The Federal Government will provide a N90 billion loan facility to state governments so as to reduce their dependency on the monthly handout from the Federation Account.
The states of the federation are expected to meet 22 stringent conditions after which the loan will be given to them over one year and will be repaid over a period of time.
Finance Minister, Kemi Adeosun, while speaking at the Stakeholders Meeting held with Commissioners for Finance on the Fiscal Sustainability Plan (FSP), said, “The amount of the loan is N50billion for three months to be shared across the 36 states, including FCT and then N40billion for nine months.”
“It is a loan and it is fully repayable although it has a secured tie against future dividends, revenues and any amount that government might owe the states.”
“We are not suspending the federation account; federation account will still be there, but we expect the federation account to recover and as it recovers, we will withdraw the need for this support.”
The Minister further stated that the state governments “have agreed to these conditions and the lenders have agreed to make an advance to them to help them through this period.”
“The loan is a bond and it has been guaranteed by the Federal Government and it is being issued and sourced in the normal way bonds are sourced.”
“Governors unanimously approved the plan; the commissioners endorsed the plan; they know it is going to involve a lot of work in some cases.”
While speaking on the conditions to be met before the loans can be released, Adeosun said, “They have to clean out their ghost workers, set up efficiency units, reduce their recurrent expenditure, publish their accounts and also publish their budgets.”
“There are lots of difficult conditions but by paying the price the governors and the commissioners recognise that these reforms are necessary if they want states to be fiscally sustainable.”