The Federal Government yesterday announced another loan package of N90 billion for states. Here’s a report as captured by NewTelegraph.
This is coming some 18 months after over N500 billion was dispensed as financial bailout to 27 states facing financial challenges. A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental), which borrows the funds for a defined period of time at a variable or fixed interest rate.
While the July 2015 bailout had no condition attached, the N90 billion loan package announced yesterday by the Minister of Finance, Mrs. Kemi Adeosun, which would be accessed through bond, comes with 22 stringent conditions that states must meet before they access the funds. She spoke to journalists after a closed-door session with states’ commissioners for finance. The minister explained that the state governors had been earlier briefed on the Fiscal Sustainability Plan (FSP) at a separate session.
The new package is coming on the heels of states’ indebtedness to the state civil servants and local contractors. Currently, the Federal Government is borrowing an average of N600 billion annually to augment payment of workers’ salaries. Shedding more light on the package, the Finance Minister said the loan would come in two tranches – N50 billion for three months to be shared across all the participating 36 states, and N40 billion for nine months. Each state would get an average of about N1.6 billion, she said.
Explaining that the fresh N90 billion package is not a bailout, but a repayable loan, Adeosun said the overall aim of FSP is to support states to overcome current fiscal challenges whilst reforming financial management to ensure their long-term viability.
The minister said: “The first thing to say is that this is not a bailout. It is very important everybody understands this. It is definitely not a bailout. The bailout was done last year July and there were no conditions attached.
This is a loan we have secured from the private sector and it has conditions attached to it.
“So, it is actually a loan to be repaid and not a bailout. What I mean by paying the price is that when you want to borrow money, the lender sets some conditions and these conditions are very stringent. There are 22 of them and I think all of you have the fiscal sustainability plan. “Government unanimously approved the plan and you know it is going to involve a lot of work.
The states have to clean up the ghost workers, they have to set up efficiency unit; they have to reduce the recurrent expenditure, they have to publish their accounts; they have to publish their budget. There are lots of very tough conditions.
“What I mean by paying the price is, governors and commissioners believe that these reforms are necessary if they want the reforms to be fiscally sustainable,” she said. On whether government has imbibed the spirit of fiscal federalism with the new stance that each state must develop ways of self-sustenance, she said: “Every state must be viable.
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