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FG, banks push for creative management of the economy

By BusinessNews Staff on November 16, 2014

In the face of falling oil prices, the federal government and banks in the country have agreed to adopt resourceful measures in the management of the country’s economy.

Both parties on Thursday agreed to sensibly work together in managing key economic issues that include lending money to states and local governments as well as indebtedness of sub-national entities.

They also extracted a good commitment from each other on the repayment of the loans accessed by petroleum marketers for importation of refined petroleum products as well as prompt remittance to the government of 25 per cent statutory incomes due to it from its revenue generating entities.

Following a closed-door meeting where these agreements were reached, the Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, told journalists that both parties agreed to support states and local governments in managing their debt portfolios in a manner that will not put them in danger of overshooting their limits.

Attended by managing directors and top management echelon of banks in Nigeria, the meeting, Okonjo-Iweala said underpinned the necessity to manage Nigeria’s economy in such a manner that will make it sustainable at all levels, especially in difficult times and bearing in mind that the economy was not independent of the global economy.

The minister noted that in devising creative means to managing the economy, banks in Nigeria will, in compliance with the borrowing laws of the Debt Management Office (DMO), ensure that every lending to subnational entity would have to pass through the ministry of finance for analysis and approval.

She explained that the measure was all in a way to ensure that states and local governments remained sustainable in terms of their ability to service their debts.

Okonjo-Iweala equally noted that in advocating for prudent economic management measures, the federal government was going ahead to continue with its close-up of loopholes in its internally generated revenue potentials, thus, its agreement with the banks to henceforth remit incomes accrued to it from the statutory 25 per cent Internally Generated Revenue (IGR) of its revenue generating entities.

The minister explained that for the economy to remain sustainable for all sections of the country, every player within it must be willing to act sensibly. She added that it therefore does not make sense for banks to withhold incomes due to government from IGR.

According to Okonjo-Iweala, the government will on the other hand, act responsibly in meeting up with the expectations of the banks, especially with regards to timely payment of subsidy claims of marketers who have been approved to supply petroleum products in the country under the Petroleum Support Fund (PSF).

“We just had some very fruitful meeting with the MDs and top management echelon of our banks and we discussed three important topics. The first and by far the most important is that we had very good discussion on the issue of lending to states and local governments and indebtedness of subnational entities.

Speaking on the agreement reached for timely remittance of IGR due to the federal government from its agencies, the minister said: “The second issue we discussed was on internally generated revenue of government entities, where the government entities are required to remit 25 per cent of their gross revenues but as you know, sometimes we’ve encountered difficulties in getting this done and therefore, the banks have pledged to work fully with the federal government to ensure that they do not inadvertently support any agency in trying to avoid this mandate of remitting the funds.

“The banks will work with the federal government to ensure that they are helpful in this regard rather than hurting us and we expect to see better compliance of agencies with remittance of IGR in conjunction with the banks.”

She also said on the agreement with the banks to grant extended room on marketer’s repayment of loans procured for importation of petroleum products into the country that: “The third element is the discussion on the facilities given to oil marketers, where we discussed situations in the economy and the need for all of us to work together in a sensible way so that we can both handle payments to marketers in a way that also takes account of all payments we have to make to other sections of the country.

“We agreed that the banks that lend money to these marketers, that we will all work together to ensure that the economy continues to function and the marketers continue to meet the need to supply the economy with the necessary refined products and the government works out a mechanism to be able to pay the marketers and they can pay their loans. We agreed on some modalities to do this.

“We reached an accommodation that the banks who are owed money will give the marketers some sensible breathing room, some understanding, so that government can also pay and they will come back to them because we are all working in one economy and I think we are very able to manage all of these things if we are all sensible,” she added.

She however said that the timeframe for such loan reprieve has been calculated not to exceed three weeks, within which payment arrangements would have been concluded.

“We are talking about a very short period of time, maybe two to three weeks for government to settle its accounts, we will settle our accounts but we have to take cognisance of what is happening in the global economy and we discussed that too and that is why all of us have to be sensible, we will come back to them, we want them to remit everything due us, in return give these people breathing room and we will come back to settle as much of our accounts as possible so that they can pay them, I think we have gotten a good agreement on that,” Okonjo-Iweala stated.

Offering further insight on the need for quick adjustment in remittance of IGR due to the federal government, the minister said: “We have just agreed that the tactics of withholding monies due to government in lieu of payments that are due by states and so on because that is what accounts are pledged, maybe on FAAC money or withholding tax and VAT, that that practice should stop and therefore, whatever monies that are due to government should be remitted to government.

[ThisDay]

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