Bail-Out Fund: FG deducts N122 billion from states’ account in 7-months

The Federal Government (FG) deducted an accumulated sum of N122.4 billion from the monthly allocation due to thirty-five (35) states in Nigeria between January and July 2019.  

According to the monthly Federal Account Allocation Committee’s (FAAC) report released (year-to-date) by the National Bureau of Statistics (NBS), a cumulated amount called “other deductions” to the tune of N122.4 billion was removed from monthly allocation due to all states in Nigeria.  

While providing details on the item, the NBS noted in its report that the other deductions include National water rehabilitation projects, National Agricultural Technology Programme, Salary Bailout, Payment for Fertilizer, State water supply project, State Agricultural Project and National Fadama Project. 

[READ MORE: NNPC spends estimated N33.60/litre on petrol subsidy]

Other deductions: According to the NBS report, Osun State tops the list of states that recorded the highest deductions across the 35 states (excluding Lagos). Specifically, most states in Nigeria largely depend on loans for developmental projects while the federal government had earlier given states bailout funds between 2015 and 2017 to pay workers’ salaries.  

• Meanwhile, on a month-to-month basis, the Federal Government deducts stipulated amounts from the statutory allocation to the state government.  
• Osun State parted with N10.3 billion within January and July 2019. 
• Ogun, Delta, Bayelsa and Akwa-Ibom made the top states with the biggest deductions.  
•  Lagos State remitted no fund under this category, as this may be due to the fact that the state did not receive bail-out fund from the FG in 2016.  

On the sideline, further analysis of the data obtained from the NBS shows that the sum of N21.98 billion was deducted from the monthly allocation entitled to states between the period of January 2019 and July 2019. This is categorised as “external debt deductions”.  

• While Lagos did not partake in the other deductions category, the State leads in external debts’ category. This may be due to the high debt profile of the state. An earlier report on the states’ debt profile shows that Lagos topped the debt profile list.  
• Other states that rank high include Rivers, Kaduna, Oyo, Bauchi and Cross-River.  

The Bottom Line: As noted in an earlier publication, the Federal Government already declared its readiness to recover the remaining N614 billion budget support (bail-out fund) given to states, as a committee to facilitate the recovery is already being constituted.   

• From the analysis, it is clear that the bail-out earlier funds given to states are already being frequently deducted, however, in bits.
• This further explains why some states are still in financial strain, as the Internally Generated Revenue and monthly allocation can not meet their huge obligations.  
• Meanwhile, the further concerns are brewing as the FG may just be all out to recover the bulk of bail-out fund from the states.  
• While debt is not entirely bad, as developing nations sometimes need a big push to meet financial obligations. Meanwhile, state governments need to be wary of building the country’s overall debt stock. 

[READ FURTHER: Debts-Revenue Quagmire heightens, as 10 States in Nigeria owe N2.74 trillion]