The Federal Government has barred banks in the country from giving loans to state governments.
The decision was taken in line with the Fiscal Sustainability Plan, FSP, which has been agreed to by the Federal Government’s economic team and state governors, to ensure prudent management of sub-national resources.
President Muhammadu Buhari’s administration, Finance Ministry sources said, was disappointed at the manner some past and current governors took loans from banks and misapplied such funds, while mortgaging their states’ finances.
Currently, some states are left with too little to meet even their recurrent obligations, after deductions are made from their monthly federation account allocations.
Gives condition for bond proceeds release Rather than bank loans, the Federal Government asked states to source funds from the capital market for their infrastructure development. It also insisted that funds sourced through bonds must not only be on bankable, measurable projects but must also be released in tranches.
Vanguard gathered that the release of the proceeds of bond issuing will, henceforth, be on the basis of satisfactory utilization of earlier released proceeds.
The FSP aims to improve accountability and transparency; increase public revenue; rationalise public expenditure; improve public financial management; and sustainable debt management.
Specific action points of the reform include biometric capture of all civil servants; establishment of an efficiency unit in each state, implementation of continuous audit, improvement in internally generated revenue, IGR, and measures to achieve sustainable debt management.
States that meet the above FSP conditions can access a new N50 billion facility to be guaranteed by the Federal Government. States must be prudent, transparent —Adeosun At a meeting with state Commissioners for Finance, in Abuja, Minister of Finance, Mrs. Kemi Adeosun, told them that the current economic challenges facing the country left state actors with little or no option than to be prudent and transparent.
According to her, all tiers of government operate in the same national economy and as such, the states cannot continue as if what happened at the federal level is not their business.
She said: “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.”
