Governors seek variation of loan repayment plans

Governors on Tuesday sought the variation of the budget support loan repayment, which they said will compound the state governments’ burden.

They rejected the proposed monthly repayment of N164billion, stressing that the states could not cope with the stiff condition.

The governors also kicked against the proposed plan by the Federal Government to extend the repayment period from 20 to 30 years.

Based on the extension, state governments’ monthly repayment will reduce from N252 million monthly to N162 million.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed the plan to state house correspondents at the end of the National Economic Council (NEC) meeting chaired by Vice President Yemi Osinbajo at the Presidential Villa, Abuja.

At the Nigerian Governors’ Forum’s (NGF) Peer-Learning Event organised to share ideas, improve revenue generation and curb leakages, the Federal Government and governors brainstormed on strategies for shoring up revenues from the non-oil sector and curbing persistent revenue shortfalls.

With the minister at the NEC meeting were Anambra State Governor Willy Obiano, Ogun State Governor Dapo Abiodun, Nasarawa State Governor Abdullahi Sule, and Minister of Health Osagie Ehanire.

The minister said the Federal Government had made the N252 million deductions in September and October based on the 20 years repayment period.

Following outcry by governors, another repayment plan extending the schedule to 30 years and with repayment of N162 million was presented to NEC.

Ahmed acknowledged that the state governors were not satisfied with the repayment extension to 30 years.

She said: “The budget support facility was initially for 20 years repayment period. When we made the first deduction in September, the states had complained that the amount deducted, which was N252 million, was too harsh.

“So, since then, the Central Bank of Nigeria, which is the lender, has revised the condition to make the repayment period longer. The new repayment period is 30 years. This means that the states will be paying monthly N162 million. But today, the states still were not satisfied with the condition.

“So, we are expecting that the Federal Ministry of Finance, Budget and National Planning, CBN and the states will engage again with the view of having the CBN further revise the condition to reduce the monthly repayment burden.”

The ministry urged NEC to note the request for N997, 490,780.00 by FAAC Sub-committee on International Public Sector Accounting Standards (IPSAS) as post-implementation support to the three tiers of government.

Ahmed said the Federal Executive Council (FEC) has directed that the three tiers of Governments adopt the provisions of IPSAS.

She also gave the Council the accounts balances as follows: Excess Crude Account (ECA) balance as at 22nd October, 2019 = $324,035,696.29, Stabilization Fund Account balance as at 22nd October, 2019 = N28, 560, 710,627.55, Natural Resources Development Fund Account balance as at 22nd October, 2019 = N70, 691, 826,511.84

The minister also presented a memorandum to the Council seeking its approval of N775, 060, 080.00 budget estimates of the Federation Account Allocation Committee (FAAC) meetings and other related activities for the year 2019.

At the peer-learning event, the minister, who unfolded Federal Government’s plan for tax law reform, disclosed that a bill will be transmitted to the National Assembly on the Value Added Tax (VAT) increase.

Also, the World Bank gave hints on how to improve revenue generation.

Ahmed identified key constraints to revenue generation, including “low effective tax rates, archaic tax laws that are not evolving at commensurate pace with businesses, leakages in revenue collection systems, low tax compliance rates and poor tax morale.”

The minister said Nigeria needed robust, tough, well-coordinated and multi-faceted reforms to achieve a turnaround.

According to Ahmed, there was a plan to review the Strategic Revenue Growth Initiative (SRGI), launched earlier in the year, adding that a Bill will be sent to the National Assembly for the review of existing Value Added Tax (VAT) regime.

Ahmed, represented at the peer-learning event by a director in the ministry Israel Igwe, said: “Nigeria needs a lot of resources to actualise the Economic Recovery and Growth Plan (ERGP) and other development plans, which are at risk of being underfunded.

“Regarding the 2019 budget, as at 30th June, the actual aggregate revenue as per our Fiscal Accounts was N2.04 trillion, indicating a revenue shortfall of 42 per cent.

On the plan to reform existing tax laws and raise VAT, Ahmed said when compared with its peers, Nigeria is “lagging on most revenue streams, including VAT and excise revenues as we not only by far have, one of the lowest VAT rates in the world but weak collection efficiencies.”

On the proposed tax law reform, the minister said the “Finance Bill”, has been sent along with the 2020 budget to the National Assembly for consideration and passage into law.

She stressed: “This Finance Bill has five strategic objectives, in terms of achieving incremental, but necessary, change to our fiscal laws. These objectives are: Promoting fiscal equity by mitigating instances of regressive taxation; reforming domestic tax laws to align with global best practices; introducing tax incentives for investments in infrastructure and capital markets; supporting micro, small and medium-sized businesses in line with our Ease of Doing Business Reforms; and raising revenues for the government.

“The draft Finance Bill proposes an increase in the VAT rate from 5 per cent to 7.5 per cent. As such, the 2020 Appropriation Bill is based on this new VAT rate. The additional revenue will be used to fund health, education and infrastructure programmes.”

NGF Chairman, Ekiti State Governor Kayode Fayemi urged states to devise ways of raising their revenue profiles and reducing wastages.

Fayemi added: “The recent fiscal crises of 2015 and 2016 proved that over the years, we have not done enough to reduce our dependence on oil. It is a fact that domestic revenues have grown significantly over the last three years.

Credit: The Nations