FG approves N522bn payment to States over Paris Club debt illegal deductions

Following a protest by states against overdeductions for external debt service between 1995 and 2002, President Muhammed Buhari has approved the release of N522.74 billion to states as refunds pending reconciliation of records.

About 14 states in the first batch will get reprieve of N153.01billion.

Each state is entitled to a cap of N14.5 billion being 25% of the amounts claimed.

But the government has raised a team to scrutinise claims by states and reconcile with available records.

These developments are contained in a statement in Abuja by the Special Adviser on Media to the Minister of Finance, Mr. Festus Akanbi.

The statement said the payment of the claims will enable states to offset outstanding salaries and pensions which had been “causing considerable hardship.”

The statement said the states have been directed to devote a minimum of 50% of any amount disbursed to address the challenges associated with salaries and pensions.

It said all the funds disbursed will be credited to an auditable account from which payments to individual creditors would be made.

The statement said:  “State governments have submitted to the Federal Government (FG)  claims of over-deductions for external debt service arising between 1995 and 2002 as a result of First Line Charge deductions from the Federation Account Allocation Committee (FAAC) allocations.

“These debt service deductions are in respect of the Paris Club, London Club and Multilateral debts of the FG and states. 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.

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.”

The statement gave insights into the conditions attached to the refunds to the states.

It added: “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 pensions, 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.”

But any state paid refunds in excess of its outstanding claims might suffer deduction from its monthly allocations from the Federation Account.

It said: “Due to the fact that reconciliation is still ongoing and the final outcome might show an under or overstatement of claims, an undertaking has been signed by state governors, declaring 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 total amount approved by the President is N522.74 billion and is to be paid in batches. The first batch of N153.01billion is currently being processed for release to 14 state governments.

“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.”