Governors warn that CBN’s proposed loan recovery from FAAC revenue is “suicidal”

Nigerian Governors have warned that given the constant reductions in FAAC Allocation to states, it would be suicidal if the Central Bank of Nigeria (CBN) goes ahead to carry out its proposed recovery of state loans.

In reaction to the warning, the National Economic Council (NEC) said it will negotiate with the CBN and the Finance Ministry on loan recovery.

The developments were disclosed by Governor David Umahi of Ebonyi State after a virtual NEC meeting presided over by Vice President Yemi Osinbajo on Thursday at the Presidential Villa, Abuja.

The Governor added that NEC also agreed to set up a committee to engage the CBN governor and the Finance Minister.

What the Governor said:

He revealed that the NEC also endorsed the reviewed National Social Protection Policy ( NSPP) by the Minister of Finance, Budget and National Planning, Zainab Ahmed.

• “Council was invited to note the revised NSPP that replaces the 2017-2022 NSPP, which was reviewed in consultation with all states and other stakeholders, he said.
• “It is subject to review every five years for updates and accommodation of some of the emerging issues, which include pandemics, insecurity, and responsive social protection.
• “The expected benefits of the revised NSPP include reduction of multi-dimensional poverty; promotion of social justice and equity and inclusive growth, reduction of unemployment, social and economic vulnerabilities and other threats to sustainable development,” he said.

Umahi also stated that the NEC approved a review of the plan for an immediate deduction of funds from the state. He said: 

• “The governors are saying with the constant reduction in FAAC allocations to states, it would be very suicidal if the CBN goes ahead to carry out their proposed recovery of state loans.
• “The governors and NEC applauded the president, the Vice President, the Minister of Finance and the CBN Governor for their efforts and commitment to states while noting that a lot of funds that were hidden from the states before the present administration have also been graciously given to states by the president and his team.
• “That has helped the states very much, so while commending them, NEC agreed to engage the CBN governor with the Minister of Finance and the governors’ forum and the NEC committee.
• “So, it was agreed that these deductions would have to be reviewed to seek other ways; that if it goes ahead, the states would suffocate and that would not be good for the nation; NEC agreed to set up a committee to engage the CBN governor and the finance minister.” He said.

On the flooding incident across the country, Umahi noted that NEC agreed to set up a committee to look at the immediate solutions and interventions over the flooding and to see how we take care of those who were affected and states too.

What you should know

• The loans states take from CBN can be used for various purposes mostly infrastructure. it was reported earlier this year that the Rivers State Executive Council has approved the state government’s request for an N15 billion loan from the Central Bank of Nigeria’s Infrastructure Fund.
• Rivers state said that tapping the fund will help speed up the completion of these projects, with a low-interest rate of 5% repayable within 20 years and a three-year moratorium.