Shock as 18 states go bankrupt, can’t pay workers’ salaries

Eighteen out of the thirty-six states of the federation are technically bankrupt. This is because they have mortgaged their federation account allocations to contractors by signing irrevocable payment orders with various banks. 

As a result, payment to contractors and other debt instruments are deducted at source and have become first line charge on their lean resources. The internally generated revenues of these states are also not enough to meet their obligations so they owe workers several months of unpaid salaries.

The states which owing workers, according to the Nigeria Labour Congress are Abia, Akwa Ibom, Bauchi, Benue, Cross River, Ekiti, Imo, Jigawa, Kano, Katsina, Kogi, Ogun, Ondo, Osun, Oyo, Plateau, Rivers and Zamfara
This is not the first time states owe workers. In 2003, then Economic Adviser to President Olusegun Obasanjo, Professor Charles Soludo, said that most state governments have signed away their future statutory allocations to contractors whom they owe.

Explaining many states are bankrupt and cannot fund developmental projects, Soludo said that most states were technically bankrupt as huge deductions are made from their allocations to pay such creditors.

This, he said, was “the reason why a good number of states in the Federation owe their workers several months of unpaid salaries.” He said  after such deductions from allocation to the states, they are left with little or nothing to operate with. As a result, most of the states are not able to perform their statutory obligations. Instead of telling the people the simple truth, they keep complaining of lack of funds.

Most of these states go into further indebtedness through heavy borrowing and undertaking projects they have no financial capacity to carry. “The problem of states in the Federation is their total dependence on the Federal Government. Their internal revenue drive and generation are so weak that no state can operate without federal allocation or grant in some cases.”

Reacting to the high indebtedness of states, Director-General, Securities & Exchange Commission (SEC) Mr. Mounir Gwarzo condemned the indebtedness of some state governments, which debts did not measure up with infrastructural development in their states as the agony of unpaid salaries haunt most of them. He described the indebtedness as a bad omen, more so, where there are no infrastructure in place to underpin their debts.

Gwarzo therefore urged the affected state governments to take advantage of equities, bonds or mortgage bond securities in the capital market to develop their states’ infrastructure. He urged governors to explore the opportunities available in the market to deliver infrastructural development to their people, saying it is better to borrow to meet infrastructural needs than to be content with just paying salaries.

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