There appears to be a consensus as to the desirability for the payment of statutory allocations due to states in the US dollar. What appears to be missing is perhaps, the will to actualise it. In different fora and through the grape vine, senior government officials have voiced their preference for the commencement of the monthly federal allocations to states in dollars.

Just when agreement is reached to begin the process, something else develops and before long, a different instruction oozes out from the same government organ to truncate and set aside the previously well thought out and agreed policy.

Within the last 30 days alone, there has been several pronouncements made on the one hand in support of the move and the necessity for its implementation and on the other contrary, fluid and undefined pronouncements creating doubts and confusion as to what exactly the government wants to make of the whole policy.

Although denied by the Central Bank of Nigeria then, the commencement date for the payment of monthly allocations to states was slated for January this year.

The reason for the dollar payment policy was that the measure would strengthen the naira as well as help manage liquidly in the economy. The policy was not an after thought, as it had been part and indeed one of the pillars of the CBN’s ‘Strategic Agenda for the Naira’ which was initially scheduled for implementation flour months earlier. Its deferment was linked to the failed attempt by the monetary authority to redenominated the naira stalled by President Yar’Adua on account of non-compliance with due process and failure to obtain presidential concur.

But to underline the resolve of the CBN to implement the policy, state governments were a month earlier paid the $1.8 billion refunds from excess Paris Club exit debts in dollars.

Many view that payment in hard currency as a model to gauge how the system would eventually respond to the intended payments of the monthly federal allocations to the states.

The system could not allow the benefit of that experiment to be felt, as the government, in what has become almost a policy, reversed itself, denying that it had at anytime proposed to pay states in dollars. The spokesman of the CBN, Mr. Festus Odioko in response to The Nation’s quest to confirm the new policy thrust, denied that the Central Bank of Nigeria was thinking along that line. He said the CBN has not taken any decision different from the existing mode of payment of statutory allocations to the states. The CBN has not taken any decision on that, Mr Odioko said.

But the Minister of Finance Dr. Shamsudeen Usman offered reasons why the government decided to pay the $1.8 billion Paris Club exit funds to states last December in the US currency. According to Dr Usman who anchored the action on a decision on the outcome of the National Economic Council meeting said the dollar payment was aimed at managing the flow of naira in the economy which could impact negatively on the inflation rate. The Finance Minister’s position on the issue tallied with the CBN’s viewpoint which it has since packaged in to its ‘strategic agenda for the naira’ Part of that strategic agenda from the apex bank’s thinking is geared towards strengthening the nation’s currency and managing liquidity in the economy. Therefore between the CBN which is charged with monetary matters and the Ministry of Finance where fiscal issues take root, there’s harmony or agreements as to the desirability to effect statutory payments to the states in dollars.

To buttress this thinking, Dr. Usman confirmed that in addition to the $1.8 billion Paris Club exit payments to the states, the $4 billion excess crude oil revenue would be paid to the states in dollars. Alluding to his earlier grounds for similar payments made in dollars, the Finance Minister restated that this is to help in terms of managing the exchange rate impact of huge amount of money like this going into the system at one time.

However, despite the strong arguments for the dollar payments and arguably the support of the two key government financial organs pushing its actualisation, the President is said to have put a halt to the exercise apparently due to objections raised by concerned state governors. The argument has been parried by the states that at a time the naira was appreciating against the US dollar, it would be inappropriate for the states’ allocations to be made in dollars as that would result in a decrease in real terms of the value of money available to them.

It is in deference to the states’ protestations, analysts believe, that prompted the President’s directive to the Minister of Finance to ask the Central Bank of Nigeria to halt its proposed disbursement of the federal allocation to the states in dollars. Although the presidential directive to the Finance Minister stopping the dollar payment gave no reasons, it is believed that Mr President’s avowed commitment to due process and desire to carry everyone along, may have informed the direction of his latest action.

However, a section in the banking sector who spoke to The Nation on the issue expressed worry about the inconsistency that is gradually becoming a part of this administration’s style of governance, especially in financial matters. Those who spoke on condition of anonymity voiced their displeasure with the frequent manner the government keeps reversing itself on issues.

They recalled the developments that greeted the announcement last year, of the naira redenomination exercise. While excusing themselves from debating the merits or otherwise of naira redenomination, they carpeted the present administration for poor coordination of its agencies, as it gives the impression, they claim, of a rudderless ship.

"For a policy as important as naira redenomination or currency change, however they choose to call it to be made public, only for it to be reversed, goes to show that there are a lot of gaps in the bureaucracy that is this government."

That incident, the claim has already created a black spot for the system. "My fear is that, it appears the government, rather than take steps to erase or contain it, appears helpless, or even determined to build on that image."

Issues that pertain to monetary or fiscal policies should not be churned out rashly, they say, rather, they should be thoroughly examined and made public only after government’s position has been articulated. "The government most do away with its knack for being inconsistent. This idea of taking a step forward in a moment and in yet another, you retrace two steps backward is fraught with danger."

In yet another strident criticism, a banker who craves anonymity, says the whole idea of allowing the CBN to make policy statements in one breath which the government hastens to reverse, question the credibility of the apex bank in performing its statutory function.

Source: The Nation