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States to raise funds from capital market

by Business News Report

Federal and state government have agreed that states should no longer seek loans from banks but focus on internally generated revenue to boost their finances. This is in line with the Fiscal Sustainability Plan (FSP) which has been agreed to by the federal government economic team and state governors with a view to ensuring prudent management of sub-national resources.

President Muhammadu Buhari’s administration, finance ministry sources said, was disappointed at the way some past and current governors took loans from banks and misapplied such funds, while mortgaging their states’ finances. Currently, some states are left with too little to meet even their recurrent obligations, after deductions are made from their monthly federation account allocations. Rather than taking bank loans, the federal government said that the states should source funds from the capital market for their infrastructure development.

Even at that, such funds through bonds must only be on bankable, measurable projects and would be released in tranches. The release of the proceeds of bond issuing would henceforth be on the basis of satisfactory utilization of earlier released proceeds, it was learnt. The FSP aims to: Improve Accountability and Transparency;  Increase Public Revenue ; Rationalise Public Expenditure ; Improve Public Financial Management; and Sustainable Debt Management.

Specific action points of the reform include: biometric capture of all civil servants; the establishment of an Efficiency Unit within each state, implementation of Continuous Audit, improvement in Independently Generated Revenue (IGR) and measures to achieve sustainable debt management. States that meet the above FSP conditions can access a new N50  billion facility to be guaranteed by the federal government.

At a meeting with state Commissioners for Finance, in Abuja, yesterday, the Minister of Finance, Mrs. Kemi Adeosun, told them that the current economic challenges facing the country left state actors with little or no option than to be prudent and transparent.

According to her, all tiers of government operate in the same national economy and that as such the states could not continue as if what happened at the federal level was not their business.

Her words, “Nigeria’s economy is a confederation of  the economies of her 36 States and the FCT. Thus, we recognise the critical importance of  developing a broad based  economy, with  productive activities in every region and State.

“At Federal level, to create headroom for the urgently needed  investment in infrastructure , we are pursuing a very disciplined approach to managing public funds, ensuring the maximisation of revenues and the minimisation of the costs of governance.

“The  Fiscal Sustainability Plan (FSP)  replicates this far reaching  public financial management reform programme across all tiers of Government and marks a turning point in the management of State Finances. By raising the standard for public financial management in the areas of transparency, accountability and efficiency, States will be repositioned to embark on a path towards fiscal independence.


“On the cost side, the pressure is to cut costs  starting with the commitment to eliminate, once and for all, the menace of ghost workers by BVN checking of payroll and the requirement that all salary payments are made directly to the individual accounts.


“This  will enable States  to control the size of their wage bill and ensure that it is affordable.  The formal commitments  being made  to improved expense management, greater efficiency in recurrent spending and   prudent debt management, will combine to ensure that States can move towards improved long term financial health.

“In the area of revenue, The FSP is based on the fundamental principle that each and every state in Nigeria must be economically viable. Accordingly, it recognises the fact that Internally Generated Revenue must be maximised and we have extended the definition of revenue beyond the traditional confines of taxes, licences and fees.”


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