seeking enabling law to obtain loan from the bond market.

But like in the previous instances under Daniel, the hounds of opposition snapped ceaselessly at his heels. PDP, Peoples Party of Nigeria, PPN, and National Association of Nigerian Students, NANS, railed against the move. Senator Adegbenga Kaka argued that state government should first determine the value and economic viability of the projects it wanted to embark on before taking loans for the purpose in order not to further plunge the state into financial problems.

In Osun, the controversy over Ogbeni Rauf Aregbesola, state governor's decision to go for a N60 billion loan has continued to generate ripples as August, month of re-election for the state approaches. In fact, political opponents of the governor are looking to score political points on this as a means of ousting the governor.

But taken from another angle, state governors may not have a choice in the matter especially when money is needed to execute project.

The bond market offers an alternative to steady federal allocation. The bond market, also known as the debt or credit market provides a mechanism for long term funding of public and private expenditures. Unlike borrowing from the money market (banks and other financial institutions) the bond market offers comparative advantages in financing long term capital projects. It has lower interest rates and allows a repayment schedule of up to five years at the least.

With dwindling resources from federal allocations, poor internal revenue, IGR, profile, state governments more or less resorts to this form of borrowing much like the federal government of the country. Federal government bond is regarded as one of the most lucrative debt instrument in the international market. This is because of the steady income from oil, services and agric sectors in the country believed to be in the upswing.

With similar regular stream of income from federal allocations, state government borrowings brings about little or no risks to buyers of the bond because the steady allocation is structured to pay the loan and the interest.

But the question for many observers is whether the money obtained from market is judiciously used by government, or whether opposition to obtaining bond by state government on whatever ground is right. "Opposition to bonds is political in some cases. But even where the bond is delivered, the application of the funds leaves much to be desired. So we may say that those opposing bonds for governments are speaking from the evidence of the application in this country," explained Obed Awowede, economic policy analyst.

But with the current financial situation can the bailout facilities from CBN bailout the distressed states? Some states like Kwara say that the current scenario regardless of the debt burden provides it with a unique opportunity to broaden its economic base. On paper, the state consistently maintains an A+ rating from Bode Augusto and Co, a reputable accounting firm over the N17 billion bond obtained by the state. The state government has a list of project to show off for the money collected as bond. Even more, it believes that the recent challenges offers opportunity to expand its financial base. "In Kwara, we see the situation as an opportunity; an opportunity to expand our financial base," explains Muyideen Akorede, Senior Special Assistant on Media to the state governor of Kwara.

He also stated that the recent financial squeeze did not come as total surprise to the state government. "In 2013 the governor saw this problem coming when the US and China started looking out for alternative sources of energy. Then he started telling the Board of Internal Revenue, BIR, to increase the IGR. At that point we were still at about N700 million. They kept coming back with excuses that this is the best they can do," Akorede said.

He further added that Governor Abdulfatah instituted a desk review of the money collection process. It was then discovered that the state was losing about N5 billion annually, either through leakages or money going through the wrong pockets. "When we went to study what other states have done and discovered that they were not relying on civil service structure to drive revenue collection. This is because you cannot give a civil service person a target. Some of them may achieve it but you cannot put a sanction in place. You can't sack a civil servant. So the government then said that since the BIR have consistently failed on its N1 billion revenue target at the time, it went to the state house of assembly to abrogate the set up of the board and instead, set up the Kwara State Internal Revenue Service, KWIRS. It is still government owned.

"But it still has new terms of service. So in this instance you come on and sign up to new terms of service. So the feeling that when you get into the civil service only death can remove you does not arise here. So you come on and sign up to new terms of service. If you don't meet up with your target in three months you are gone. It is just like the banks. The banks just give you target and if you can meet them you are sacked. We are still changing people process and technology, Akorede said.

How these measures will help can only be known in the fullness of time.