NIGERIA: BAYELSA STATE FACING FINANCIAL

C O N F I D E N T I A L SECTION 01 OF 03 LAGOS 000184 SIPDIS STATE FOR AF/W, AF/EX AND INR/AA STATE PASS TO USTR-AGAMA STATE PASS TO USAID/AFR/WA TWAY, AFR/SD DATWOOD, AND EGAT MOTT GABARONE FOR PHIL DROUIN DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ANESA/DHARRIS TREASURY FOR PETERS AND HALL RHMFIUU/COMUSNAVEUR NAPLES IT RHPHOGB/COMUSNAVEUR NAPLES IT E.O. 12958: DECL: 04/10/2018 TAGS: PGOV KCOR KCRM NI SUBJECT: NIGERIA: BAYELSA STATE FACING FINANCIAL CHALLENGES, SET-BACKS IN FIGHTING MILITANCY REF: LAGOS 74 Classified By: Consul General Donna Blair, Reasons 1.4 (B,D) ¶1. (C) Summary. The Director General of the E-Government and Due Process Bureau of Bayelsa State, Dimieari Von Kemedi, told PolOff on March 19 that Bayelsa State passed a completely unrealistic budget and was on the brink of insolvency unless oil prices increased. Bayelsa is addressing this financial crisis by trying to restructure the budget and reduce fraud; Bayelsa currently pays salaries to some 28,000 public servants despite having a population of less than two million inhabitants that would normally require a public service workforce no more than 4,000 strong. Kemedi also expressed concern that the efforts to demobilize the militants in Bayelsa were stalled by the failure of the Federal Government to provide amnesty and suggested that the Joint Task Force (JTF) has no interest in ending the violence in the Niger Delta. While Kemedi appears sincere in his desire to address the problems in Bayelsa, Post questions the efficacy of the proposed fraud detection and fiscal responsibility measures. Likewise the will or power of Governor Timipre Sylva (Peoples' Democratic Party - PDP) to implement the initiatives outlined appears questionable. End Summary. Budget Priority to Income Generation and Cost Savings -------------- -------------- ¶2. (C) Dimieari Von Kemedi, Director General of the E-Government and Due Process Bureau of the Bayelsa State government told PolOff on March 19 that Bayelsa State had passed a completely unrealistic budget based on oil-price assumptions far above current prices. The State has been receiving much smaller allocations from the Federal Government than expected as a result of the drop in oil prices and is facing insolvency in the short term unless oil prices improve or State expenditures are drastically reduced. Kemedi admitted that within the next couple of months, the State would be unable to pay public servant salaries unless there was some improvement in allocations and or reductions in payroll. To address this crisis, the state government is restructuring the budget to give priority to those allocations which can generate revenue (i.e. reduce the dependence on allocations from the Federal Government),save costs, and generate private employment (i.e. increase the tax base). Income Generation in Agriculture -------------- ¶3. (C) Kemedi claimed that Bayelsa sees the greatest potential for income diversification in agriculture. The State wishes to invest money in projects that will foster the establishment of palm plantations and palm oil processing, fish farming and deep sea fishing. Fish farming projects will focus on catfish and shrimp production. In addition, the state has purchased two fishing trawlers for off-shore fishing and wants to encourage more Bayelsians to engage in deep sea fishing. Cost Savings from Fraud Prevention -------------- ¶4. (C) On the cost savings side of the equation, the Bayelsa State government recognizes that fraud is the primary cause of cost inflation and established a Multi-Stakeholder Working Group on Bayelsa State Expenditure and Income Transparency Initiative. This body is chaired by Kemedi himself and includes the State Attorney General, the Commissioners of LAGOS 00000184 002 OF 003 Health, Finance and Information, the Ijaw Youth Council, the Ijaw National Congress and the major International Oil Companies (IOCs),as well as several environmental NGOs. The working group seeks to ensure transparency in government spending by publishing expenditures on the internet on a monthly basis. Kemedi told PolOff that an important aspect of the software developed for implementation of this project is that it does not have to pass through the Ministry of Finance but that each project manager can enter data directly. He noted also that all payments to contractors had to go via banks and that the banks were held liable for these payments. Kemedi said that the World Bank was also involved in overseeing the planned