President Muhammadu Buhari has approved that the sum of N522.7 billion be paid to the 36 states of the federation as refund of over-deductions of external debt service proposal submitted by states to the Federal Government.
The approval confirmed yesterday by the Minister of Finance, Mrs. Kemi Adeosun, came a few days after a complaint by Benue State government that the state had yet to receive any kobo from the Federal Government as refund of money over-deducted from the state governments from 1995 to 2002 to settle Paris Club debt. Mrs. Adeosun confirmed the president’s approval yesterday in a statement by her Media Assistant, Festus Akanbi .
The Minister added that, the N522.74 billion would be paid in batches, just as she confirmed that the first batch of N153.01 billion was currently being processed for release to 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”, she said in a statement. “Mr. President’s overriding concern is for the welfare of the Nigerian people considering the fact that many states owe 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”, Mrs. Adeosun said. She added that, due to the fact that reconciliation is still on-going and the final outcome might show an under or overstatement of claims, an undertaken 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 state governments had submitted to the Federal Government 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.
The 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, President Buhari directed that, the claims be subject to verification by the Debt Management Office (DMO). A team was established with a mandate to scrutinize the 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”.