Minister of Finance, Kemi Adeosun, disclosed on Thursday that the federal government had been borrowing to support states to enable them pay salaries. The minister also announced that deductions on loans to states by the federal government would be suspended for the month of April to enable states cope with salary payments. Adeosun stated this while addressing State House correspondents on the outcome of the National Economic Council (NEC) meeting held in the Council Chamber of the Aso Rock Presidential Villa, Abuja.
She said the deferral may be extended for more than one month after the financial profile of the states was examined. Speaking further, Adeosun explained that the decision to grant deferral to the states was borne out of the need to put money into the pockets of citizens so as to stimulate the economy, adding that “we can’t run economy on austerity.” She also adduced the current poor state of the federation account and the resultant salary burden on state government as reasons why that decision was approved by President Muhammadu Buhari.
Her words: “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 has been seen in recent memory. “We are looking at N299 billion this month and that is because of the very low oil prices 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 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.
“I need to emphasize 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 obligation. I am very pleased to announce that all the governors endorsed the request to provide financial data, to work on biometric and other initiatives to cleanse out fraudulent entries on their payroll. You may call them ghost workers but it is being done at state levels very aggressively and the efficiencies that state governors have already committed to, they have all endorsed those things as part of this support that we are trying to put in place.” She continued: “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 deferral 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 pockets 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. Now 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. “We have asked them to give us their financial data so that we can work together to create 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 how 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.”
Also speaking at the press briefing after the NEC meeting, Nasarawa state Governor, Tanko Umaru Al-Makura announced that the issue of power generation and distribution also dominated discussion at the meeting, with NEC approving the reconstitution of the board of Niger Delta Power Holding Company (NDPHC). He said: “NEC reconstituted the Board of the Niger Delta Power Holding Company, (NDPHC), which you know is to facilitate effective distribution across the country. “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 North Central Zone, we have Plateau to represent: for the North East zone, we have Adamawa governor ; North West, we have Kebbi State; South East, we have Anambra; South West we have Lagos and South South, we have Edo. The committee has since been inaugurated by the Vice President.”