THE Federal Government has offered state governments a fresh bailout. The Minister of Finance, Mrs. Kemi Adeosun, told commissioners of finance of the 36 states that the Federal Government has secured a N90 billion conditional loan for them from the private sector through issuance of bonds in the bond market. The credit facility, which is to assist the states with the execution of their 2016 budgets, will be guaranteed by the Federal Government. It is to be repaid in one year.
Under the agreement, N50 billion will be released in the first three months, with each qualifying state getting about N1.3 billion. Another N40 billion will be released over nine months, with the states getting an additional N1.1 billion.
Access to the loans was, however, tied to stringent conditions relating to transparency in the management of the states’ finances by the private sector investors who would issue the bonds.
We welcome the Federal Government’s offer to facilitate loans for deserving states. We are also happy about the report that the Federal Government will assist state governments to raise long-term funds from the capital market to finance their capital projects. This plan has already been captured in the Fiscal Restructuring Plan, which has been approved by the National Economic Council.
Although the idea of the central government intervening in states’ financial matters appears strange to Nigeria’s federal arrangement, we cannot but appreciate the Federal Government’s abiding interest in helping the states to meet their obligations to their people. As we have said earlier, the Federal Government, even under our federalism, has a responsibility to come to the aid of any of its constituent parts, and it should not be maligned for doing this.
The government had in July 2015 approved a N804.7 billion intervention package to help cash-strapped states pay their outstanding workers’ salaries. It also worked out a fresh repayment plan for their heavy financial obligations. In April this year, it deferred their N10.9 billion restructured loan repayments to give them some breathing space.
Thirty states were, however, reported last Friday to have failed the stiff tests they are required to pass in order to access the fresh loans. The Akwa Ibom State Governor, Udom Emmanuel, reportedly told State House correspondents that one state declined to access the loan, while only five others met the conditions to access it.
It is quite in order that only five out of 36 states will be able to access these funds. This is because of the need to ensure that only those states that can conveniently service the facility are allowed to access it. This is very important considering the fact that many of the states that accessed the last bailout were reported to have diverted it.
The insolvency of most of the states has, however, highlighted the need for them to design strategies to boost their Internally Generated Revenue (IGR). It is very sad, indeed, that states are tied to the apron strings of the Federal Government on account of their inability to efficiently manage their finances and run their administrations. This unfortunate situation does not bode well for the autonomy desired for the states under the true federalism that Nigerians are hankering after.
To be truly independent from the Federal Government, the states ought to be able to stand on their own feet and meet their financial obligations to their people without having to run to Abuja for monthly allocations. Even though they have a right to the monthly allocations from the Federation Account, as provided for in the Nigerian Constitution, their economies should not collapse simply because of dwindling allocations from the centre.
Under this circumstance, we call for the prompt disbursement of the loans to the qualified states, after all due diligence. The machinery for the release of the loan and the monitoring of its repayment should be set in motion. Nigeria must leave no room for allegations of diversion of the loans to other uses, as we are having it with the July 2015 bailout funds.