Examining the Delay in Accessing N90bn Loan Facility by States
Barely three weeks ago, the Minister of Finance, Mrs. Kemi Adeosun, unveiled plans by the federal government to facilitate a N90 billon loan to the 36 states of the federation to enable them meet their financial obligations to workers and contractors.
The gesture followed the predicament of some state governments that had been unable to pay salaries to workers for several months as oil revenues from the monthly federation account allocation continued to decline drastically.
The intervention, which the minister was quick to rule out as bailout but rather a loan which must be repaid came with stringent conditions attached to it.
The credit facility was made possible following the disposition of state governors to bend to the federal government’s demand that they all implement a comprehensive 22-point Fiscal Sustainability Plan (FSP) which was targeted at ensuring transparency, and cutting wasteful spending of public resources as observed in past administrations, where resources were deployed for personal satisfaction amid rising poverty and discontent among the people.
The states will still receive their monthly share of the federation account notwithstanding the proposed loan advancement to them.
On June 16, it was disclosed that only five states had met the stringent loan conditions.
Speaking while briefing State House correspondents at the completion of the National Economic Council (NEC) meeting in Abuja, Akwa Ibom State Governor, Mr. Udom Emmanuel, had disclosed that five states had met the criteria for accessing the loans at a single-digit interest rate of nine per cent while Lagos State had shown it’s not interested in the facility.
However, on June 27, Adeosun reportedly dismissed claims that any Nigerian state had met the 22 conditions to access the Federal Government’s N90 billion budget support fund.
She said: “When I keep reading that some states have complied, I think there is a misunderstanding. No state could have complied,” she said Monday on national Television.” According to her, “It is going to take about 18 months for all these reforms to get through but when they are concluded, we expect to have much more leaner, much more efficient and much more transparent state governments which I think will be good for the whole nation.”
The apparent confusion on states which had met the terms may have stemmed from the fact that the governor could have mistaken the submission of loan proposal documents by the five states in question to the Ministry of Finance for satisfying the loan conditions.
Nevertheless, a source within the ministry of finance told THISDAY that it was premature to say whether a state had met all requirements or otherwise, given that there are timelines to each of the conditions spelt out in the fiscal sustainability plan.
However, it would have been executed except for the states’ sordid financial positions and even some of them would have by now accessed the loans, if the requirement were not so stringent.
Economist and former acting Unity Bank Managing Director, Mr. Muhammed Rislanudenn, told THISDAY in an interview that it would require a lot of adjustment to states’ fiscal strategy to be able to meet the laid down conditions.
He said: “To me before granting the so called bail out to states we ought to ask: what they have done with huge funds accrued to them over the years from Federation account ? We all know the fiscal strategy of most states, which is largely tilted towards heavy reliance on federally collected revenue largely from oil sales to finance their annual budgets, has to be spurious and extremely unrealistic.
“Each of the states have the potentials of independent economic growth with or without oil but over the years, most of them became lazy because they can get easy hand-out monthly from Abuja. Now the amount to share from federation account has gone down drastically due, in large part, to reduced oil export earnings as well as lack of any fiscal buffer in savings to fall back on.”
He said: “Conditions set for states for bail out are not unrealistic or impossible to comply but some states find it difficult to easily comply because it requires a lot of changes to their fiscal strategy as well as how they manage their resources. Bailout will not end until states begin to seriously craft internal capacity for harnessing their full economic potentials for growth and optimising on same to enhance internally generated revenue.”