- Financial gloom hangs over Federation Account
- Workers’ salaries may be hard hit
BY COBHAM NSA, ABUJA – The worrying signs are increasing by the day that the 36 states will be hard pressed meeting future financial obligations given the debilitating effects of coronavirus (COVID-29) pandemic on the global economy.
With massive loss of projected revenue staring them in the face, Minister of Finance Mrs. Zainab Ahmed admits all three tiers of government must brace up for the expected tough times ahead.
In ringing the alarm bell, Mrs Ahmed said shortfalls in revenue projections and earnings will expectedly come from oil and gas; Customs’ collections; and Value Added Tax (VAT) accruals.
Speaking during a citizens dialogue organised by the Ministry of Finance, Budget and National Planning in partnership with United Kingdom’s Department for International Development (DFID), the Minister said from initial projected overall inflow of about N8.6 trillion into the Federation Account in 2020, current expectations are being pegged at N3.3 trillion, representing over 60 per cent shortfall.
She further explained that from the initial figure of N1.5 trillion, Customs’ projected revenue has contracted to N1.2 trillion, just as VAT also dropped from the targeted N2.1 trillion to N2 trillion
According to Mrs Ahmed, mostly in dire strait is the oil and gas sector with the accruals dropping significantly from the projected N5.5 trillion.
Obviously preparing the various tiers of government for the rough times ahead, Mrs Ahmed’s presentation indicated the need for reviewed plans for year 2020, with many states unable to meet their critical obligations, especially the payment of workers’ salaries and other renumeration.
Going by growing concerns about drastic drop in monthly allocations from the Federation Account, emerging signals are frightening that states may not receive more than N2.1 trillion as against the initial N3.3 trillion projected as distributable income for year 2020.
The same goes for the 774 Local Government Councils, whose earnings will now drop to N1.5 trillion compared to projected fihure of N2.5 trillion, just as the Federal Government will have to make do with about N2.4 trillion, representing 50 per cent of the projected N4.8 trillion income.
Featuring alongside Mrs Ahmed as Webinar’s panelists to discuss Nigeria’s response to the falling oil prices and COVID-19 pandemic, were Minister of State, Budget and National Planning, Prince Clem Agba; Director General, Budget Office of the Federation, Mr. Ben Akabueze, and the Chief Executive Officer, Nigeria Economic Summit Group (NESG), Lade Jaiyeola
In his intervention, Minister of State, Mr Agba hinted that the month of June forward could present the most financially challenging times for all levels of government in the country.
However, Agba, who insisted that urgent measures must be taken to mitigate any negative impact, said: ”We also expect that from about June, the States might begin to feel the effects of low revenue coming from oil and, therefore, might be having challenges in meeting up with obligations, especially the payment of salaries.
“Of the $2.5 billion facilities from the World Bank, about $1 billion of it will be going to the States as loans. These are concessionary loans.”
According to him; “Mr President has already approved N850 billion loan from domestic capital market. He has also approved $150 milion to be taken from the Sovereign Wealth Account in support of FAAC.”
He said as a means of assisting states to effectively manage their financial challenges and obligations, the Federal government is “also looking at suspending deductions in respect of the budget support funding which was provided to the States as a way of easing (burden).
“So, discussions are on with the CBN as to provide moratorium on the deductions in respect of the bailout loans.”
He further disclosed that; “Already, N10billion has been given to support Lagos State; we also have additional provisions to cover the remaining 35 States and the Federal Capital Territory.
“We will ensure that about 5 million homes that are off-grid are provided with solar system. This is being driven from the Ministry of Power.”
