State Governments Borrow N46.17 Billion To Pay Salaries

Indications have emerged that state governments have borrowed N46.17 billion from three banks to pay salaries between January and June 2023.

It was gathered that the three banks include Access Bank, Fidelity Bank, and Zenith Bank Group.

According to The Punch, the development was unravelled based on an analysis of the half-year 2023 financial statements of the three banks.

It was gathered that state governments borrowed the most from Access Bank in six months, with a record of N42.97 billion, followed by Zenith Bank (N1.78 billion borrowed) and Fidelity Bank (N1.42 billion borrowed) within the six-month period.

It was observed that, in total, they borrowed about N46.17 billion from the three banks to pay salaries between January and June 2023.

The development comes after a slight increase in the revenue allocation to states. An analysis of the communiqués issued by the Federation Account Allocation Committee (FAAC) between January to July 2022 and 2023 indicated a N540 billion increase in the amount shared between the Federal Government, states, and Local Government Areas.

However, it was learned that about 25 states in Nigeria suffered a drop in their internally generated revenue  (IGR) and battled a cash crunch in the first quarter of 2023.

According to the platform, the 25 states projected an IGR of N219.56 billion for Q1 2023 but only made about N182.26 billion, which means that they had a revenue performance of 83.01 per cent, which means they underperformed in the quarter.

According to the H1 2023 financial statement of Access Bank, the outstanding balance on the salary bailout fund was N58.84 billion by June 30, 2023, from N101.81 billion in December 2022.

The Access bank statement disclosed that ”The amount of N58,842,651,795 represents the outstanding balance on the state salary bailout facilities granted to the bank by the Central Bank of Nigeria for onward disbursements to state governments for payments of salary of workers of the states. The facility has a tenor of 20 years with a 2 per cent interest payable to the CBN. The bank is under obligation to on-lend to the states at an all-in interest rate of nine per cent per annum. From this creditor, the bank has nil undrawn balance as at 30 June 2022.”

Also, “For Fidelity Bank, the H1 2023 financial statement showed that the outstanding balance on the salary bailout fund was N80.65 billion by June 30, 2023, from N82.07 billion in December 2022.”

The bank noted, “FGN Intervention fund is CBN Bailout Fund of N80.65 billion (31 Dec 2022: N82.07 billion). This represents funds for states in the Federation that are having challenges in meeting up with their domestic obligation, including payment of salaries. The loan was routed through the bank for on-lending to the states. The bailout fund is for a tenor of 20 years at 9 per cent per annum.

“The bailout fund is for a tenor of 20 years at 7 per cent per annum and availed for the same tenor at 9 per cent per annum until March 2020, the rate was reduced to 5 per cent for one year period due to Covid-19 pandemic to March 2021 after which it was extended to February 2023. CBN, on August 17 2022, further reviewed the rates in response to the economic outlook and approved the following order; All intervention facilities granted effective July 20, 2022, shall be at 9 per cent per annum, while all existing intervention facilities granted prior to July 20, 2022 shall be at 9 per cent per annum effective September 1, 2022.”

Similarly, in the H1 2023 financial statement of Zenith Bank, the outstanding balance on the salary bailout fund was N125.14 billion by June 30, 2023, from N126.92 billion in December 2022.