States lose easy access to foreign, local loans
States will no longer have easy access to foreign or local borrowing windows due to the drop in their earnings from the Federation Account.
Debt Management Office (DMO) Director-General Ms. Patience Oniha broke the news yesterday when she hosted Edo State Governor Godwin Obaseki.
Oniha said the decision was taken because there was no longer huge allocation to states shared at the end of the monthly Federation Accounts Allocation Committee (FAAC) meetings “from where borrowed funds could be deducted, hence continuous exposure to new lines of borrowings may no longer be sustainable”.
She advised states to imbibe frugality and a new strategic way of fiscal plans and implementation
Oniha lamented that oil mineral resources had continued to be the dominant contributor to the Federation Account.
She said states should “deploy new strategic thinking on how to address the financing of their already bloated debt stocks as well as how to generate funds to execute their plans aside from borrowings.
“Previously, we could rely on funds from FAAC and in addition to that we could borrow both at the Federal and at the State levels because there wasnt a challenge. But I think the times have changed. Revenues are under severe pressures, we are still dependent on oil revenues, non oil revenues are picking up, but that is still a journey.”
She noted that what this “means now, and in future, is that we need to do things so much differently, we must be more strategic in the management of public finance so the language I always use in my previous work where I was at the Efficiency Unit is that its no longer business as usual.”
Oniha warned that “we can’t collect money from FAAC, borrow, continue and wait until the next month. So at various levels, we need to be more strategic and more creative in the things that we do.”
Oniha said the federal government had “initiated several measures to increase non-oil revenue and control cost.”
The DMO boss said “the law recognises the states for being responsible for fiscal laws relating to the states, but we decided to parther with them in the belief that Nigeria is one project, hence we should not be looking at the centre, we should be looking at the various tiers of governments.”
Regarding the states’ compliance to generating debt data, the DMO boss said “we have major challenges. At the DMO, we have done a lot with the states in terms of assisting in developing their debt data, passing debt laws leading to the establishment of Debt bureaux and so on. As we speak, we have a good understanding of the debt portfolios at the sub- national levels.”