The federal government has cut down to 5 per cent, the interest rate on intervention facilities to state governments in addition to a bridging facility of N656.1 billion in a boost to assist them to repay the N1.75 trillion bailout facilities granted them in the early years of this administration.
The Minister of Finance Budget and National Planning, Zainab Ahmed Monday announced the approval by President Muhammadu Buhari of the bridging facility which covers a period of six months to cushion the effect in the repayment of three FGN Bailout facilities
The federal government since the advent of President Buhari’s administration has bailed out the states with a total of N1.75 trillion extra-statutory allocation including the N614 billion Budget Support Facility (BSF) approved by the Central Bank of Nigeria (CBN) at 9 per cent while the term was 20-year. The purpose was to help states facing fiscal difficulties meet outstanding salary obligations.
This was followed by the N575 billion restructuring programme bond negotiated through the Debt Management Office at 14.83 per cent to allow about 23 states to convert high-interest bank debt into a 20-year tenured debt.
Again, In July 2015, the federal government remitted approximately N92.18 billion to States from dividends worth $2.1 billion paid to the centre by Nigerian Liquified Natural Gas Company (NLNG).
Barely a year later, the sum of N7.85 billion was also approved by the federal government to assist states with revenue shortfalls in January 2016 from the dividend remitted by NLNG.
In July 2016, the federal government endorsed the allocation of N3.6bn from solid minerals savings to states as part of the routine monthly FAAC disbursements.
Another tranche of N117.3 billion was also disbursed to states, an amount taken from excess revenue generated from Petroleum Profit Tax (PPT).
The reduced interest rate and the N656 bridging facility may have been granted to prevent a strain between the federal government and the Nigeria Governors Forum (NGF). Kayode Fayemi, the NGF Chairman who is also the governor of Ondo state had threatened that states would stay away from the last Federation Account Allocation Committee (FAAC) when the Federal Government decided to begin deduction.
The federal government which had earlier planned to recover the funds in 2019 before the pandemic, now hopes to start deductions from states for repayment of the budget support facility, amid already strained relationship from deficit financing, shortfalls in its Federation Accounts Allocation Committee (FAAC) and its inability to sustain subsidy payments.
The reduction in the rate and also, the bridging facility are expected to cushion the deductions on many states, who were unable to increase their internally generated revenues, according to the latest data from the National Bureau of Statistics (NBS) as a result of the pandemic.
Speaking at the opening of the National Council on Finance and Economic Development Conference in Lagos with the theme, “Public Sector Finance Management in the New Normal (Post COVID -19)”, the Minister also disclosed that the modalities for the repayment of the facility including interest rate reduction to 5 per cent from 9 per cent, had been worked out and the disbursement would commence soon.
The boost from the federal government also came on the heel on the recently concluded arrangements with the World Bank to further make available another sum of $750 as Additional financing for States under the States Fiscal Transparency, Accountability and Sustainability (SFTAS) programme.
The minister admitted the economic strain in the last couple of years but noted “the good news is that our recovery rate from the pandemic has been sustainably good and encouraging”, adding that, “things are now looking up for us and our economy is bouncing back to normal.”
Lagos State Governor, Babajide Sanwo-Olu thanked the Federal Government for the various initiatives to boost the economy, adding that all hands must be on deck to rebuild from the destructions occasioned by the Covid – 19 pandemic.
He added that “we need to think outside the box, indulge in job and wealth creation by walking the rope, compelling both those in the private and public sector to focus more on exploring ways to do more with less or little.
“Optimise spending by cutting down wastages and excesses, be creative, create avenues for revenue creation, expand innovations, avoid unnecessary spending and create transparent ways and tendencies that will yield maximum value for every spending.”
Earlier, the Permanent Secretary of Finance, Aliyu Ahmed stated that various recommendations of NACOFED conferences in the past served as inputs for preparation of annual budgets as well as for policy formulation towards economic growth and development at both the federal and state government levels.
The Conference had in attendance, Senate Committee Chairman on Finance, Sen. Solomon Olamilekan Adeola, Hon. Kabiru Idris, Chairman House Committee on Development Partners and also a member of the House Appropriation Committee, former Governor of Gombe State and former Accountant-General of the Federation, Ibrahim Dankwambo, members of the Federation Account Allocation Committee (FAAC), State Accountant-Generals, and other Stakeholders.
Others expected at the two-day conference include the Governors of Ekiti, Borno and Kaduna State, Director-General, Budget Office of the Federation, Ben Akabueze, and the Governor of the Central Bank, Godwin Emeifele.