Many states in the country currently in dire need of financial straits may already be walking a tightrope to access the N90 billion loan package which the Federal Government says it has secured from the private sector. The loan is to assist the insolvent states in their bid to be less dependent on the monthly handout from the Federation Account. Last week, top officials from two of the heavily indebted states told me that meeting the conditions for loan is like a camel passing through the eye of a needle. The loan through the issuance of bonds in the bond market, comes with 22 stringent conditionalities, and will be repaid by the states over a period of time. It is not a bailout, like the one Federal Government disbursed to the states through the Central Bank of Nigeria last year, to offset some of the arrears of workers’ salaries.
Minister of Finance, Mrs  Kemi Adeosun announced details of the loan package recently in Abuja during a meeting with Commissioner of Finance of the 36 states of the Federation. Part of the details of the loan shows that N50bn would be released in the first three months, and each of the 36 states is expected to get about N1.3bn. Subsequently, N40bn would be released over a nine-month period as the second tranche through the bond market, with each states expected to receive N1.1bn.
But strong indications have begun to emerge that most of the states are unlikely to meet the conditionalities. Few days  after  the announcement of  the loan package, five states were reported  incapable of meeting the stringent conditions.
Some of the conditions which have been captured in Government’s Fiscal Sustainability Plan (FSP) include a mandatory publication of the states of their audited annual financial statements within nine months of the financial year, and  compliance with the International Public Sector Accounting Standards (IPSAS), as well as  online  publication of their annual budgets, including “security votes of the governors.”
Other conditions are a restriction on the states’ borrowing from commercial banks, in addition to a mandatory review of obsolete revenue laws and tariffs and a redefinition of the states’ Internally Generated Revenue (IGR), which will henceforth include, non-tax revenue sources that will reflect local opportunities in each states, in particular, solid minerals.
Besides, for any state to get the loan, it must set target limits for its recurrent and capital expenditures. This will include target for personnel costs as percentage of the total budget, just as the conditions also require  that every state will clean up its payroll by eliminating “ghost workers”, and set up Efficiency Unit to reduce the cost of governance.
Moreover, any beneficiary state must have begun the Implementation of the Centralised Treasury Single Account (TSA) in addition to having a quarterly financial reconciliation meeting with the Federal Government to cover Value Added Tax (VAT) and Pay As you Earn (PAYE) remittances, refunds on government projects.
Altogether, the loan package and the stringent conditions attached to it seen a welcome development. It should be seen beyond helping the states to be less dependent on the Federal Allocation, but as a measure to ensure fiscal discipline and transparent management of the states’ finances by the governors. Hitherto, most of the states have been financially reckless, with no clear framework to support their finances and expenditures in a prudent and most efficient manner.
In some states, the governors see the states finances as their personal account. Once upon a time, a former governor of Imo State reportedly described the state’s funds as “my money.” He lost his re-election bid.
One is not surprised that most of the states are declared incapable of meeting the conditions because virtually all of them do not have any standardized processes and Information Technology infrastructure. Their expenditures are largely at the whimps and caprices of the governors. This has made misappropriation of state funds easy, and most of the states insolvent.
It will be recalled that early this year, the CBN set a TSA guidelines for the states to help streamline their finances and enthrone transparency in the management of public funds. But six months after unveiling the guidelines no state government has embraced the policy, many of them claiming independence of the states under the constitution. But clearly, this is a tepid defence by the states to avoid public scrutiny of their expenditure profile and other accounting pitfalls that have allowed fiscal indiscipline.
It makes a lot of sense if the states will embrace the conditions precedent upon accessing the loan. It will make them financially responsible and accountable to their citizens, as well as provide a clear framework and processes in setting realistic and achievable targets in their expenditure pattern. Failure to accept the conditions for the loan could lend support to widespread allegations that the states’ finances are shrouded in secrecy, especially on items like security vote, estacodes, feeding, entertainment and other sundry allowances that are taking a hefty vote of the states budget.
Let the state governors see the N90bn loan as a rude awakening that they need to look inwards on how to increase their IGR and other sources of generating revenue, and less dependent on the Federal Allowances that are currently on the downward slide as a result of the fall in the prices of oil in the international market. More than ever before, the present economic situation in the country places additional responsibility on all tiers of government to think outside the box in their revenue drive. Nigerians need good life.
But mismanagement of resources has not allowed good things to happen. Most importantly, prudent management of finances will put the states in good stead, less dependent on ‘handouts’ from the Federal Government and borrowing from financial institutions.
Therefore, if the states must walk a tightrope to get the N90bn loan, that will be fine.

Related News