FG Orders Nigerian Banks To Stop Giving Loans To State Governors

The Nigerian 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 decision was prompted by concerns of the Finance Ministry at the manner some past and current governors took loans from banks and misapplied such funds, while mortgaging their states’ finances.
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Kemi Adeosun
Kemi Adeosun

Currently, some states are left with too little to meet even their recurrent obligations, after deductions are made from their monthly federation account allocations.

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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Daniel Enisan is a content writer at edliner.com. With a degree in mass communication, Daniel is a full breed journalist. Daniel is a realist, loves the use of sarcasm, a movie and music junkie. He is also a poet and a good listener.

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