Subsidy palliatives might plunge states into N1.34tn debt

According to an NRTC investigation, the new subsidised palliatives loans could increase 36 states’ borrowing from the federal government to N1.34 trillion.

The Federal Government’s debt was made up of an N614 billion debt as of 2019; an N656 billion debt in 2021; and a new N69.12 billion debt this year as a subsidy palliative.

This debt is probably distinct from the state’s N5.48 trillion domestic debt as of March 2023 and its $4.4 billion external debt as of December 31, 2022, all figures provided by the Debt Management Office.

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The analysis also revealed that the 36 states owed the federal government a total of N614 billion as of 2019 under the budget support loan programme.

This total included an approved N28.8bn as a budget support loan facility to the 36 states of the federation in 2017.

The Federal Government last week announced a N5bn palliatives for each state of the federation, including the Federal Capital Territory to cushion the impact of the removal of the petrol subsidy.

The policy, which led to sharp and multiple increases in fuel pump prices, has driven up the costs of goods and services, pushing millions of Nigerians into poverty and worsening the socio-economic situation in the country.

According to the terms of the facility, contained in the memo to the governors, a total of N4,000,000,000.00, will be disbursed as follows: Loan (48 per cent)- N1,920,000,000.00; FGN Grant: (52 per cent) N2,080,000,000.00; Beneficiary: each state government; repayment period: 20 months.”

The facility which carries a moratorium of three months, is also interest-free, while a monthly deduction of N120,000,000.00 after three months applies.

Unlike the previous facility in 2021 with an interest rate of nine per cent, the current one, which is a total of N69.12bn is interest-free.

However, state governments are expected to begin repayment by December after the three-month moratorium.