President Muhammadu Buhari has approved a total of N522.74 billion to be disbursed to states as reimbursement for over-deductions on external debt service.
A statement issued on Friday, December 2, 2016 by Festus Akanbi, media aide to the minister of finance, Mrs. Kemi Adeosun said the debt service deductions were in respect of the Paris Club, London Club and multilateral debts of the federal and state governments.
He said the first tranche of N153.01 billion is currently being processed for release to 14 states.
The ministry of finance said state governments had submitted to the federal government claims of over-deductions for external debt service between 1995 and 2002 as a result of allocations on First Line Charge deductions from the Federation Account Allocation Committee, FAAC.
“While Nigeria reached a final agreement for debt relief with the Paris Club in October 2005, some states had already been overcharged.
“On the request by state governments for a refund of amounts owed by the federal government, Mr. President directed that claims be subject to verification by the Debt Management Office and 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,” the statement said.
However, it added that in the interim, 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.
“The federal government has reached a conditional agreement to pay 25% of the amounts claimed subject to a cap of N14.5 billion to any given state. 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.
“Therefore, to ensure compliance with the directive that a minimum of 50% 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 statement stressed
Arising from the fact that reconciliation is still on-going with the final outcome likely to show an under or overstatement of claims, the statement revealed that an undertaken had been signed by state governors, with a declaration that in the event the amount already paid exceeds the verified claim, the surplus would be deducted directly from the their states’ monthly FAAC allocations.
“The total amount approved by the President is N522.74 Billion and is to be paid in batches. 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,” the statement concluded.