The federal government on Friday unfolded modalities for the reimbursement to the 36 states of about N522.74 billion over-deduction on foreign loans.
The amount is to be paid in batches, with the first batch of N153.01 billion currently being processed for release to 14 state governments.
The debt service deductions were in respect of the Paris Club, London Club and multilateral loans of the federal and state governments between 1995 and 2002.
Following a final agreement reached by Nigeria under the Obasanjo administration with the Paris Club in October 2005 for debt relief, some state governments had already been overcharged.
Some states had submitted requests to the federal government for the refund of amounts deducted from their Federation Account Allocation Committee (FAAC) allocations.
Consequently, President Muhammadu Buhari directed the Debt Management Office to verify the claims based on available records.
A verification team constituted with a mandate to scrutinise claims and reconcile records had reviewed interim payments made by previous administrations.
A Federal Ministry of Finance’ statement on Friday confirmed the commencement of work to reconcile each state government’s claim.
“The exercise expected to take approximately 12 months, will be thorough, including a complete reconstruction of records dating back to the period in question”, the statement by the minister of finance’ spokesperson, Festus Akanbi, said.
Mr. Akanbi said state governors have continued to plead for the release of payments based on fairness, as some states had already received refunds under previous administrations.
He said the federal government had reached conditional agreements with states for the payment of 25 per cent of each state’s claim, subject to a cap of N14.5 billion.
In line with the agreement, balances due to any would be revisited and paid when the country’s financial 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,” Mr Akanbi said.
A minimum of 50 per cent of any amount disbursed to any state government would be dedicated to the payment of salaries and pensions.
To ensure compliance, Mr. Akanbi said funds would be credited to only auditable accounts from which payments to individual creditors would be made.
“Where possible, such payments would be made to BVN (bank verification number) linked accounts and verified,” he explained..
Besides, he noted that due to the on-going reconciliation, state governors have been asked to sign an undertaking that in the event the amount already paid exceeds the verified claim, the surplus would be deducted directly from the affected state’s monthly FAAC allocations.
The release of these funds is intended to support the fiscal stimulus programme of the present administration to provide direct stimulus through government spending.
Mr. Akande said it is particularly aimed at boosting demand at consumer level and reversing the slowdown in economic activity.
The federal government on Thursday denied reports credited to the senator representing Kogi West senatorial district, Dino Melaye, that government had secretly shared $4 billion of the over-deduction to states.
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