…Contractors, pensioners, oil marketers to get promissory notes
—-Says debt economic set back
—-Approves another N1.6bn to tackle flood in 16 States
By Johnbosco Agbakwuru
ABUJA—SUCCOUR may have come the way of contractors and pensioners as the Federal Government has approved the process for the payment of the N2.7 trillion it owes contractors and pensioners.
The Minister of Finance, Mrs. Kemi Adeosun, disclosed this while briefing State house Correspondents at the end of yesterday’s Federal Executive Council (FEC) meeting, in Abuja.
The beneficiaries as confirmed by government will be settled through the issuance of liquid promissory notes (ten-year tenure) phased over a three-year period to minimise impact on liquidity and with preference given to those willing to offer the largest discounts.
She said that some of the obligations dated back as far as 1994 and that its resolution will significantly enhance liquidity in critical sectors of the economy.
According to her, after the reconciliation by the committee set up to look into the indebtedness, it was able to provisionally confirm a discounted total of N2.7 trillion of obligations consisting of N740 billion of outstanding pensions and promotional salary arrears (not discounted) and N1.93 trillion (discounted) of other obligations including dues to Federal Government contractors and suppliers.
Her word, “The Federal Executive Council has today approved the Ministry of Finance’s proposed validation process and promissory note and debt issuance programme to resolve a number of inherited and long outstanding Federal Government (FG) obligations to contractors, State governments and employees. This will be followed by a request to the National Assembly to approve the programme ahead of implementation.
“In March 2017, the Economic Management Team, under the leadership of His Excellency Acting President Yemi Osinbajo, mandated the Minister of Finance to Chair a Committee that would establish a process to confirm the validity of inherited Federal Government obligations, and propose a mechanism to resolve them.
“These obligations largely consist of dues owed to State governments, oil marketers, power generation and distribution companies, suppliers and contractors by FG parastatals and agencies, payments due under the Export Expansion Grant (EEG), outstanding judgement balances as well as pension and other benefits to Federal Government employees.
“Some of the obligations date back as far as 1994. The resolution of this will significantly enhance liquidity in critical sectors of the economy.
“Following an exhaustive process of reconciliation, the committee has been able to provisionally confirm a discounted total of N2.7 trillion of obligations, consisting of N740 billion of outstanding pensions and promotional salary arrears (not discounted) and N1.93 trillion (discounted) of other obligations including dues to Federal Government contractors and suppliers.
“These numbers are aligned with existing Federal Government estimates, and in some cases, are lower than previously estimated.
“The supplier and contractor obligations will be resolved through a strict process of final validation, following which those confirmed will be settled through the issuance of liquid promissory notes (ten-year tenure) phased over a three-year period to minimise impact on liquidity and with preference given to those willing to offer the largest discounts.
“Obligations owed to individuals (for example pensions and employee benefits) will be resolved through the issuance of specific bond instruments, again phased over the next 3 years. These obligations will then be incorporated into the Medium- Term Expenditure Framework by the Ministry of Budget and National Planning.”
Speaking further the minister said “We cannot get our economy moving at the pace we need to if we do not address the legacy issues we have inherited, which act as a significant drag on economic activity.
“The Government must be a driver of growth, and enable private sector activity. It should not be the most significant obligor to many value creating businesses. At the same time, we have an obligation to our Federal Government employees to address these long-outstanding pension and employment benefit issues.
“We are doing this systematically, and we want to do so once and for all. We are enhancing the Government’s controls and processes to ensure we do find ourselves in this situation again.”
“Over the last two decades the Federal Government has built up over N2.7 trillion of obligations which were not cash backed, and remain outstanding to this day.
“We have developed a solution that will simultaneously resolve these issues, and deliver a boost to economic performance. Our solution will remove the drag on economic performance these obligations cause, improve liquidity in key sectors, especially the power sector where we will resolve FG dues to the distribution and generation companies, and so boost investor confidence.
“It will also help to improve non-performing loan ratio’s in the banking sector, where an unacceptable number of NPL’s are linked to Government contracts.”
Giving details of the efforts of the Committee in resolving legacy Federal Government obligations, she said, “The Committee was established at the request of the Economic Management Team, in March 2017, to design a solution to the inherited obligations sitting within Federal Government institutions and agencies.
“The Committee includes representatives from the Ministry of Justice, Ministry of Budget and National Planning, Ministry of Power Works and Housing, Ministry of Trade Industry and Investment, Office of the Head of Service, Debt Management Office, Office of the Accountant General of the Federation, Nigerian Customs Service, Central Bank of Nigeria and Nigeria Export Promotion Council.”
Meanwhile, the Acting President, Prof. Yemi Osinbajo at the Federal Executive Council, FEC has directed the Minister of Finance, Kemi Adeosun, to release the sum of N1.6 billion for 16 states ravaged by floods across the country.
The move, according to Special Adviser to the President on Media and Publicity, Mr Femi Adesina, was to help cushion the effects of the disaster on Nigerians.
Briefing State House Correspondents shortly after the FEC presided over by Acting President, Mr. Adesina said that the money would be taken from the Federal Governent’s Ecological Account in the Central Bank of Nigeria (CBN).
He said the Minister of Finance has been directed to release the money to the National Emergency Management Agency (NEMA) for onward distribution to the affected states.
The states included Ekiti, Kwara, Lagos, Bayelsa, Enugu, among others.
Federal Executive Council approves process to validate and pay inherited Federal Government contractor and employee liabilities
FEC also approved the award of a N159 million contract for the engineering design of a sewer line N159m to capture Katampe, Gwarimpa, Kado, and other districts of the Federal Capital Territory, Abuja.
Another contract of N2.5 billion for the completion of Kabusa road, also within the FCT. The contract is expected to be completed in 12 months.