Dwindling oil revenue: Some states may shutdown in six months, FRC boss warns

*A drilling rig operating in Soku.

*A drilling rig operating in Soku.

Oscarline Onwuemenyi

25 November 2015, Sweetcrude, Abuja – The Chairman, Fiscal Responsibility Commission, Chief Victor Murako, has warned of a possible shutdown by some states of the federation in the next six months unless they find creative ways of handling their dwindling allocations from the Federation Account.

Murako, who spoke at the opening of a two-day study tour of the FRC by officials of the Ebonyi Fiscal Responsibility Commission in Abuja on Monday, expressed shock that the Nigerian Governors’ Forum had declared that the states could no longer meet the payment of the minimum wage of N18,000 per month.

On the dwindling oil prices, Murako said the Federal Government was seriously worried about the impact on the economy and the ability to carry out development programmes.

“The government is very worried. Almost all economies of the world are facing difficulties in the form of headwinds,” he said.
The FRC boss also chided the state governments for lack of creativity, saying that if they were private concerns; they would be generating profits from the huge endowments found in the different states of the federation.

According to him, many states were dishonest about their level of indebtedness, adding they were much more indebted than the governors were willing to admit in public.

He said, “The truth is that if the situation we are in persists for the next six months; I said six months, not one year or two years; we will be on the floor. If the revenue continues to dwindle for the next six months and the allocations continue being low, some state governments that refuse to look for alternative revenue sources will definitely crash and there will be a labour crisis.

“Debts and borrowing have become the biggest problem of sub-national governments. If most state governments will be honest and tell you their accurate debt profile, you will marvel. A lot of them try to hide by different strategies. They take short loans; some, long-term ones that will go beyond their tenure, which ordinarily, they should not do.”

He added, “You must find ways and means to trigger state companies and parastatals that over the years have been collecting money rather than remitting money to the government coffers. If you investigate some of them, you will find that they are making so much money.

“We cannot continue to shy away from the current realities. The Fiscal Responsibility Commissions are agencies of the government that have been used all over the world to transform nations such as India, Brazil, Malaysia, Singapore, Canada, and several other countries.”

Murako said both the Federal Government and the state governments must look inward in order to generate resources to run their operations.

He said it was regrettable that the nation was no longer discussing how to meet the infrastructure gap, but how to finance recurrent expenditure.

“It’s how one manages ones’ situation that matters. The Federal Government is already aware of this challenge the country is facing. Reforms are already being undertaken. The impact of the reforms may not come as quick as one would expect, but with time, they would manifest,” the FRC boss said.

With the country’s dependence on more than 70 percent of her revenue on oil, he said the volatility in the price of crude oil has exacerbated the country’s poor revenue base.

​The government has been talking about diversifying the economy away from oil, with its focus now shifting to other sectors of the economy, especially the non-oil sector.

The concentration of government effort, he pointed out, was now on domestic resource mobilisation in the area of improvement on the country’s tax administration to widen the tax net to cover the formal sector, to generate more revenue.
The Chairman of the Ebonyi State Fiscal Responsibility Commission, Mr. Vincent Mbam, said the team was in Abuja to build their capacity in order to help achieve the change mantra in the country.

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