The Federal Government has decided to stop the deductions for loan being made from the monthly allocations of each state of the federation in order to allow them to meet their obligations of paying workers’ salaries.

The stoppage of the deductions is for the month of April in the first instance.


 
The Minister of Finance, Mrs. Kemi Adeosun, disclosed this on Thursday while briefing State House correspondents  on  the outcome of the National Economic Council meeting presided over by Vice President Yemi Osinbajo.

The minister was joined at the briefing by the Nasarawa State Governor, Tanko Al-Makura; and the Corps Marshall of the Federal Road Safety Corps, Boboye Oyeyemi.

Adeosun said the decision to suspend the deductions was taken because of the sharp drop in the amount available to all levels of government to share.

She, however, said the deferral could not be described as a bailout, noting that the amount available for sharing for the month of April was about N299bn.

Adeosun added that state governments had been asked to make their financial data available to the Federal Government in order for them to be helped.

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 have been seen in recent memory. We are looking at N299bn this month and that is because of the very low oil price that was 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 should defer the loan deductions from the Federation Account entitlements.

“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 that the ability of the states to meet salary obligations is a very important part of getting the economy moving again.”

The minister added, “To that end, the President approved that deferral. The states have been asked to submit financial data that will allow us to module 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 emphasise that it is not a bailout but a deferral; postponement of deductions just to allow the states to have the cash that they need to meet their salary obligations.”

Adeosun said all the state governors endorsed the request to provide financial data and to work on biometrics and other initiatives to cleanse out fraudulent entries on their payrolls and eliminate ghost workers.

When asked to be specific on how long the deferral would last, the minister said the approval she got was for the current month but with a proviso.

She said the current situation in the economy required some actions, and what was needed to be done was to understand the financial profile of the states in detail so that the Federal Government could understand how long it needed to support them with loan deferrals.

When asked of the effect of the deferral on the economy, Adeosun said the government’s concern was the effect of non-payment of salaries on the economy.

She said, “We have got to put money into people’s pockets so that the people can start spending just to get the economy moving. Nobody stimulates the economy by austerity but by spending.

“So, in some states, as you know, the state governments are the highest employers 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 payrolls, commit to efficiency and maximising their Internally Generated Revenue.”

The Minister also said, “We have asked them to give us their financial data so that we can work together to create a financial module and understand what government needs to do to support the states. Of course, we are borrowing, but we have got to make sure that we are borrowing to support the states that are fiscally sensible and prudent in their management of money.

“So, the answer is we have a month guaranteed, but we are asking for information from the states to enable us to build a module so that we will know if it is three months or six months to supplement the shortfall to ensure that within reasonable parameters, majority of the states can pay salaries.

“And that is taking into account that different states have different obligations and different profiles; but the idea is to support them to be able to pay.”

Adeosun also said she gave a report to  NEC on the balance in the Excess Crude Account, which she said stood at $2.3bn on the account of the interest that had been received since the last update.

She added that she gave an update on the constitution of a search committee for the Board of the Nigerian Sovereign Investment Authority, saying she nominated one person each from the six geo-political zones (four men and two women) who would search for the board members.

Al-Makura said the Governor of Central Bank of Nigeria, Godwin Emefiele, reported to the council that a total of N689.5bn had been disbursed as salary bailout or loan to the states.