Amid the decline in the revenues disbursed to them by the Federal Accounts Allocation Committee (FAAC) in recent months, the total debt owed by states to the Central Bank of Nigeria (CBN) has increased to N1.24 trillion.
In November last year, President Muhammadu Buhari approved a N656 billion bridge financing facility to the 36 states to help them meet financial obligations, especially the previous budget support facility due for repayment. Zainab Ahmed, minister of finance, budget and national planning, said the loans would be given to states “over a period of six months towards cushioning the effects of their resumption in the repayment of the three federal government bailout facilities (salary bailout, excess crude facility and budget support facility)”.
Data obtained from the CBN showed that the states started borrowing from the apex bank in April 2016, with the total loan put at N14.58 billion at the time. The debt owed to the central bank jumped to N300.38 billion in December 2016 and N590.42 billion at the end of 2017. Following the collapse in global oil prices, the country slipped into recession in the second quarter of 2016 and emerged from it a year after. States’ debt to the central bank declined gradually to N600.62 billion in October 2021 from N614.92 trillion in September 2019, but jumped to N700.47 billion in December last year. It rose further to N1.24 trillion in June this year, according to the latest data from the CBN.
The revenues shared by the federal, state and local governments in the first quarter of this year fell to N2.18 trillion from N2.46 trillion in the previous quarter, according to the National Bureau of Statistics. The disbursement by FAAC to states declined to N590.45 billion in the first quarter of this year from N640.16 billion in the previous quarter. “A decline in the FAAC allocation would exacerbate the state governments’ financial difficulties, resulting in salary cuts and staff layoffs, which will likely affect aggregate demand and consumption levels as income levels remain squeezed,” analysts at Financial Derivatives Company Limited, led by economic expert Bismarck Rewane, said.