Many states have found it hard to carry on with business as usual because of a sharp drop in the allocations they receive from the federal government. Now they could be getting some help from the government at the centre. With strings attached.
About 22 conditions laid out by the Federal Government must be met by states seeking to access the ₦90 billion loan. The plan was unanimously agreed upon by state governors at the National Economic Council meeting held on May 19, according to an official statement. The outlined measures were targeted at fiscal reform in states. They are the constituents of a federal government-driven reform agenda called the Fiscal Sustainability Plan (FSP).
States which will receive bailout funds must now publish audited annual financial statements within nine months of financial year end. Each state is also to publish the state budget online annually, make budget implementation performance report available online quarterly, and implement a centralised Treasury Single Account (TSA). Other interesting points include setting realistic targets to improve independently generated revenue and the ratio of capital to recurrent expenditure and imposing limits on personal expenditure as a share of total budgeted expenditure. Biometric capture of all state civil servants is required to be done by each state, to eliminate fraud.
₦50 billion will be made available for 36 states and the FCT for 3 months; this is to be followed by ₦40 billion for nine months. Kemi Adeosun, Nigeria’s finance minister explained that it was a fully repayable loan, although it has a secured tie against amounts governments might owe states.
“The idea is to tie the states over for a year, so that they rebalance, which is an average of about ₦1.3 billion for the first three months and ₦1.1 billion for the next nine months”, she said.
A full list of the bailout conditions are listed as follows:
- Publish audited annual financial statements within 9 months of financial year end.
- Introduction and compliance with the International Public Sector Accounting Standards (IPSAS).
Publish State budget online annually. - Publish budget implementation performance report online quarterly.
- Develop standard IPSAS compliant software to be offered to States for use by State and Local Governments.
- Set realistic and achievable targets to improve independently generated revenue (from all revenue generating activities of the State in addition to tax collections) and ratio of capital to recurrent expenditure.
- Implementation of targets; implement a centralised Treasury Single Account (TSA) in each State.
- Quarterly financial reconciliation meetings between Federal and State Governments to cover VAT, PAYE remittances, refunds on Government projects, Paris Club and other accounts.
- Share the database of companies within each State with the Federal Inland Revenue Service (FIRS). The objective is to improve VAT and PAYE collection.
- Introduce a system to allow for the immediate issue of VAT / WHT certificates on payment of invoices.
- Review all revenue related laws and update of obsolete rates / tariffs.
Set limits on personnel expenditure as a share of total budgeted expenditure. - Biometric capture of all States’ Civil Servants will be carried out to eliminate payroll fraud.
- Establishment of Efficiency Unit.
Federal Government online price guide to be made available for use by states. - Introduce a system of Continuous Audit (internal audit).
- Create a fixed asset and liability register.
- Consider privatisation or concession of suitable state-owned enterprises to improve efficiency and management.
- Establish a Capital Development Fund to ring-fence capital receipts and adopt accounting policies to ensure that capital receipts are strictly applied to capital projects.
- Domestication of the Fiscal Responsibility Act (FRA).
- Attainment and maintenance of a credit rating by each State of the Federation.
- Federal Government to encourage States to access funds from the capital markets for bankable projects through issuance of fast- track Municipal bond guidelines to support smaller issuances and shorter tenures.
- Full compliance with the FRA and reporting obligations, including;
- No commercial bank loans to be undertaken by States;
- Routine submission of updated debt profile report to the Debt Management Officer (DMO).
