Workers who have gone on for many months without salaries got yesterday a piece of cheery news.
States’ loans repayment is to be deferred this month to allow them pay workers’ salaries, which have run into many months arrears.
But what the states pay to banks as a result of the Irrevocable Standing Orders (ISOs) will not be affected.
About N10.9billion is the extra cash that the states will take away, depending on their repayment obligation to the Federal Government.
About 27 states are finding it difficult to pay workers.
Minister of Finance Mrs Kemi Adeosun broke the news after yesterday’s meeting of the National Economic Council (NEC) at the Presidential Villa in Abuja. The meeting was chaired by Vice President Yemi Osinbajo.
Mrs Adeosun was accompanied by Nasarawa State Governor Tanko Al Makura and Federal Road Safety Commission (FRSC) chief Boboye Oyeyemi.
According to her, the current economic situation necessitated the deferral of the loans repayment.
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 N299 billion this month and that is because of the very low oil prices 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 defer the loan deductions from the Federation Account entitlement.
“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 the ability of states to meet salary obligations is a very important part of getting the economy moving again.”
“To that end, the President approved that deferral. The states have been asked to submit financial data that would 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,” Mrs Adeosun added
The Minister said the measure was not a bailout but a deferral of deductions to allow the states have the cash they need to meet their salary obligation.
She also said all the governors endorsed the request to provide financial data and to work on biometric and other initiatives to clean out fraudulent entries on their payroll, such as ghost workers.
On how long the deferrals will last and their possible consequences on the treasury, the minister said: “The approval I have is for the current month but with a proviso. What we discussed is the current situation in the economy requires some actions and what we need to do is to understand the financial profile of states in detail so that we can understand how long we need to support them with loan deferrals.
“On the effect of the deferrals on the economy, I think I will wish to say what is the effect of non-payment of salaries on the economy? That, for us, is really the issue. We have to put money into people’s pocket so that people 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 government is the highest employer of labour. So, if the state government is unable to pay, nothing happens.
“We have prioritised getting the states back into good financial health.” Mrs. Adeosun said.
The minister said: “Part of that is this commitment to fiscal sustainability and that is why we have asked the states to commit to cleansing their payroll, commit to efficiency, maximising their Internally Generated Revenue (IGR).
“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 managing money. So the answer is, we have a month guaranteed but we are asking for information from states to enable us build a module so that we would know if it is three months, six months or however many months to supplement the shortfall to ensure that within reasonable parameters majority of 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,” she stated.
Mrs Adeosun presented a report on the balance of the Excess Crude Account to NEC – $2.3 billion.
The second update to NEC, she said, is on the constitution of a search committee for the board of the Nigerian Sovereign Investment Authority.
“And I nominated six people from the geo-political zones. Four men, two women who will search for board members for the Nigerian Sovereign Investment Authority board,” she said.
Al-Makura said one of the critical issues discussed was power.
Due to the priority the administration places on power and the challenges being faced, he said, NEC reconstituted the Board of the Niger Delta Power Holding Company (NDPHC) to facilitate effective power distribution across the country.
He said: “There was a unanimous acceptance of the recommendations and reconstitution of the Board to include one governor from each of the six geopolitical zones. For the Northcentral Zone, we have Plateau to represent: for the North East zone, we have Adamawa governor; Northwest, we have Kebbi State; Southeast, we have Anambra; Southwest we have Lagos and South South, we have Edo.”
The committee has since been inaugurated by the Vice President.
According to him, NEC also discussed bailout matter and Central Bank of Nigeria (CBN) Governor Godwin Emefiele gave an update about those states that have been able to access salary bailout, which is put at about N689.5 billion. An additional N310 billion was disbursed as Excess Crude Account-backed loans to states.
The FRSC Corps Marshal said that the Council approved the Nigerian Road Safety Strategy document of 2014-2018.
The document, he said, will address the current overlaps, and streamline the responsibilities of all participants to maximise the benefits of investments in road safety management.
According to Oyeyemi, NEC also discussed the National Road Safety Council, which the Vice President chairs, with representatives from two political zones and other critical members. Click to signup for FREE news updates, latest information and hottest gists everyday
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