In furtherance of his administration’s agenda to ensure full transparency in governance, Abia State Governor, Dr Okezie Ikpeazu, recently authorized the publication of the state’s audited account in national dailies.
The Governor who, among others in Nigeria, is known to engage the most with citizens of his State, insists that the people have the right to know as such knowledge aids in effective social mobilization for development purposes as well as help in cutting off rumours and malicious propaganda.
Budget Support or Bailout Funds?
It is important to recall that in 2015 the Central Bank of Nigeria (CBN) availed Abia state a facility of N14.152bn (bailout) out of N39bn requested to enable the state clear outstanding salaries, pensions and gratuities inherited from previous administrations dating back to the military administrations of the 90s up to 2015.
Upon receipt of the N14.152bn bailout which had a 20-year repayment period, just as with 33 other states of the federation that also received, Governor Ikpeazu decided to inaugurate an organized labour dominated committee to decide on how to allocate the resources to the areas of need in terms of workers’ outstanding emoluments. Indeed, the Independent Corrupt Practices and Other Related Offences Commission (ICPC), organized Labour and Nigeria Governors Forum (NGF) applauded Governor Ikpeazu for the transparent management of the fund.
Since 2015, the state has been repaying the facility with a monthly payment of N80m.
The above facility of N14.2bn is different from the Budget Support given to states by the Federal Ministry of Finance.
What is Budget Support?
Owing to the fact that Nigeria’s economy is largely dependent on oil receipts and, to some extent, on taxes and other revenue sources, what states share monthly vary from month to month. At the end of every month, the Federation Account and Allocation Committee (FAAC) meets to review what was received in a month and then allocate to the federal, state and local governments based on predetermined sharing formulae from Revenue Mobilization Allocation and Fiscal Commission (RMAFC).
In some months, the amount of revenue generated by the federation is much lower than budgetary expectations due largely to low oil pricing in the international market. The implication is that FG, States and LGAs will receive much lower revenue than can support elementary budgetary responsibilities like payment of salaries, cost of governance and security. The FAAC decided that for such months, funds would be drawn from a loan obtained by the federal government on behalf of the states. It is that loan given to the states in multiple monthly tranches as bridge financing that is referred to as “budget support”.
For instance, in November and December 2015, allocations to Abia State were below or about N1.7bn/month with the state monthly wage bill standing around N2.7bn then. Other states had similar challenges with payment of salaries and other services as a result of low allocation from the federation account. It was to mitigate such situations that our federal government decided to introduce “budget support” and the same amount was given to all the states in different months with revenue shortfalls.
The total amount given as budget support to Abia State was N17.5bn and that is what the federal ministry of finance wants to be repaid. All the 36 states collected the same amount, to the best of my knowledge.
Since most states do not have that amount in their treasury, it is most likely the Nigeria Governors Forum will agree with the Federal government on how to amortize the repayment which will, in turn, be deducted from allocations to the states over a period of time.
Once we know the monthly implication to our state you will be informed, as directed by Governor Ikpeazu.