REIMBURSEMENT OF OVER-DEDUCTIONS ON PARIS CLUB LOANS FROM STATE GOVERNMENTS

State Governments have submitted to the Federal Government (FG), claims of over-deductions for external debt service arising between 1995 and 2002 as a result of First Line Charge deductions from the Federation Account Allocation Committee (FAAC) allocations.

These debt service deductions are in respect of the Paris Club, London Club and Multilateral debts of the FG and States. While Nigeria reached a final agreement for debt relief with the Paris Club in October 2005, some States had already been overcharged. 

On the request by State Governments for a refund of amounts owed by the Federal Government, Mr. President directed that claims be subject to verification by the Debt Management Office and 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. 

Work has commenced to resolve each State Government’s claim and the exercise is expected to take approximately 12 months. 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. 

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. 

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.

Due to the fact that reconciliation is still on-going and the final outcome might show an under or overstatement of claims, 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.

The total amount approved by the President is N522.74 Billion and is to be paid in batches. The first batch of N153.01 Billion is currently being processed for release to 14 State Governments.

The release of these funds is intended to support the fiscal stimulus programme of the President Muhammadu Buhari led 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.