How FG bailed out states with 3 pack­ages – Os­in­bajo

Daily Trust - - BUSINESS - By Fran­cis Arinze Iloani

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.


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