President Muhammadu Buhari
The federal government has reaffirmed its commitment to the Paris Club refund for states.
Minister of Finance Mrs Kemi Adeosun, in a statement yesterday, said “independent monitoring of compliance with the terms and conditions of funds released” would be “conducted in due course.”
The statement assured “the public that the Federal Government has consistently complied with all extant rules and regulations in the disbursement of the Paris Club refund to state governments.”
It added: ”The Federal Government’s disbursement process is transparent and targeted at the attainment of specific economic objectives.
“The inability of some sub-national governments to meet salary and other obligations was considered inconsonant with the Federal Government’s economic stimulus programme. Claims with regard to over deductions had been made to the Federal Government, consistently since 2005.
“The Debt Management Office (DMO) initially requested for a period of 22 months to complete the reconciliation and facilitate disbursement.
“However, President Muhammadu Buhari, considering the plight of salary earners and pensioners and the need to stimulate the economy, directed that the exercise be completed within 12 months.
”In addition, Mr. President gave an express Anticipatory Approval for the release of up to 50% of the claim of each state, pending final reconciliation.
“That reconciliation is undertaken by the DMO, Office of the Accountant General of the Federation (OAGF) and the relevant State Governments. Accordingly, the disbursements are staggered in batches and payments are only made when the claims of each state have been reconciled with the facts at the disposal of the Federal Government.
”Specifically, information was available that some states had been paid either in full or in part, under previous administrations. This necessitated a more detailed review for the states in question.
”The release of the first tranche, representing up to 25% of claims, being N522.7 billlion, commenced in December 2016. Disbursement was subject to an agreement by State Governments that 50% of any amount received would be earmarked for the payment of salaries and pensions.
“In addition, each governor gave an undertaking that excess payments would be recovered from the Federal Accounts Allocation (FAAC), if the final reconciliation found that the amount paid under the Anticipatory Approval exceeded that due.
” It is standard practice in the Ministry of Finance to undertake independent monitoring of compliance with the terms and conditions of funds released. This will be conducted in due course.
”To date, nine batches have been processed while some balances remain outstanding to the possible credit of a number of states. “Given the foregoing, complete and final figures can only be released and published after each state and the Federal Government have reconciled and agreed on the sums due.
”At the National Economic Council meeting on Thursday March 16, 2017, President Muhammadu Buhari instructed the Minister of Finance and Central Bank Governor to commence the process of resolving the balance of the approved amount.
“The overriding consideration for any further releases will be the current and projected cash flows of the Federation as well as the outcome of the independent monitoring of the compliance with terms and conditions attached to the previous releases.
”The Minister of Finance would like to reaffirm the commitment of the administration to publish all relevant information on the Paris Club refund.”
Where are the original records of the Paris-London Club loans?
Some of the records are not traceable, as most of the states have none, The Nation learnt yesterday.
Besides, the Federal Government intervened in the rescheduling of some of the loans. Some of the states do not have details of such rearranged obligations, a source said yesterday.
But this will not stop the presidential order that states should have $6.9 billion refund to lessen their salary arrears burden.
The Federal Government is verifying the $6.9billion refund, which the states are claiming as over deductions from their allocations, for repayment of the loan.
That the records are missing has made the ongoing verification and reconciliation of the loans difficult.
It was also learnt that since the reconciliation started in 1990, the timeline has affected the exercise over the years. Some of the desk officers have either retired or resigned from office.
But the Federal Ministry of Finance, the Debt Management Office (DMO) and the Office of the Accountant-General of the Federation (OAGF) are working round the clock with the states and the creditors to collate the figures.
The loss of the original records of the loans was uncovered by the committee raised by President Muhammadu Buhari. The Committee on Over Deduction of Foreign Loan Obligations from States, which examined claims by the states for the refund of over deduction on the Paris Club and London Club debts recommended that states requests for refund should be considered.
“Accordingly, all State Governments which have claims for the refund of over deductions on Paris Club and London Club debts should submit applications for refund attaching all relevant documents in support of the claims to the office of the Honourable Minister of Finance, with a copy to the Debt Management Office (DMO) for appropriate action,” the committee said in its recommendation.
Such substantiated claims should be submitted with documents not later than August 31, 2016, it said, adding:
“Upon receipt of the claims, the DMO in collaboration with the Federal Ministry of Finance and the Office of the Accountant-General of the Federation will conduct an assessment, validation and reconstruction of the historic debt data of the claiming States, using evidence submitted by the State to match the data available in the DMO’s system, and advise Mr. President of the outcome for His further directives.
“In the past several attempts had been made by the Federal Government at determining the true position of State’s External Debt Obligations.
“We have on record the result of the various attempts at reconciliation starting with the reconciliation of Paris Club Debt in January 1990, Reconciliation of External Loan – on-Lent and Reschedule Loans in February 1995 and other efforts in 2001, 2005 and 2007.
“Over time the Bilateral Loans i.e. Paris Club and London Club Obligations have been renegotiated, rescheduled and re-arranged hence the original identities of these loans were lost in the process.
“These rescheduled loans were arranged by the Federal Government hence the States were not in the know of the details of the re-arranged obligations.”
A source involved in the reconciliation said: “Some of the records of these loans cannot be traced. Most states also did not keep proper records.
“This is why the DMO said it will need two years to do a proper reconciliation but the state governors said they cannot wait.
“We went deep to get the loan data from the CBN, OAGF, RMAFC, Funds Department and DMO. Every agency gave data which were conflicting.”
The source spoke of the anxiety of paying states more than they actually deserve. “We will all however learn from this on how to keep records,” he said, pleading not to be named because he is not allowed to talk on the matter.
A former Military Governor of Kaduna State, Col. Abubakar Dangiwa Umar (retd.) yesterday urged President Buhari to suspend the refund to states and the Federal Capital Territory(FCT).
He said some governors contracted consultants with fees ranging from 10 to 30 per cent to secure the refund.
Umar gave the advice in a statement in Abuja against the backdrop of the controversy over loan refund to states.
States are demanding about $6.9billion deductions from the Federal Government.
Col. Umar said: “It is now revealed that some governors contracted consultants with fees ranging from 10 to 30 per cent to secure refund from the Federal Government of Nigeria (FGN).
“With this shocking revelation, President Muhammadu Buhari should suspend his order to the Federal Ministry of Finance and the Central Bank of Nigeria (CBN) for the release of the second tranche of the refund.
“It is also evident now that most of the earlier released funds were deployed for other purposes than payment of salaries and pension arrears as directed by Mr. President. This impunity has got to stop.”