Nigeria's central pot, the federation account, has hit one of its lowest balances in the history of the country.
Kemi Adeosun (middle) with governors after the FEC meeting in Abuja
Just after the National Economic Council (NEC) meeting in Abuja on
Thursday, Minister of Finance, Kemi Adeosun, disclosed that Nigeria’s
central pot, the federation account, has hit one of its lowest balances
in the history of the country.
As a result, deductions will not be made before April allocations
are shared by the Federation Account Allocation Committee (FAAC).
Usually, debts incurred by various tiers of government are deducted
as first-line charges and remitted to the creditors before the sharing
of allocations.
Osun state recently got only N10 million as monthly allocation
after the deduction of its obligations to banks and other agencies. But
Adeosun said the deductions will be deferred for April 'in order to stimulate as well as revamp the economy.'
Many states are currently unable to pay salaries as a result of huge liabilities.
FEDERATION ACCOUNT
She said: "On the update of the financial situation of the
states, it was discussed extensively that currently the federation
account receipts are among the lowest that has been seen in recent
memory. We are looking at N299 billion this month and that is because of
the very low oil prices that were recorded in January and February.
"If you remember oil prices went as low as $28 and $31 and of
course that has led to a very low federation account as a result of
which I approached the president and the governors that we defer the
loan deductions from the federation account entitlement.
"The aim of this is to ensure that we support them through this
difficult period to be able to meet salary obligations. The government
is very committed to stimulating the economy and recognises the ability
of states to meet salary obligations is a very important part of getting
the economy moving again.
"To that end the president approved that deferral. The states
have been asked to submit financial data that would allow us to model
and predict how much support in terms of loan deferrals we might need
to give just to get through this period until the economy recovers.
"I need to emphasize that it is not a bail-out but a deferral,
postponement of deductions just to allow the states to have the cash
that they need to meet their salary obligation.
"I am very pleased to announce that all the governors endorsed
the request to provide financial data, to work on biometric and other
initiatives to cleanse out fraudulent entries on their payroll, you may
call them ghost workers but it is being done at state levels very
aggressively and the efficiencies that state governors have already
committed to, they have all endorsed those things as part of this
support that we are trying to put in place."
ECONOMIC EFFECTS
On how long the deferrals are for, Adeosun said: "The approval
I have is for the current month but with the proviso. What we discussed
is the current situation in the economy requires some actions and what
we need to do is to understand the financial profile of states in detail
so that we can understand how long we need to support them with loan
deferrals."
On the effect of the deferrals on the economy, she said: "I
think I will switch to say what is the effect of non-payment of salaries
on the economy, that for us is really the issue. We have go to put
money into people’s pockets so that people start spending just to get
the economy moving.
"Nobody stimulates the economy by austerity but by spending. So
in some states as you know they state government is the highest
employer of labour so if the state government is unable to pay, nothing
happens.
"We have prioritised getting the states back into good
financial health. Now part of that is this commitment to fiscal
sustainability and that is why we have asked the states to commit to
cleansing their payroll, commit to efficiency, maximising their
Internally Generated Revenue (IGR). We have asked them to give us their
financial data so that we can work together to create financial module
and understand what government needs to do to support the states."
The minister presented a report at the council meeting on the
balance of excess crude account. It now stands at $2.3 billion, a
little increase as a result of accruing interests.
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