N90bn bailout: FG to evaluate states’ fiscal plan

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N90bn bailout: FG to evaluate states’ fiscal plan

N90bn bailout: FG to evaluate states’ fiscal plan
September 25
06:57 2016

The Federal Government will soon begin an evaluation of the rate of compliance by state governments with the implementation of the Fiscal Sustainability Plan, which they signed onto in June.

The adoption of the FSP was a condition given by the Federal Government before it started the disbursement of the N90bn budget support facility to the states to enable them pay workers’ salaries.

The Minister of Finance, Mrs. Kemi Adeosun, had on June 14 while announcing the N90bn conditional loan facility to the states, said the fund had been secured from the private sector for the state governments through the issuance of bonds in the bond market.

She had said during a meeting with the commissioners of Finance from the 36 states of the federation that the loan would be given within a one-year period.

The minister explained that based on the agreement with the state governors and the commissioners, N50bn would be released within the first three months, and that each of the 36 states would get about N1.3bn.

Thereafter, she said, N40bn would be released over a nine-month period as the second tranche through the bond market, and each state would receive the sum of N1.1bn.

The subsequent release of the fund, according to her, is subject to the achievement of some milestones by the respective state governments as contained in the FSP.

There are 22 conditions contained in the FSP. Some of them are that a restriction will be placed on states’ borrowing from commercial banks; all states must publish their financial statements, budgets and the quarterly budget performance; states’ finances will no longer be shrouded in secrecy; and items like security vote, feeding and travel, among others, will be made visible.

Others are that the states will review obsolete revenue laws and tariffs; and redefine Internally Generated Revenue to include non-tax revenue sources that will reflect local opportunities in each state, especially in solid minerals.

In the same vein, the states were directed to set target limits for recurrent and capital expenditures; set target for personnel costs as a percentage of the total budget; clean up their payrolls by eliminating ghost workers; as well as set up Efficiency Units to reduce the cost of governance.

Responding to enquiries on the implementation of the programme shortly after this month’s Federation Account Allocation Committee meeting held on Tuesday, Adeosun said the government was still disbursing the facility to the 35 state governments that signed on to the plan.

She, however, said while the Federal Government was satisfied with the fact that most of the states had been able to resume the payment of salaries as a result of the loan package, the Ministry of Finance was currently in the process of appointing consultants to monitor the rate of implementation of the FSP.

She said, “We are quite happy that majority of the states have resumed the payment of some, if not in most cases, salaries and we are encouraging them to continue to do so and they have made that commitment.

“We recognise that at these difficult times, payment of salaries is paramount and the governors have committed to it; the commissioners are committed to it and the Federal Government is committed to it.

“We recognise that really, that is what keeps the economy moving; that is what stimulates demand; and we really are so far quite satisfied with how the state governments have gone about meeting their obligations.”

She added, “The budget support facility is conditional and at the moment, we are in the process of appointing the monitoring consultants, who will be going out to the state governments to monitor how they are complying with the fiscal sustainability plan.

“That is the commitment that they have made about the reforms that they were going to do.”

Before the conditional loan was released by the Federal Government, about 27 states were unable to pay the salaries of their workers.

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