News

FG eliminates bailout, earmarks N90bn bond for States

KEMI ADEOSUN

Freda Okhiria, Abuja

Federal Government has announced an available bond of N90 billion for states as part of its Fiscal Sustainability ‎Plan (FSP) for the country, where N50 billion for three months would be shared across all the participating States‎ and then N40 billion for 9 months‎

The Minister for Finance, Kemi Adeosun, disclosed this at the Stakeholders Meeting held with Commissioners of Finance on the  Fiscal Sustainability Plan ( FSP) at the ministry’s headquarters in Abuja.

According to her, “N50 billion for 3 months to be shared across all the participating States‎ and then N40 billion for 9 months. The idea is to tie state over for a year so they can rebalance the portfolio, which is an average of about 1.3 billion per state for the first 3 months and N1.1billion for the next 9 months,”‎ she said.

The Minister who said the bond was federal government guaranteed, said, states are expected to pay back after 18 months period.

She said the draft FSP would address the issue of fiscal responsibility, or financial prudence, as part of the federal government’s on-going fiscal responsibility reform.

She said there are 22 conditions that states would sign to before accessing the loan.

“This is not a bailout, in the bailout, there were no conditions attached, here there are 22 conditions for states to sign to.”

Some of the conditions among others, are for states to eliminate ghost workers from payroll; publish state budget online annually; publish audited annual financial statements within 9 months of financial year end; implement a centralised Treasury Single Account (TSA).  

Asked if the federal government was ready to suspend federation account base on the new arrangement, the she said, “we are not suspending federation account.”

Explaining the framework, the Minister said, “‎at Federal level, to create headroom for the urgently needed  investment in infrastructure , we are pursuing a very disciplined approach to managing public funds, ensuring the maximisation of revenues and the minimisation of the costs of governance.

“The  Fiscal Sustainability Plan (FSP)  replicates this far reaching  public financial management reform programme across all tiers of Government and marks a turning point in the management of State Finances. By raising the standard for public financial management in the areas of transparency, accountability and efficiency, States will be repositioned to embark on a path towards fiscal independence.  

 

“On the cost side, the pressure is to cut costs  starting with the commitment to eliminate, once and for all, the menace of ghost workers by BVN checking of payroll and the requirement that all salary payments are made directly to the individual accounts.

“This  will enable States  to control the size of their wage bill and ensure that it is affordable. The  formal commitments  being made  to improved expense management, greater efficiency in recurrent spending and   prudent debt management, will combine to ensure that States can move towards improved long term financial health.

“In the area of revenue, The FSP is based on the fundamental principle that each and every state in Nigeria must be economically viable.

“Accordingly, it recognises the fact that Internally Generated Revenue must be maximised and we have extended the definition of revenue beyond the traditional confines of  taxes, licences and fees.  

“In some States, there is no significant private sector and therefore, States are being encouraged to identify their own areas of comparative advantage and to embrace partnerships with the private sector to generate revenue and stimulate development.  Such projects will establish the viability of key opportunities and will attract investors.

“In certain States, we are already seeing  notable progress  being made in specific agricultural products  including rice and yam as a source of state revenue. Similarly, other States are  working in new partnerships and exploiting their own solid minerals to generate funds.

“This is a development to be encouraged and emulated.  Never before has there been a greater need nor a greater opportunity to look inwards  to identify and explore local resources.

“This may entail, in certain States, a fundamental review of the role of Government  in line with revised objectives, but will yield long term sustainable dividends.”

According to her, “When fully  implemented,  The FSP will begin the process of guaranteeing that States take responsibility for  their financial viability. Pursuing the objective that  IGR rather than  Federal Allocation, should be their principal focus of  revenue is a fundamental change in approach. This is in line with our objective to have a diversified and inclusive economy where every state adds value.  

“We realise that this is not an overnight process, rather a journey, but it is a necessary one for the future of State and Local Government in Nigeria.

By agreeing that  further financial support under this  guaranteed loan package,  is  conditional upon independently verified attainment of  the 22 milestones, the State Governors are to be commended.

“They are sending a strong signal that they are indeed partners in the journey towards the recovery of the Nigerian economy and are  fully prepared to pay the price for a sustainable future,” she said.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

To Top