ECONOMIC CRISIS: No more bailout funds for States - FG

·Gives conditions for accessing N90bn

 

The Federal Govern­ment has dashed the hopes of the 36 states of the federa­tion of getting another round of financial succour from the Muhammadu Buhari Presi­dency.

Hit by another round of cash crunch with most of them unable to pay workers’ salaries, the states have been pushing for fresh financial bailout funds from the Fed­eral Government to meet most of their obligations.

Last year, President Bu­hari came to the rescue of the cash-strapped states when he disbursed the sum of N338 billion to 22 states to pay workers’ salaries.

The Central Bank of Ni­geria (CBN) however pub­lished 19 of the states which benefitted from the package.

The states were: Kwara, Zamfara, Osun, Niger, Bauchi, Gombe, Abia, Ad­amawa, Ondo, and Kebbi.

Others include: Ekiti, Imo, Ebonyi, Ogun, Plateau, Nasarawa, Sokoto, Edo and Oyo states.

The package has a 20-year repayment tenure for all states, except Ogun State, which opted for a 10 year tenure.

Nigerians were, howev­er, shocked when the Inde­pendent Corrupt Practices and Other Related Offences (ICPC) published a report which showed that most of the states diverted the funds.

It is believed that the de­velopment informed the Fed­eral Government’s refusal to grant the request of the states for another round of finan­cial bailout funds.

The Federal Govern­ment announced a N90 bil­lion bond for the states with stringent conditions for ac­cessing it.

The conditions are con­tained in its Fiscal Sustain­ability Plan (FSP) Fiscal Framework for Sub-Nation­al Governments (States) in Nigeria which the Minister of Finance, Mrs. Kemi Ade­osun, released on Tuesday at a stakeholders’ meeting at­tended by the 36 states Com­missioners for Finance.

The minister declared that there were no more bailout funds for the states. Rather, participating states were mandatorily required by the government to meet the specified conditions be­fore accessing the bonds.

Adeosun noted that the last bailout funds to states were given in July last year without any condition at­tached and were not re­paid, adding that “this time around, states must meet the conditions and must repay the loans.”

She explained that the FSP, which will run for 18 months, will within the pe­riod have the funds released to the participating states in two tranches of N50 billion in the first three months and N40 billion within the subse­quent nine months.

The 22-point conditions to be met by participating states for accessing the loan facility include publication of audited annual finan­cial statements within nine months; introduction and compliance with the Inter­national Public Service Ac­counting Standards; publish state budget online annually; publish budget implementa­tion performance report on­line quarterly; set realistic and achievable targets to im­prove independently gener­ated revenue, and implement a centralised Treasury Single Account (TSA) in each state.

Other conditions are quarterly financial recon­ciliation meetings between federal and state govern­ments to cover Value Added Tax (VAT), Pay As You Earn (PAYE) remittances, refunds on government projects, Par­is Club and other accounts, review of all revenue relat­ed laws and update of obso­lete rates and tariffs, set limits on personnel expenditures as share of total budgeted ex­penditure, among others.

According to the minis­ter, the FSP objectives include that states must improve ac­countability, increase public revenue, rationalise public expenditures, improve finan­cial management and main­tain sustainable debt man­agement.

She said: “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 bills 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.”

She explained that the FSP is based on the funda­mental principle that each and every state in Nigeria must be economically viable.

Adeosun continued: “It recognises the fact that In­ternally-Generated Reve­nue (IGR) 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, they 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.

“The FSP will begin the process of guaranteeing that states take responsibility for their financial viability. Pur­suing the objective IGR rath­er than Federal Allocation should be their principal fo­cus of revenue.