Bailout: Buhari’s Quick-Fix Option | Independent Newspapers Limited
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Cover Choice, POLITICS

Bailout: Buhari’s Quick-Fix Option

Posted: Jul 12, 2015 at 12:01 am   /   by   /   comments (0)

In 2014, the pangs of falling oil prices began to take its toll on states even though the Federal Government continued public spending with almost the same gusto as the pre-oil price fall period. However, it took some measures believed to be in response to the nation’s dwindling fortune, but this was seen more as mere intentions which the government didn’t intend to implement since the government and its official refused to change their lifestyle.

CartoonsMeanwhile, conditions in states had deteriorated so much in some states that they could not render even the simplest services. This was the situation when Muhammadu Buhari became president. In the weeks after, the economic morass in states had deepened, and it became necessary for the president to intervene fast.

Therefore, at the beginning of the week President Muhammadu Buhari approved the sum of N804.7 billion to assist states who have been unable to pay salaries to do so. The amount is meant to also cover sharing of fresh allocations, granting of soft loans and restructuring of states’ debt-servicing payments.

About $2.1b (N413.7b) will be shared in fresh allocation between the states and the federal government. The money is sourced from recent Liquefied Natural Gas (LNG) proceeds to the federation account.

A Central Bank of Nigeria (CBN)-packaged special intervention fund that will offer financing to the states, ranging from between N250b and N300b. This would be a soft loan that states could access to pay the backlog of salaries.

The bailout funds may be disbursed in the next few days, according to reports.

Implementing a debt relief programme proposed by the Debt Management Office, DMO, will help states restructure their commercial loans currently put at more than N660b, and extend the life span of such loans while reducing their debt-servicing expenditures.

Also, a total of N391 billion from the Excess Crude Account, ECA, will be shared among the three tiers of government, the Accountant-General of the Federation, Ahmed Idris, disclosed.

With the N413.7 billion LNG proceeds it means the three tiers of government will share a total of N804.7 billion.

By extending the commercial loans of the states, according to the third package, more funds would be made available to the state governments, which otherwise would have been claimed at source by the banks.

It has been reported that the Federal Government has agreed to use its influence to guarantee the elongation of the loans for the benefit of the states.

The package, which was considered at the National Economic Council, NEC, two weeks ago, is designed specifically for workers. It was reported that President Buhari reviewed and approved the package in his bid to intervene and alleviate the suffering of workers, some of whom have not been paid for over 10 months.

Currently, 12 of the 36 states of the federation are owing their workers more than N110 billion. The most affected states are Osun, Rivers, Oyo, Ekiti, Kwara, Kogi, Ondo, Plateau, Benue, and Bauchi.

The beneficiaries of the relief package include workers in Federal Ministries, Departments and Agencies (MDAs) who have remained unpaid for many months.

It is also believed that the President took the decision to boost the purchasing power of Nigerians, especially average and low-income earners, and to reflate the economy.