The Federal Government has barred banks in the country from giving loans
to state governments. The decision was taken in line with the Fiscal
Sustainability Plan, FSP, which has been agreed to by the Federal
Government’s economic team and state governors, to ensure prudent
management of sub-national resources.
This comes as the Central
Bank of Nigeria, CBN, will today announce details of the much
anticipated ‘flexible’ foreign exchange rate policy. President Muhammadu
Buhari’s administration, Finance Ministry sources said, was
disappointed at the manner 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. Gives condition for bond
proceeds release Rather than bank loans, the Federal Government asked
states to source funds from the capital market for their infrastructure
development.
It also insisted that funds sourced through bonds
must not only be on bankable, measurable projects but must also be
released in tranches. Vanguard gathered that the release of the proceeds
of bond issuing will, henceforth, be on the basis of satisfactory
utilization of earlier released proceeds.
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; establishment of an efficiency unit in
each state, implementation of continuous audit, improvement in
internally 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.
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