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States may get budget support loans of N50 billion from government

By Mathias Okwe and Chuka Odittah , Abuja   |   15 June 2016   |   3:48 am
Minister of Finance, Mrs Kemi Adeosun

Minister of Finance, Mrs Kemi Adeosun

• Govs to show proof of prudent use of security votes
• Minister launches fiscal plan to rescue economy
• Inflation rises to 15.6 per cent

Although the nation’s economy continues to falter amid threatening recession, relief may be on the way for cash-strapped states of the federation as each of them may, under some conditions, get budget support loans of up to N50billion from the Federal Government.

Disclosing this at the launch of a new stimulus package to reflate the economy and further bail out cash-trapped states struggling to meet basic obligations like the payment of wages and meeting servicing of debt liabilities , entitled ‘Fiscal Sustainability Plan’ the Minister of Finance, Mrs. Kemi Adeosun, said the new fiscal stimulus  would be conditional liquidity support designed by the government to support states willing to embrace transparency and cost- cutting strategies in the management of their resources.

She spoke at a meeting with states’ finance commissioners in Abuja yesterday.Accordingly, states willing to key into the scheme must fulfill certain basic prudent requirement like showing evidence of how they have kept their books of accounts, including how the security votes were spent as well as design new workable alternative sources of internally generated revenue as opposed to the over-reliance on allocations from the Federation Account for the funding of their budgets.

Meanwhile, inflation rate in May rose to 15.6 per cent, up from the 13.7 per cent rate recorded in April, according to the National Bureau of Statistics (NBS).

The Consumer Price Index (CPI) released by the bureau and made available to The Guardian yesterday indicated that the rise of the costs of goods and services in May by 1.9 per cent of the figure captured in April represented the fourth consecutive month-to-month increase.

One of the desk officers of the new fiscal stimulus package yesterday told The Guardian that the Federal Government embarked on the strategy with the support of multilateral agencies to assist the states solve their liquidity challenges at the moment as opposed to their compounding their huge debt portfolios from the banks.

The officer who asked not be named as he had not been permitted to talk on the scheme which was still being finalised said the fiscal support was different from the earlier bailout which was unconditional.

Only states compliant with the Federal Government’s new fiscal regime to enthrone prudence and transparency in the management of resources will be qualified for this liquidity support,” he said.

Addressing the commissioners latter, the Finance Minister, Mrs. Kemi Adeosun told them that the scheme was a critical part of the President Muhammadu Buhari-led administration’s plans to reset and reflate the economy.

The nation’s economy, she told them, is a confederation of the economies of her 36 states and the Federal Capital Territory , pointing out that the Federal Government recognised the critical importance of developing a broad-based economy, with productive activities in every region and state.

She further spoke more on the new fiscal plan : “ We must ensure that the necessary conditions for growth are firmly put in place. We are working to achieve this through investment in enabling infrastructure and reforms in the ease of doing business, which will spur growth and development in the private as well as public sectors.

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. 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 the individual accounts. This will enable states to control the size of their wage bill and ensure that it is affordable. The formal commitments being made to improved 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 recognises the fact that internally generated revenue must be maximised and we have extended the definition of revenue beyond the traditional confines of taxes, licences and fees. In some states, there is no significant private sector and therefore, states are being encouraged to identify their own areas of comparative advantage and to embrace partnerships with the private sector to generate revenue and stimulate development.

Such projects will establish the viability of key opportunities and will attract investors. In certain states, we are already seeing notable progress being made in specific agricultural products including rice and yam as a source of state revenue.

When fully implemented, the FSP will begin the process of guaranteeing that states take responsibility for their financial viability.
Pursuing the objective that IGR rather than Federal Allocation, should be their principal focus of revenue as a fundamental change in approach. We realise that this is not an overnight process, rather a journey, but it is a necessary one for the future of state and local councils in Nigeria.

By agreeing that further financial support under this guaranteed loan package, is conditional upon independently verified attainment of the 22 milestones, the state governors are to be commended. They are sending a strong signal that they are indeed partners in the journey towards the recovery of the Nigerian economy and are fully prepared to pay the price for a sustainable future,” Adeosun said.

According to the NBS: “In May, the Consumer Price Index (CPI) which measures inflation recorded a relatively strong increase for the fourth consecutive month. The headline index increased by 15.6% (year-on-year), 1.9% points higher from rates recorded in April (13.7%).”

It stated that the increase in rates in May, as compared to those of April reflected an overall increase in general price level across the economy, as all divisions which contribute to the headline index increased at a faster pace in the same period.

The bureau further revealed that year-on-year, electricity rates as well as other energy prices continued to manifest as key drivers of the core component of the CPI.

“The core sub-index increased by 15.1% in May, up by 1.7% points from rates recorded in the previous month. During the month, the highest increases were seen in the passenger transport by road, liquid fuel (kerosene), fuels and lubricants for personal transport equipment (Premium Motor Spirit) and Vehicle Spare Parts groups. Imported foods as well as a drawdown of inventories across the country continued to push food prices higher,” the NBS said.

The CPI showed that the food sub-index increased by 14.9 per cent in May, up by 1.7 per cent points from rates recorded in April as all major food groups which contribute to the food sub-index increased at a faster pace driven by higher food prices in fish, bread and cereals and vegetables groups for the second consecutive month. In addition, the imported food sub-index increased by 18.6 per cent in May, 2.2 per cent points from rates recorded in April.


In this article:
BudgetKemi AdeosunNBS


  • Curseless

    Scrap the security vote nonsense. In Nigeria that fund stands for “egunje” as most of the governors can not account for what they have done with the money and it is like throwing a choice meat to a lion.

  • UOU

    Docile Lugardian contraption, doomed to fail and die

  • emmanuel kalu

    rubbish, they would waste and loot the funds again. The conditions should massive investment in agriculture, because agriculture is the only and main source that can generate revenue immediately for the state. By giving this fund to state again, it is sure to be wasted again. This funds should be either directly paid to workers that are owed and used to invest in agriculture.

  • vincentumenyiora

    What it is about bailing out for State CEOs; OK, nobody is against or will be but what we are concerned about or interested in is about accountability – they become like the child whose parents have tried to reprimand and reminded to grow up about good house keeping – to act maturely and he doesn’t feel like it and worse, because they consider such bailouts as public money and on blackmail basis some of them do not care! So, mush as you may be persuaded to bail them out we want you to make accountability be part of the pre-conditions for the loans please or they wil keep coming back like Oliver Twist!

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