April 26, 2017

FG has provided N1.75tn extra-statutory “bailout” fund to states – BudgIT

Bailout, governors


According to BudgIT research, N1.75tn has been given to states as extra-statutory allocation known as bailout since the advent of President Buhari’s administration.


In 2015, a Salary loan of about N338bn was disbursed to states. The term of the loan was 20-year and the purpose of the loan was to help states facing fiscal strain meet outstanding salary obligations. Interest rates of 9% approved by the Central Bank of Nigeria (CBN).

This was swiftly followed by the N575bn restructuring programme bond. The federal government negotiated this debt package through the Debt Management Office to allow states convert high interest bank debt into a 20 year tenured debt with interest rates set at 14.83%.

With the exception of Ogun state, 23 states were immediate beneficiaries. However, the actual sum disbursed was not made public. Again, In July 2015, the federal government remitted approximately N92.18bn to States from dividends worth $2.1bn paid to the centre by Nigerian Liquified Natural Gas Company (NLNG).

Barely a year later, the sum of N7.85bn was also approved by the federal government to assist states with revenue short falls in January 2016 from the dividend remitted by NLNG.

In July 2016, the federal government endorsed the allocation of N3.6bn from solid minerals savings to states as part of the routine monthly FAAC disbursements.

A total of N117.3bn was also disbursed to states, amount taken from excess revenue generated from Petroleum Profit Tax (PPT). Ordinarily, this should go into the Excess Crude Account, but it was speedily distributed between the federal and state governments.

In all, a total of N1.75tn has been disbursed to states as extra-statutory fund but little is known about how the funds had been spent. The latest amount released is the N522.74bn refund to states for surplus deductions of external debt servicing fees between 1995-2002.

The lack of will to encourage states to embrace transparency and the inability of the federal government to enforce conditions that mandate states to articulate their policies and submit to standardised performance indicators has ensured that governors merely sit back and routinely await the discovery or refunding of money into the treasury, and immediately seek their share. BudgIT had previously sent Freedom of Information Request to Central Bank of Nigeria and no adequate response was provided.

It is observed that the Federal Government seems to have adopted a reductionist approach to the States; often basing its release of funds on a need to offset recurrent expenditure at sub-national level.

To discontinue this tradition and ensure funds are used efficiently, the allocation, utilization and spending of public funds should be transparent, coordinated and discreet. BudgIT calls for an holistic and comprehensive audit of the funds disbursed so far.