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CBN to recover bailout funds from state allocations

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in from Ali Smart …

As debtor states prepare to cash in their bailout funds from the Central Bank of Nigeria (CBN) in a few weeks time, it has been learnt that the apex bank is proposing to deduct the bailout directly from the Federation Account Allocations to benefiting states in graduated manner and over a long period of time.

Ripples was informed by Presidency sources that deducting the bailout from states federation allocation is one of the options the apex bank is considering among others, but the deduction would be done in such a way that it will not cause too much distress on the states.

“The reason the CBN is seriously considering the direct deduction of the bailout from states allocation is because there is no other way the CBN can recover this bailout funds,” an informed source said.

The source stated that the decision to bailout the states was strictly “a fiscal and political decision” that has nothing to do with the CBN but that the CBN was brought in to make the bailout possible.

Read also: 27 states to get CBN N300b bailout

It would be recalled that at the end of the Monetary Policy Committee (MPC) meeting in Abuja, last Friday, the CBN Governor, Mr. Godwin Emefiele had warned the affected states that the bailout was not a grant, but a loan.

He then urged state governments to design ways of being less dependent on monthly allocations and retool their Internally Generated Revenue (IGR) mechanism.

The Presidency source admitted that the state governments might put up some resistance because deducting the bailout from their federation account allocation will reduce their monthly take home from the federation’s purse. However, the argument being considered the source noted, is that benefiting states must be made to pay back the bailout as the fund was not a gift.

Ripples had reported yesterday that 27 states had applied to draw from the cash relief packaged by President Muhammadu Buhari through the apex bank from a N300 billion CBN lifeline, to enable them pay their workers.

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