States get N523bn conditional reprieve from FG

President Muhammed Buhari has approved the release of N522.74 billion to state governments as refunds for deductions.

The release is sequel to a protest by states against over deductions for external debt service between 1995 and 2002.

The president therefore sanctioned the release pending reconciliation of records.

While about 14 states in the first batch will get reprieve of N153.01billion, each state is eligible to a cap of N14.5 billion being 25 per cent of the amounts claimed.

However, the Federal Government has raised a team to scrutinise claims by states and reconcile with available records.

According to a statement released by the Special Adviser on Media to the Minister of Finance Mr. Festus Akanbi, in Abuja, the payment of the claims will empower states to offset unsettled salaries and pensions which have contributed in a great measure to the present hardship the country.

States were directed in the statement to allocate a minimum of 50 per cent of any amount disbursed to address the problems of salaries and pensions. It added that all the funds disbursed will be credited to an auditable account from which payments to individual creditors would be made.

“State governments have submitted to the Federal Government (FG) claims of over-deductions for external debt service arising between 1995 and 2002 as a result of First Line Charge deductions from the Federation Account Allocation Committee (FAAC) allocations.

“These debt service deductions are in respect of the Paris Club, London Club and Multilateral debts of the FG and states. While Nigeria reached a final agreement for debt relief with the Paris Club in October 2005, some states had already been overcharged.

“On the request by state governments for a refund of amounts owed by the Federal Government, Mr. President directed that claims be subject to verification by the Debt Management Office and a team was established and given the mandate to scrutinise claims and reconcile with available records. The brief for the team was also extended to include a review of interim payments made under previous administrations.

“Work has commenced to resolve each state government’s claim and the exercise is expected to take approximately 12 months. The exercise will be thorough, including a complete reconstruction of records dating back to the period in question. In the interim, however, state governors have continued to appeal for release of payment on the grounds of fairness because some states had already received refunds under previous administrations,” part of the statement read.

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It further gave insights into the conditions attached to the refunds to the states, saying that “the Federal Government has reached a conditional agreement to pay 25 per cent of the amounts claimed subject to a cap of N14.5 billion to any given state. Balances due thereafter will be revisited when fiscal conditions improve.

“Mr. President’s overriding concern is for the welfare of the Nigerian people, considering the fact that many states are owing salaries and pensions, causing considerable hardship. Therefore, to ensure compliance with the directive that a minimum of 50 per cent of any amount disbursed is dedicated to this, funds will be credited to an auditable account from which payments to individual creditors would be made. Where possible, such payments would be made to BVN linked accounts and verified. But any state paid refunds in excess of its outstanding claims might suffer deduction from its monthly allocations from the Federation Account.”

This will be the second time the federal government will be bailing out the states. Many states were alleged to have improperly managed the first bail-out as many of them were unable to pay salaries of workers and pension. While some paid half salaries, some others cut off a sizable per cent in the salaries of workers.

 

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