Governors to publish financial statements as condition for bailout

States government will now receive fresh monthly bailout from the federal government, following the adoption of the fiscal sustainability plan of the federal government.

According to the ministry of finance, state governments have agreed to a common standard to which they must operate in terms of financial management.

“We are determined to attain financial discipline across government and implementing the FSP at state level will ensure alignment,” Kemi Adeosun, minister of finance, said.

“The focus on increasing revenue, which is not limited to conventional taxes but rather encourages states to explore opportunities in areas such as agriculture and solid minerals, is in line with our diversification objectives.

The ministry said some states were already at par with these best practice standards but many still have work to do to reach the requisite standards.

“The governors approved this reform programme, which is a condition for any future funding support. The reforms are the same as those being pursued at federal government level and will ensure that the entire public financial management system is aligned and improved.

“At the conclusion of the programme, state government finances will be more robust, less vulnerable to shocks and less dependent on FAAC as a source of funding.

“Each state will have sustainable levels of staff costs and would have developed its own plan to enhance internally generated revenue (IGR), taking full advantage of its local endowments.”

The ministry said IGR had been widened and could not be taxes only, because there is no significant private sector in many states.

“State governments will therefore partner under PPP type arrangements to exploit local endowments. Each state will develop its own plan to attain the targets and compliance will be independently monitored. If there is failure to meet the targets, then funding will cease,” it said.

FG WILL BAIL COMPLYING STATES MONTHLY

The stakeholders agreed that funds will be disbursed to states in monthly tranches as opposed to full disbursement upfront as was the case in the 2015 bailout.

“Disbursements each month are fully conditional on achieving the fiscal reform milestones set out in the FSP within the agreed timelines.

“Independent audit firms will be engaged for monitoring and evaluation of each state’s performance against the FSP.”

STATES TO PUBLISH FINANCIAL PERFORMANCE

“The objective of the FSP is for enhanced transparency and accountability. To attain this, states must publish their financial statements, budgets and the quarterly budget performances.

“State finances will no longer be shrouded in secrecy. Items like security vote, feeding, and travel will be visible.

“The second objective of the cost management angle whereby wasteful spending will be reduced. Target limits for recurrent to capital expenditure will be set.

“Payroll will be cleaned up by the elimination of ghost workers from the system. The Efficiency Unit which has been set up to further cut cost, together with the setting up internal audit, will further enhance the objective of the exercise.”

STATES TO DEPEND LESS ON FAAC

The FSP is also said to be aimed at revenue collection, which will make states less reliant on FAAC allocation, with improved IGR.

Current database of taxpayers will be shared with FIRS. A review of obsolete revenue laws and tariffs must be achieved to checkmate the ineffectiveness of the past guidelines.

Analysis of the plan will strengthen public financial management by setting up an asset and liability register, while considering some privatisations, especially of state owned enterprises and the domestication of the Fiscal Responsibility Act.

The plan also seeks to manage debt in a sustainable manner, obtain and maintain credit rating, restrict borrowing from commercial banks, revised and fast-track access to the capital markets which are cheaper and more transparent.