FG stops deduction of loans from states' allocations

The Federal Government has succumbed to demands by state governors to suspend at source deductions for repayments of their bailout loans, while assuring Nigerians that the current administration would not run an austerity government.

A total of N689.5 billion had been disbursed to several financially handicapped states as bailout to pay off backlog of their workers' salaries. The problem has, however, persisted as workers are still being several months' wages in many states.

The Minister of Finance, Kemi Adeosun, who announced the suspension of deductions as part of the outcome of yesterday's National Economic Council (NEC) meeting, said the idea is to enable the struggling states pay their workers' salaries.

The NEC meeting was chaired by Vice President Yemi Osinbajo and had many governors in attendance as well as heads of some agencies, including the Central Bank of Nigeria (CBN) and Ministry of Finance.

Stressing that the presidency will not operate an austerity government, the minister argued that non payment of salaries puts the economy in serious situation than a deferral of the loan repayments from the Federation Account.

She pointed out that the action was being taken even when the funds in the Federation Account as at March is N299 billion, which she noted as the lowest in recent times because of low oil prices for January and February even when the Excess Crude Account stands at $2.3 billion.

She said, "On the update of the financial situation of the states, it was discussed extensively that currently the Federation Account receipts are among the lowest that have been seen in recent memory. We are looking at N299bn this month and that is because of the very low oil price that was recorded in January and February.

"If you remember, oil prices went as low as $28 and $31; and of course, that has led to a very low Federation Account as a result of which I approached the President and the governors that we should defer the loan deductions from the Federation Account entitlements.

"The aim of this is to ensure that we support them through this difficult period to be able to meet salary obligations. The government is very committed to stimulating the economy and recognises that the ability of the states to meet salary obligations is a very important part of getting the economy moving again."

She noted that, "To that end, the President approved that deferral. The states have been asked to submit financial data that will allow us to module and predict how much support in terms of loan deferrals we might need to give just to get through this period until the economy recovers.

"I need to emphasise that it is not a bailout but a deferral; postponement of deductions just to allow the states to have the cash that they need to meet their salary obligations."

The minister said, "We have got to put money into people's pockets so that the people can start spending just to get the economy moving. Nobody stimulates the economy by austerity but by spending.

"So, in some states, as you know, the state governments are the highest employers of labour; so, if the state government is unable to pay, nothing happens.

"We have prioritised getting the states back into good financial health. Now, part of that is this commitment to fiscal sustainability and that is why we have asked the states to commit to cleansing their payrolls, commit to efficiency and maximising their Internally Generated Revenue."

"We have asked them to give us their financial data so that we can work together to create a financial module and understand what government needs to do to support the states. Of course, we are borrowing, but we have got to make sure that we are borrowing to support the states that are fiscally sensible and prudent in their management of money.

"So, the answer is we have a month guaranteed, but we are asking for information from the states to enable us to build a module so that we will know if it is three months or six months to supplement the shortfall to ensure that within reasonable parameters, majority of the states can pay salaries.

"And that is taking into account that different states have different obligations and different profiles; but the idea is to support them to be able to pay."







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