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Bailout: Release funds to states – CBN orders banks

By on August 28, 2015

The Central Bank of Nigeria said on Wednesday that it had given approval to the request by the Deposit Money Banks to provide funds for state governments to enable them to pay the backlog of salaries of their workers.

This central bank stated this in a statement made available to our correspondent and signed by the Director, Corporate Communications, CBN, Mr. Mu’azu Ibrahim.

It said in the statement that the approval was based on the CBN’s decision to collaborate with relevant stakeholders to consider ways of liquidating the outstanding staff salaries owed by states and local governments.

The statement read in part, “The Central Bank of Nigeria has approved the request by the Deposit Money Banks to provide financial accommodation to state governments to enable them to pay the backlog of salaries of their workers.

“This is sequel to the decision by the National Executive Council at its meeting of 29th June, 2015 requesting the Central Bank of Nigeria, in collaboration with other stakeholders, to appraise and consider ways of liquidating the outstanding staff salaries owed by state and local governments.

“The conditions for accessing the loan facility include resolutions of the State Executive Council authorising the borrowing and state house of assembly consenting to the loan package, as well as issuance of Irrevocable Standing Payment Order to ensure timely repayment.”

The statement said out of the 27 states involved, funds had been disbursed to two states, namely: Zamfara and Kwara states, which met the requirements as agreed with their respective banks.

Efforts, it added, would be made in the coming days to conclude disbursements to other states so that all outstanding salaries to civil servants could be cleared.

The CBN approval is coming just three days after the Debt Management Office had said that the 11 states that had their commercial debts restructured into bonds would be paying an interest rate of 14.83 per cent of the value, which their debts to commercial banks were converted into.

The DG, DMO, Dr. Abraham Nwankwo, had stated in Abuja that the 14.83 per cent would be paid by the 11 states whose debts had already been restructured in the first phase of the exercise.

The restructuring, according to him, has already been effected. And with the arrangement, the bond, which had already been issued, would mature on July 18, 2034.

The first 11 states that got their debts to commercial banks restructured are Osun, N88.6bn; Delta, N69.8bn; Ogun, N55.4bn; Imo, N37.1bn; Ekiti, N18.8bn; Kwara, N15.6bn; and Edo, N11.9bn. Others are Benue, N10.9bn; Oyo, N9.1bn; Bauchi, N6.5bn and Kogi, N0.81bn.

Nwankwo had revealed that the impact of the debt management operations implied that the monthly debt service burden would reduce by a minimum of 55 per cent and a maximum of 97 per cent among the 11 states.

Similarly, interest rate savings for the 11 states would now range from three per cent to nine per cent per annum.

 

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