- The federal government has barred banks in the country from giving loans to state governments
- The decision was taken in line with the Fiscal Sustainability Plan (FSP)
- The federal government’s economic team and state governors agreed to this plan
The federal government has barred banks in the country from giving loans to state governments. The move is to ensure effective and transparent management of sub-national resources.
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| President Buhari and his team are using every means possible to ensure that the Nigerian economy does not collapse |
At the moment, some states are left with very little funds to meet their recurrent obligations, after deductions are made from their monthly federation account allocations.
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| Nigerian past and present state governors have been accused of squandering bank loans |
As an alternative, the federal government asked the state government to source for funds from the capital market if they intend to carry out any major infrastructural project.
According to the government’s directive, funds sourced through bonds must not only be on bankable, measurable projects but must also be released in tranches.
Vanguard gathered that the release of the proceeds of bond issuing will now be on the basis of satisfactory utilization of earlier released proceeds sourced and used.
The FSP aims to improve accountability and transparency; increase public revenue; rationalise public expenditure; improve public financial management; and sustainable debt management.
The reform process includes improvement in internally generated revenue, biometric capture of all civil servants; establishment of an efficiency unit in each state, implementation of continuous audit and measures to achieve sustainable debt management.
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| Nigeria’s finance minister, Kemi Adeosun is presiding over an ailing economy and doing all that it’s possible to revive it |
States that meet these conditions can access a new N50 billion facility to be guaranteed by the federal government.
Meanwhile, finance minister, Mrs Kemi Adeosun, yesterday, June 14 told finance commissioners all over the nation at a meeting that the current economic challenges facing the country is reminder to state governments to be prudent and transparent.
Her words: “Nigeria’s economy is a confederation of the economies of her 36 states and the FCT. Thus, we recognise the critical importance of developing a broad-based economy, with productive activities in every region and state.
“At the federal level, to create headroom for the urgently needed investment in infrastructure, we are pursuing a very disciplined approach to managing public funds, ensuring the maximisation of revenues and the minimisation of the costs of governance.
“The fiscal sustainability plan 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.”
Adeosun charged the commissioners to raise their states’ standard for public financial management in the areas of transparency, accountability and efficiency, which she opined will reposition the states 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 individual accounts.
“This will enable states control the size of their wage bill and ensure that it is affordable. The formal commitments being made to improve 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.
“In the area of revenue, the FSP is based on the fundamental principle that each and every state in Nigeria must be economically viable.
“Accordingly, 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,” She concluded.
In a related development, Nigeria’s inflation rate has hit an 80-month high of 15.6%.
The last time Nigeria recorded an inflation rate as high as 15.6% was in September 2009 when the rate of inflation was put at 15.86 %.
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