FG issues IOUs to clear 11-year backlog of debt

The federal executive council (FEC) on Wednesday approved the issuance of promissory notes for the settlement of debts owed local contractors worth N740 billion.

Kemi Adeosun, minister of finance, said this at a briefing after the FEC meeting, adding that debts to GENCOS, DISCOS and state government were N193.69billion.

“The memorandum that the council approved was for the issuance of a promissory note programme to settle inherited debts to local contractors and state governments on the part of federal government,” she said.

“These obligations had accrued prior to our coming into office and are across a number of sectors.

“We had pension liabilities, salaries some of which go back to 2006; unpaid salaries from 2012 to 2015; pensions to former Nigeria Airways staff from 2009, the export expansion grant which was suspended in 2014, there are actually obligations on that between 2007 and 2014 when they were suspended.

“What the government has agreed to do is to issue a promissory note, which is effectively an IOU. We are going to issue IOUs to the contractors and to those who federal government is obligated.

“Those promissory notes would mature over the next 10 years. So basically what we are doing is solving a long standing problem of contractor arrears.”

Adeosun said the debts were slowing the economy down because contractors owed banks who in turn had non-performing loans. She said the promissory loans can be accepted by banks and traded to improve non-perfoming loans.

She said government debts have held back investments in some sectors like the power sector, which had reversal of tariff, which led to a debt to GENCOS of about N495 billion.

Adeosun noted that government will draw a line on inherited obligations and expects those owed to negotiate what should be paid to them at a discount.

She also said a rigorous process has been put in place to validate claims and a firm has been engaged to do the validation adding that the government has directed agencies to give feedback on their indebtedness every quarter to avoid a repeat.

The minister said that government had identified that promotion arrears to civil servants had not been paid for long and planned to clear the debt over a three-year period.