Federal Government has reached a conditional agreement to pay states up to 25 percent claims of over-deductions for external debt service arising between 1995 and 2002 from First Line Charge deductions from the Federation Account Allocation Committee’s (FAAC) allocations.
The total amount approved by President Muhammadu Buhari is N522.74 billion and is to be paid in batches. The first batch of N153.01 billion is currently being processed for release to 14 state governments, according to a statement from the finance ministry at the weekend.
The amount is however subject to a N14.5 billion cap to any given state and balances due thereafter, will be revisited when fiscal conditions improve.
“Mr. President’s overriding concern is for the welfare of the Nigerian people considering the fact that many States are owing salaries and pension, causing considerable hardship,” Festus Akanbi, special adviser, media to minister of finance, Kemi Adeosun, said.
To ensure compliance with the directive that a minimum of 50 percent of any amount disbursed is dedicated to this, funds will be credited to an auditable account from which payments to individual creditors would be made. Where possible, such payments would be made to BVN linked accounts and verified, the finance ministry said.
While Nigeria reached a final agreement for debt relief with the Paris Club in October 2005, some states had already been overcharged.
State governments had to submit to the Federal Government claims of over-deductions in respect of the Paris Club, London Club and Multilateral debts of the Federal Government and states.
On their request for a refund of the amounts, President Buhari directed that claims be subject to verification by the Debt Management Office. A team was established and given the mandate to scrutinise claims and reconcile with available records.
The brief for the team was also extended to include a review of interim payments made under previous administrations.
“Work has commenced to resolve each state government’s claim and the exercise is expected to take approximately 12 months. The exercise will be thorough, including a complete reconstruction of records dating back to the period in question,” Akanbi noted in the statement.
In the interim however, state governors have continued to appeal for release of payment on the grounds of fairness because some states had already received refunds under previous administrations.
But due to the fact that reconciliation is still on-going and the final outcome might show an under or overstatement of claims, state governors have signed an undertaken that in the event the amount already paid exceeds the verified claim, the surplus would be deducted directly from the state’s monthly FAAC allocations.
“The release of these funds is intended to support the fiscal stimulus programme of the President Muhammadu Buhari led administration to provide direct stimulus through Government spending.
“It is particularly aimed at boosting demand at consumer level and reversing the slowdown in economic activity,” Akanbi further noted.
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