A Federal High Court sitting in Abuja on Wednesday stopped the Central Bank of Nigeria from further releasing monthly federal allocations to the Rivers State Government.
This order stopping the release of federal allocations to Rivers comes after a suit was filed by the Rivers House of Assembly faction led by Martin Amaewhule, challenging the legitimacy of the four-member faction loyal to Fubara who approved the appropriation bill earlier sent by Governor Siminalayi Fubara.
Background
In October 2023, 27 members of the Rivers State House of Assembly loyal to the former governor of Rivers, Nyesom Wike Led by the Speaker, Martin Amaewhule moved to impeach Governor Siminalayi Fubara.
The impeachment plan was foiled by the governor and the house in December 2023 declared the seats of the pro-wike members were vacant, the governor thereafter proceeded to present the state’s N800 billion Appropriation Bill for the 2024 fiscal year to the four-member Rivers House of Assembly loyal to him.
Court Ruling
In her ruling in a suit brought before her by the 27 dismissed lawmakers, Justice Joyce Abdulmalik sitting in a federal high court in Abuja on Wednesday found that Governor Fubara’s presentation of the 2024 budget to a four-member House of Assembly breached constitutional protocol.
The judge highlighted that since January, Rivers State has received and spent allocations based on an “illegitimate” budget, describing this as a “constitutional aberration’. She thereafter restricted the CBN, the Accountant General of the Federation, and the state’s accounts at Zenith Bank and Access Bank from releasing any further funds to Governor Fubara.
Rivers State Finances
According to the Nigerian Bureau of Statistics (NBS), Rivers State generated N195.41 billion in Internally generated revenue in 2023. This figure places the state third for IGR within this period only surpassed by Lagos and the FCT.
The state generated N186.96 billion in taxes and N8.447 billion from MDAs in addition to substantial federal allocations, which rose from N293.79 billion in 2022 to N339.53 billion in 2023, marking a 15.57% increase.
This increased allocation from the Federal Account Allocation Committee (FAAC) which accounts for 60.44% percent of the state’s total revenue is due to derivates from being a a major oil-producing state.
At first glance, Rivers’ financial situation looks healthy but the state’s expenditure and increasing debt threaten the sustainability of the state, especially with the stoppage of its federal allocations.
Rivers state Expenditure
The state’s 2024 budget was put as N800billion. Out of this figure, the State Government intends to spend N410 billion (55%) on capital expenditure while the remaining 45% will be used to fund recurrent expenditure.
About 36% of the funding for this budget is expected to come from Federal government allocations. This shows how reliant the state is on federal allocations despite its significantly high internally generated revenue.
The Debt Problem
Rivers state’s debt as at 2023 was put at N305.37 billion. This is as a result of numerous capital in tensive projects embarked upon by the Rivers state government in recent years.
In the 2024 budget, debt servicing accounts for N76.9billion while a further borrowing of N264.9 billion is earmarked to finance budget deficits. The court order suspending federal allocation to Rivers state therefore puts the state in a more dangerous position with regards to its growing debt profile.
Implications for Rivers State
With the Rivers state house of Assembly saga looking unending and the power tussle between Wike and Fubara getting thicker, the freeze on federal allocations to Rivers could not have come at a worse time.
The state is expectedly going to struggle to pay salaries having based a significant part of its budget on federal allocations. This allocation by the recent order has now been taken away for the rest of the year meaning the state’s ability to deliver good governance for its citizens would be further hinged upon.
The stop in federal allocations bring with it a situation of the Rivers government having to turn to loans to fund budget deficit which further worsens the states’ already high debt sustainability profile.
