Bailout deduction: More states to go bankrupt next month

Posted by News Express | 11 September 2019 | 741 times

Gmail icon

The financial crisis rocking some states of the federation may worsen from next month when the Federal Government begins deduction at source of the N650 billion bailout fund given to 35 states to resolve urgent obligations in the twilight of President Muhammadu Buhari’s first term.

The deduction which would be made from their statutory allocations from the Federation Accounts Allocation Committee (FAAC) by latest indications would leave majority of the states which depend on the handout from Abuja, bankrupt.

Giving this hint during the presentation of the Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), yesterday in Abuja,  Minister of Finance, Budget and National Planning, Mrs.  Zainab  Ahmed, said that the fund would not be used to fund  the 2020 budget because it was a loan obtained from the Central Bank  of Nigeria (CBN) which would be repaid to the apex bank.

She added, however, that the money would be deducted at source from the Federation  Accounts Allocation Committee (FAAC) fund next month.

“The N614 billion bailout fund given to the states is not going to form  part of the revenue for funding the budget. It was a loan which was advanced by the Central Bank of Nigeria (CBN) and the repayment will be made to the CBN. So, the recovery process is that we deduct from the FAAC  allocations from the states  and then we return it to the CBN and we are starting  this process by the next FAAC” she declared.

On the personnel cost which has risen to N3.0 trillion, she said that the government is taking steps to curtail the upsurge.

To this effect,  she noted that  Ministries, Departments and Agencies (MDAs) have been given till  October this year to link with Integrated  Personnel Payroll Information System  (IPPIS) failing which their salaries would be delayed.
“The personnel cost has continued to rise.

Government has however, taken steps to contain the rise of personnel cost including a target by Mr President that by the end of October, every MDA  must  be on IPPIS. The consequences of that is that any MDA that drags its feet over moving to IPPIS will not be getting their salaries from that time” she noted. The minister said that  government is making efforts to curtail the rising overhead expenditure and has cut it to the barest minimum.

“On the expenditure side of the framework, we are trying to get the expenditure to as low as practical. As a matter of fact,  we have stripped overhead cost to the barest minimum.

Having projected a production of  2.1 million barrels per day; projected crude oil of  55 million barrels per day;  an exchange rate of N305 to a dollar, we are projecting an aggregate Federal Government revenue of  N7, 810 trillion. This is a slight movement from N6.99 trillion  in 2019 and you will also see that there was a positive movement in the 2021 and 2022.

“Oil revenue is projected to decline from  N3.688 trillion in 2019 to N2.367 trillion in 2020. This is because of  the lowered production volumes as well as the lowered crude oil price per barrel.

Non-oil revenue is also increasing from N1.409 trillion in 2012. The increase we project is N1.55 trillion in 2020. This is spread over income tax, VAT, Nigerian Customs Service (NCS) revenue as well as the share of federal government inspection federation account.

“Debt service is also increasing. This is so because we have increased our borrowing in the past three  years and therefore debt service obligation has also increased from N2.144 trillion  in the year 2019 to N2.45 trillion in the year 2020.

“Recurrent expenditure which was N4.85 trillion in the year 2019 has increased to  N4.749 trillion in the year 2020. This is occasioned by  the rise in the personnel cost as well as the marginal rise in overhead…” (Daily Sun)


Source: News Express

Readers Comments

0 comment(s)

No comments yet. Be the first to post comment.

You may also like...