Finance Experts and analysts have warned that the nation’s economy could slip back into recession if the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, insists on sub national governments – the states- paying back the $2.1 billion Budget Support Facility (BFS), which the apex bank advanced them between 2016 and 2017 to cushion their liquidity crisis.
Emefiele’s announcement on Thursday that the CBN board had resolved that the states should pay back the facility followed the claim by the Edo State Governor, Mr. Godwin Obaseki, that the Federal Government printed about N60 billion in March to augment revenue distributed by the Federation Account Allocation Committee (FAAC).
Speaking to Saturday Telegraph on the issue, the Chief Executive Officer, BIC Consultancy Services, Dr. Boniface Chizea, said that, while the Edo State Governor was wrong with his claim, he did not expect the CBN to go ahead with its plan to force the states to repay the BSF. He said: “I don’t expect that the states will be compelled to repay the loan. Many of them can’t pay salaries. I expect the President to intervene. The CBN Governor must have spoken out of anger. He said he is not a politician and really, we should not play politics with the economy.
“There is no central bank that has not printed money to deal with the current crisis. What has worsened our case in Nigeria is that we don’t have a productive base; so whenever there is a sharp drop in oil prices we find ourselves in trouble.
The Edo State Governor was wrong because he did not have the facts.” In his reaction, Dr. Idakolo Gabriel Gbolade, Managing Director /CEO of SD&D Capital Management Limited, said he foresaw danger in the economy should the CBN press on with repayment from states.
“The move by the CBN to demand the BSF is retaliatory in nature and it was borne out of the statement by the Edo State Governor and other state governors who have been attacking the policy implementation by CBN on behalf of the Federal Government. “It is important to note that the facility given to states in 2016 could have been memorized and repayment pattern should have been consistent with monthly allocation to the affected states. “I foresee a danger in the demand by the CBN for these states to start repayment of the BSF because the situation that necessitated the facility in 2016 is worse now as most states are presently unable to meet their debt obligations and the implementation of the minimum wage payment,” he said. However, Gbolade lampooned states for not being creative with the abundant resources at their disposal.
“The states also cannot be said to have performed well as they continue to criticise the Federal Government without doing anything considerable to develop their respective states. Be that as it may, this demand will further increase the economic recession in the country with the country’s inflation at the roof top,” he said. In his reaction, former Imo State Commissioner for Finance and professor of Capital Market, Prof. Uche Uwaleke, also said the economy could slide into recession should the CBN insists that states pay back the money now.
He said given that the economy had just managed to get out of the recession occasioned by COVID-19 pandemic challenges, the states aren’t in a position to pay now. He was, however, of the opinion that, the CBN or government was justified to demand accountability of the funds from states.
“A lot of sub-national governments are not in a position to do that (repay loan) now. I would advise that the matter be shelved, and if possible the loan should be written off. “The states are not in a position to make the repayment; that is the truth. Of course you know that the economy has started recovering gradually. “By the time you now ask states to pay, or force them to pay back the money, and they are not in position to discharge their responsibility, of course the economy will fall back into recession. “This is not the time to talk about repayment at all because the economy just came out of recession due to the impact of COVID-19 pandemic. The impact of COVID-19 is still there. The best thing to do now is debt forgiveness not asking sub-nationals to come and pay what they took from the Federal Government.
The summary is, this is not the best time to that. “Rather than asking states to pay, the Federal Government should demand accountability from them on how they utilize the budget support funds,” Prof. Uwaleke submitted. Also reacting to the issue, a renowned public speaker, analyst and Founder/CEO of Centre for Values in Leadership, Professor Pat Utomi, said that Governor Godwin Obaseki was right to have cautioned the Federal Government on allegedly printing N60 billion to share to states in March. Utomi pointed out that printing currency that is not backed by production could be dangerous to the nation’s economy. Speaking on “Sunrise Daily” on Channels Television on Friday, the former Special Adviser to the late president Shehu Shagari said that Nigeria was dependent on domesticating revenues, and that the nation had come to a point where oil revenue dropped significantly. According to Utomi, “it is natural for the nation’s authority that is used to domesticating revenues to say let us get some cash to pay what the states need.
“What the Edo State Governor was trying to say is that we should be careful because it happened in Latin America and when it happened there in the ‘70s and ‘80s, it affected the purchasing power of the people. “This also happened in Argentina, where such decision totally ruined their economy.
Obaseki was trying to warn the Central Bank of Nigeria to be careful.” Utomi, who spoke via zoom, noted that many of the countries that have strong economies today including China and Brazil were like Nigeria less than 30 years ago. “How did they go from such position to where they are now should be the concern of the managers of our nation’s economy. “If you go through a bit of history from 1978, you will understand why China is where they are today. They realised that their future depended on knowledge. So, we must learn that our future depends on knowledge.
“The Nigerian political party system has made nonsense of knowledge. If you look at the people in position of decision making today, many of them don’t have the competence, they only believe in sharing. We must realise like China realised in 1978 that our future depends on knowledge,” he said. Utomi stressed that if Nigeria should move forward, a foreign expert could be hired to be the Governor of the CBN, while giving an instance of the immediate past governor of the Bank of England, who he said is a Canadian.
It will be recalled that Obaseki had last week alleged that the Federal Government printed N60 billion as part of federal allocation for March. Speaking at the Edo state transition committee stakeholders’ engagement, the governor said the economy is no longer what it used to be. Obaseki said the rising debt profile is worrisome as dependence on crude oil is no longer sustainable. He expressed worry that the country has continued to borrow despite unclear means of repayment. The governor said the government must live up to its social contract with citizens.