Introduction
States Secure N46 Billion amid economic challenges, Nigerian states have resorted to borrowing significant sums from banks to meet their salary obligations. This article delves into the details of this financial struggle and the key findings from the first half of 2023.
States Borrow Billions from Banks
During the period between January and June 2023, Nigerian states collectively borrowed approximately N46.17 billion from three prominent banks, namely Access Bank, Fidelity Bank, and Zenith Bank Group. The data is based on an analysis of the financial statements of these institutions.
Access Bank Leads the Way
Among these banks, Access Bank emerged as the primary source of loans for states, with an astounding N42.97 billion loaned out in just six months.
Zenith Bank and Fidelity Bank Follow
Zenith Bank and Fidelity Bank also extended loans to the states during the same period, with Zenith Bank providing N1.78 billion and Fidelity Bank offering N1.42 billion in financial support.
Debt Details from Financial Statements
The financial statements of these banks reveal the specifics of the loans:
- Access Bank reported an outstanding balance of N58.84 billion on the state salary bailout fund by June 30, 2023, down from N101.81 billion in December 2022. The Central Bank of Nigeria provided these funds to the bank for onward disbursement to state governments for salary payments. The bank is obligated to on-lend the money to the states at an all-in interest rate of nine percent per annum.
- Fidelity Bank showed an outstanding balance of N80.65 billion on the salary bailout fund by June 30, 2023, compared to N82.07 billion in December 2022. This fund is also for state governments facing challenges in meeting their financial obligations, including salary payments. It has a tenor of 20 years and an interest rate of nine percent per annum.
- Zenith Bank reported an outstanding balance of N125.14 billion on the salary bailout fund by June 30, 2023, down from N126.92 billion in December 2022. The Salary Bailout Scheme was designed to assist state governments in settling outstanding salaries. The funds are disbursed to banks nominated by beneficiary states at two percent for on-lending to the states at nine percent.
Despite Revenue Increase, States Struggle
Surprisingly, this borrowing trend continued despite a slight increase in revenue allocation to states. An analysis of communiqués issued by the Federation Account Allocation Committee revealed an increase in the amount shared between the Federal Government, states, and Local Government Areas from N4.96 trillion in 2022 to N5.5 trillion in 2023 for the first seven months of each year.
Revenue Shortfall for States
However, despite this increase in federal allocations, approximately 25 Nigerian states experienced a drop in internally generated revenue (IGR) and faced cash crunches in the first quarter of 2023. Data showed that these states earned N182.26 billion in Q1 2023, a shortfall of 3.07 percent or N5.77 billion compared to Q4 2022.
Conclusion
States Secure N46 Billion: As states grapple with fiscal challenges and increased indebtedness to banks, it’s clear that they face significant financial pressures. Finding sustainable solutions to enhance revenue generation and manage expenditures remains a critical task for state governments across Nigeria. Visit thedailycourierng for more news