By the time President Muhammadu Buhari took over power on May 29 last year, it was glaring to the discerning that the economy was tottering and that urgent decisions needed to be taken on two critical fundamentals: subsidy payments for PMS and the exchange rate of the Naira. What particularly made decisions on the two issues compelling was that they both have such economic and political implications that if nothing was done, the matter could be forced out of the hands of the federal government.
Since the Nigeria National Petroleum Corporation (NNPC) makes subsidy payment a first-line charge from the federation account (even when the idea is not supported by law), it means that the 36 states and 774 local governments were contributors to the subsidy fund. And since the remaining sum being shared between the three tiers of government is in Naira, it also means that what is due them would also be dominated in the prevailing official exchange rate. Against the background that many of the states are in dire straits, it is difficult to imagine that such policy choices that practically reduce their earnings from the federation account by more than 50 percent would endure.
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