reforms, although he provided no additional details. Kemedi also noted that "many good ideas" ended at the governor's desk because the governor said: "Let's do it" but there is no one in the state government with the capacity to implement the governor's decisions. ¶5. (C) Kemedi also stressed the need to eliminate the many duplicate and "ghost" workers currently on the State payroll. Bayelsa currently pays roughly 28,000 public servants although as a state with less than two million inhabitants a public service workforce of roughly 4,000 workers ought to be sufficient. The payroll is so inflated that it devours the bulk of the State budget. According to Kemedi, the word "biometrics" strikes "fear into the hearts" of all "ghost workers" and their patrons. He claims that the earnings of the "ghost workers" are going to a very small clique of people. Kemedi put the number of the beneficiaries as low as 15 and felt that it would be possible to move against them without a serious backlash. As a second step in reducing the dangerously inflated payroll, Kemedi plans to eliminate "duplicate" employment. He believes that many employees are listed on the payrolls of multiple agencies and ministries, thereby drawing double or triple salaries. The final step in reducing payroll costs would be to eliminate all those drawing pay based on fraudulent employment documents. Kemedi believes that implementation of these three steps would reduce the work-force by as much as 80 per cent or from 28,000 public employees to 5,600. While this is still too high for a state the size of Bayelsa, the cost savings would be sufficient to free up substantial revenues for investment in development, health, education etc. Kemedi said he would welcome any help he could get in obtaining fraud detection and prevention training for the staff charged with implementing these programs. Demobilization of Bayelsa Militants Stalled -------------- ¶6. (C) The demobilization of militant camps located in Bayelsa called for at the Yenagoa Youth Summit on February 7 (Reftel) appears stalled by the lack of amnesty for militants. At the Yenagoa Youth Summit, militants were given three months to leave the camps and surrender their arms or be considered criminal. Kemedi pointed out to PolOff on March 19 that seven weeks had already passed but no militant camps, which he estimated to contain no more than 1,000 youths altogether, had been disbanded. Kemedi attributes the lack of positive response from the youths to the absence of amnesty - which can only be given by the Federal Government. (Note: According to press accounts, President Yar'Adua announced to the PDP leadership on April 2 his intention to grant amnesty to Niger Delta militants who lay down their arms and agree to be reintegrated into society. Yar'Adua also claimed that the details of the amnesty conditions would be announced the week of April 6, which has now passed. End Note.) ¶7. (C) Kemedi furthermore expressed concern that the Joint Task Force (JTF),which is supposed to be fighting the LAGOS 00000184 003 OF 003 militancy in the Niger Delta, is in fact keeping it alive to ensure its own relevance. Kemedi complained that military and police commanders were "always in Government House trying to get contracts and bribes." Kemedi argued that the Niger Delta would be better served by local police, recruited from the communities in which they served and familiar with the inhabitants. Kemedi added that the communities view the militants as criminal not as "freedom fighters." ¶8. (C) Comment: Kemedi appears sincere in his desire to address the problems of corruption and militancy in Bayelsa. However, he faces serious handicaps due to the lack of capacity in the State government for implementing his transparency and accountability programs. In addition, the danger of back-lash from those who stand the most to lose from his proposals should not be underestimated. With respect to the demobilization of militants, Post has heard from other sources connected to the militants that amnesty is a prerequisite for demobilization; Kemedi's remarks about the JTF's interest in perpetuating the conflict have also been voiced by other interlocutors. However, the recent presidential announcement of a possible amnesty plan that would only cover those willing to lay down their arms and reintegrate into society, along with "new rules of engagement" for the JTF suggests that the GON might finally be moving on a framework for the Niger Delta, but more likely this is just additional rhetoric. End Comment. BLAIR