President Muhammadu Buhari has given the nod for the payment of N522.74 billion reimbursement for states who were over-charged from the Paris Club, the London and other offshore lenders loan.
Nigeria reached a final agreement for debt relief with the Paris Club in October 2005, but some States had already been overcharged.
The Spokesman of Finance Minister, Festus Akanbi who revealed this yesterday in Abuja said the excess deductions also represent external debt service that arose between 1995 and 2002 as a result of First Line Charge deductions from the Federation Account Allocation Committee (FAAC) allocations.
He said work had since commenced to resolve each State Government’s claim, even as he added that the exercise is expected to take approximately 12 months.
He revealed that the first batch of N153.01 billion was currently being processed for release to 14 State Governments.
He said: “The Federal Government has reached a conditional agreement to pay 25% of the amounts claimed subject to a cap of N14.5 Billion to any given State. Balances due thereafter, will be revisited when fiscal conditions improve. The exercise will be thorough, including a complete reconstruction of records dating back to the period in question.
“In the interim however, State Governors have continued to appeal for release of payment on the grounds of fairness because some States had already received refunds under previous administrations. Mr. President’s overriding concern is for the welfare of the Nigerian people considering the fact that many States are owing salaries and pension, causing considerable hardship.
Therefore, to ensure compliance with the directive that a minimum of 50% of any amount disbursed is dedicated to this, funds will be credited to an auditable account from which payments to individual creditors would be made. Where possible, such payments would be made to BVN linked accounts and verified”, Akanbi explained.
On the request by State Governments for a refund of amounts owed by the Federal Government, Akanbi said President Buhari directed that claims be subject to verification by the Debt Management Office, stressing that a team was established and given the mandate to scrutinise claims and reconcile with available records.
“The brief for the team was also extended to include a review of interim payments made under previous administrations”, he stated.
The Minister’s Spokesman also added that reconciliation of states’ claims was ongoing, even as he noted that there was a possibility the final outcome might show an under or overstatement of claims.
“To this end, an undertaken has been signed by State Governors, declaring that in the event the amount already paid exceeds the verified claim, the surplus would be deducted directly from the State’s monthly FAAC allocations”, he said.
Akanbi maintained that the release of these funds was intended to support the fiscal stimulus programme of the President Muhammadu Buhari administration to provide direct stimulus through government spending.
“It is particularly aimed at boosting demand at consumer level and reversing the slowdown in economic activity”, he said.