How FG bailed out states with 3 packages – Osinbajo
Vice President Yemi Osinbajo has revealed how the Federal Government bailed out distressed states, using three packages to enable them pay salaries and execute capital expenditure.
Osinbajo, who disclosed yesterday at the 21st Nigerian Economic Summit which opened yesterday in Abuja that he had been designated by President Muhammadu Buhari to coordinate the economy, said the bailout has led to about 80 per cent reduction in the states’ commercial loan repayments.
Before the Buhari administration intervened, the states were hamstrung by a total loan profile of N680 billion obtained from commercial banks.
The VP told his audience during the Presidential Policy Dialogue at the Summit that the Presidency realized the loans had become a burden to the states, especially as federal allocations continued to dip over time. “For instance, a state that was earning N2.1bn was paying about N600m in loan repayment,” he explained, adding an example of a state he didn’t mention, which was getting N4.6bn a month from the federal allocation but has to make do presently with N2.1bn because of drop in oil revenue.
As a first step in giving the states some relief, Osinbajo explained the federal government had to work out a way by which the banks could take federal government bonds and the states would then owe the federal government for the period of 25 years.
Government then, as the second bailout measure, provided a window for states to borrow as much as N10bn in total. “That window allows them to borrow about N10bn at about 9 per cent interest, but with specific conditions,” he said.
Third, government decided to empower the states financially, by advancing them early, payments they were statutorily entitled to.
“For example, we made a payment from federal allocation but that payment was simply in naira value of the foreign exchange dividends that they were entitled to but we made that payment early,” he said.
On the logic that necessitated the bailouts, the VP said government thought beyond the allegation in some quarters that some governors mismanaged state funds and lost money. Rather, he said, “everyone recognised that the states were getting far less than within the same period what they were receiving just six months before and decided to bail them out.”
While quickly clarifying that government was not absolving states of fiscal indiscipline, he added that the situation demanded that the federal government act accordingly in the interest of the people, especially workers, many of whom were owed many months in salaries.
The VP had declared the Summit open by admitting that the country was undergoing monumental challenges and compelling tough choices, Despite these, he argued, it is also presented, at this time, with incredible opportunities for achieving competitiveness, inclusive growth and sustainability.
“We (the Buhari government) are called upon to make tough choices in exchange control restrictions, all through the absurd recurrent to capital expenditure ratio, reducing the deficit and overall size of government. We are called upon to clean up the mess and rebuild the institutions that corruption had ravaged over the years,” he said.
Osinbajo declared that sincere leadership had been what the country lacked for a long time.