of bailouts 2

So you’re a dad, you run a business, sales have been down 50%, your scaling back on expenses. You have a daughter in University, you give her an allowance to buy data of N1,000 a month,.

One day, she comes to you and says, “oh dad, my data usage is N1,500 a month cause I download a lot of music and videos, I am owing N2,000.00 for 4 months, can you help me?” options…

1. Increase her allowance? Remember your sales/income are down 50%
2. Pay the debt, but ask her to reduce her data consumption to match her allowance?

A smart dad will pick option (2). You pay for the outstanding debt, but you address the central issue, her data bill has to come way down to reflect the reality of her allowance.

Osun State owes a lot, Osun has received a bailout of N123.59b, out of this figure, N34.99b is a CBN loan to pay salaries. Osun monthly wage bill is N3.6b, so a quick and dirty calculation shows that the CBN bailout will cover Osun for 8 months….note this based on FAAC allocations remaining the same. The math’s is not exact but intended to show that these bailouts are temporary measures. In Fact Gov Ajimobi of Oyo State said “Hopefully, we should access the bailout next week .As soon as we finish paying the outstanding salaries, we will start owing again as we still have to scramble for more money.”

In effect, sometime in the future, these owing states will start owing again…..so how do we fix this? For good?

In management 101, this is simple, to solve this crisis, it’s either the states start earning more or the states cut down costs… to be specific staff costs. In fairness to Osun, Governor Aregbesola cut down salaries and it was rejected by the state workers.

Ignoring for a second the failure of the Governors to broaden their state economies, State civil servants are wrong to insist on the same salaries nationwide. The workers in Nigeria richest state (with high rents) cannot be paid the same as workers in Nigeria poorest state, thus the wage and salaries need to be taken from the Exclusive list in the Constitution and taken to the Concurrent list. This way states like Osun are able to negotiate wages with her own workers and are not bound by the Federal minimum wages.

That will be the start to the restructuring the states and solving this self-inflicted crisis.
Another idea is to adopt the US model of mandating states to balance their budgets, yearly…..if FAAC falls, then the state must respond and not carry over salaries for 8 months….This can only work if the States are given devolved fiscal powers, VAT for instance has no business going federal, states should set their VAT rates, collect it locally and spend locally…

In summary however, we need CEO to become governors, I hope the voters going forward will understand that good politicians may not make great CEOs of states. As some states are receiving bailouts to pay salaries, some states are increasing salaries of their workers…same nation.
We can do better

Its our problem, we can fix it