Unless there is a quick resolution of the row between the Federal Government and states over deductions from the Federation Account, many states may not be able to pay salary this month.
Governors have rejected their September allocation until the disagreement is resolved.
Chairman of the Nigeria Governors Forum (NGF) Dr. Kayode Fayemi indicated yesterday that governors are angry.
He said: “We are dealing with the issue. We would find a resolution to it. As far as states are concerned, they do not accept that funds belonging to Federation Account could just be arbitrarily deducted without the input of the states, and that’s why we are insisting that until this is clarified, we would rather leave the money in the pool until we have all agreed on the direction.”
He spoke on the sidelines of the 27th Nigerian Economic Summit in Abuja.
The issue is the commencement of deduction of the consultant fees from the September allocation in the Federation Account.
The consultant fee is believed to be $416 million, which is a percentage of the Paris Club loan refund that they assisted the states to get back from the Federal Government after the states overpaid.
It was learnt that the Minister of Finance, Budget and Planning Mrs Zainab Ahmed, bowed to pressure, having been served the mandamus judgment obtained by the consultants.
The judgment, it was gathered, directed the minister to directly deduct the consultancy fees from the states’ allocation from the Federation Account.
A source said: “The Finance Minister’s hands were tied by the judgment. She also got an advise from Attorney-General and Minister of Justice Abubakar Malami.”
A Federation Account Allocation Committee (FAAC) member familiar with the issue said: “Some years back, state governments overpaid their remittances of their Paris Club debt to the Federal Government. To recover their money, state governments individually hired consultants to help them recover their money from the Federal Government.”
He said while the states individually had an agreement with the consultants, over time, the states came together under the umbrella of the Nigerian Governors Forum to harmonise their claims and thus paved the way for the consultants to also “amalgamate” as a united body to fight for the refund to the state governments.
The consultants, the official stated, succeeded in recovering the amount from the Federal Government and the monies were paid directly to the individual state governments.
However, after the consultants won their case in court, the states collected their refunds and never bothered to pay the consultants.
The consultants in turn, approached the court and sued the states to pay the agreed percentage of the total sum returned to them by the Federal Government.
The official said the federal government was joined in the suit against the states by the consultants in order to get their money directly from the monthly FAAC allocations of the states, if the judgement ended in their favour.
In accordance with their expectation, when judgement was delivered, it was in favour of the consultants. The state government did not appeal the judgement until the period for appeal elapsed.
Thereafter, the consultants approached the Ministry of Finance to be paid directly from the FAAC allocations to the state governments the agreed percentage of the total sum agreed upon between the states and the consultants.
When that did not happen, the consultants went to court again and got a mandamus compelling the Federal Government through the Federal Ministry of Finance to pay the consultants.
Another area of contention between the federal and state governments is the exact amount to be paid the consultants. What is not in doubt however, is that the amount runs into over a trillion Naira.
This development, along with other judgement debts were presented to President Muhammadu Buhari, who authorized that a 10-year Promissory Note be issued by the Federal Ministry of Finance, Budget and National Planning and the Debt Management Office (DMO) to offset most, if not all of the judgement debts.
The Promissory Note has been issued and the consultants can either hold on to the promissory notes until they mature in 10 years or they can redeem them for cash from their banks.
Having settled with the consultants through the issuance of promissory notes, the Minister of Finance and the Permanent Secretary have started withdrawing portions of the debt from the states’ accounts and paying same to the consultants in six special accounts to be drawn down over a 10 year period.
Each account is opened in favour of the six consultants, two representing the 36 states and four others representing the 774 local government Areas of the country.
Following the action taken by the Minister of Finance and Permanent Secretary to commence the direct deduction of what is owed the consultants from the states’ monthly allocation, the states, it was learnt, have rushed to President Muhammadu Buhari to secure a political settlement.