Financial Crisis: FG To Bail Out States Again
About a year after President Muhammadu Buhari approved a relief package designed to enable states offset workers’ salaries and also remedy their economic situation, the federal government is set to once more, provide the states with a financial support facility.
The latest financial support from the federal government is to cushion the adverse effect of the current financial challenges in the country, although with stringent conditions.
A statement on Saturday by the Federal Ministry of Finance said that further relief would come the way of states soon, provided they met a 22-point reform agenda tagged the Fiscal Sustainability Plan (FSP).
The FSP is said to have been endorsed by state governors themselves at a meeting of the National Economic Council last month.
The conditions encompass a framework of reform measures including the requirement to publish their audited financial statements and budgets, biometric and Bank Verification Number (BVN) payroll review exercises for the workers, and restricting recurrent expenditure.
Besides, the states are expected to set and meet targets to enhance their Internally Generated Revenue (IGR), establish Efficiency Units to reduce overhead costs, privatize State Owned Enterprises, domesticate Fiscal Responsibility Act, and put a limitation on further bank loans.
The Ministry said the Federal Government has agreed to develop International Public Sector Accounting Standards (IPSAS) compliant software for the states’ use.
It is also developing new bond issuance guidelines to ease access to the capital market for states wishing to fund developmental projects.
The statement further said disbursements will be subjected to states meeting their agreed targets, which will be subjected to monitoring and evaluation by independent monitoring agents.
It warned that states that fail to meet the agreed reform targets will be excluded from further funding.
According to the finance ministry, the FSP mirrors the public financial management reforms currently being pursued at the federal government level and is expected to set the states on a path towards long-term fiscal sustainability.
The Minister of Finance, Kemi Adeosun, was quoted in the statement to have explained that the FSP represents an important programme of reforms that will develop best practice financial management across all tiers of government and will improve transparency and accountability.
“We are determined to attain financial discipline across government and implementing the FSP at state level will ensure alignment. The focus on increasing revenue, which is not limited to conventional taxes, but rather encourages states to explore opportunities in areas such as agriculture and solid minerals, is in line with our diversification objectives.
“The targets for cost management and improved efficiency will deliver value for money and will yield long term savings. Overall, we believe that the survival of state governments is essential to the economic recovery of Nigeria, specifically their ability to meet salary obligations”, she added.