Minister of Finance, Kemi Adeosun, says the Federal government will be granting states a N90 billion loan which is to be paid back within one year. At a meeting with the finance commissioners of the 36 states to discuss the Fiscal Sustainability Plan FSP in Abuja yesterday June 14th, Adeosun said the loan will be given to the state governments after they meet 23 stringent conditions put together by the federal government. According to her, the loan will be in two tranches
“The loan is in two tranches – N50 billion for three months to be shared across the 36 states including FCT and then N40 billion for nine months. The idea is to tie states over for a year so that they rebalance. The loan is an average of about N1.3 billion per state for the first three months and N1.1billion for the next nine months. It is a loan and it is fully repayable although it has a secured tie against future dividends, revenues and any amount that government might owe the states.”she said
She also announced that state governors are not to collect any more loans from banks but should rather source for funds from the capital market. The decision was taken due to the disappointing manner in which some past and present state governors have managed the loans they have taken from some commercial banks. She noted that the stability of the economy in the states would reflect on the economy of the country as a whole.
“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, FSP, 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.
By raising the standard for public financial management in the areas of transparency, accountability and efficiency, states will be repositioned 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 said
Here is a list of all the 23 conditions state governors have to fulfill to access the Federal Government’s N90 billion loan that was announced by Minister of Finance, Kemi Adeosun.
Publish audited annual financial statements within nine months of financial year end.
- Publish audited annual financial statements within nine months of financial year end.
- Comply with the International Public Sector Accounting Standards (IPSAS)
- Publish state budget online annually
- Publish budget implementation performance report online quarterly
- Develop standard IPSAS compliant software to be offered to states for use by state and local governments
- Set realistic and achievable targets to improve independently generated revenue (from all revenue generating activities of the state in addition to tax collections) and ratio of capital to recurrent expenditure
- Implement targets
- Implement a centralised Treasury Single Account (TSA) in each state
- Have quarterly financial reconciliation meetings with federal government to cover VAT, PAYE remittances, refunds on government projects, Paris Club and other accounts
- Share the database of companies within each state with the Federal Inland Revenue service (FIRS). The objective is to improve VAT and PAYE collection
- Introduce a system to allow for the immediate issue of VAT/WHT certificates on payment of invoices. Review all revenue related laws and update obsolete rates/tariffs
- Set limits on personnel expenditure as a share of total budgeted expenditure
- Biometric capture of all states’ civil servants will be carried out to eliminate payroll fraud
- Establish efficiency unit
- Federal government online price guide to be made available for use by states
- Introduce a system of continuous audit (internal audit)
- Create a fixed asset and liability register
- Consider privatization or concession of suitable State-owned enterprises to improve efficiency and management
- Establish a capital development fund to ring- fence capital receipts and adopt accounting policies to ensure that capital receipts are strictly applied to capital projects
- Domesticate Fiscal Responsibility Act (FRA)
- Attainment and maintenance of a credit rating by each state of the federation
- Federal government to encourage states to access funds from the capital markets for bankable projects through issuance of fast- track Municipal bond guidelines to support smaller issuance and shorter tenures
- Comply with the FRA and reporting obligations, including: No commercial bank loans to be undertaken by States; Routine submission of updated debt profile report to the DMO.
Photo of the President Buhari, Vice President Osinbajo and the state governors after a meeting at the presidential villa, Abuja