The decision was taken in line with the Fiscal Sustainability
Plan, FSP, which has been agreed to by the Federal Government’s economic team
and state governors, to ensure prudent management of sub-national resources.
This comes as the Central Bank of Nigeria, CBN, will today announce details of
the much anticipated ‘flexible’ foreign exchange rate policy.
President
Muhammadu Buhari’s administration, Finance Ministry sources said, was
disappointed at the manner some past and current governors took loans from
banks and misapplied such funds, while mortgaging their states’ finances.
Currently, some states are
left with too little to meet even their recurrent obligations, after deductions
are made from their monthly federation account allocations.
Gives condition for
bond proceeds release Rather than bank loans, the Federal Government asked
states to source funds from the capital market for their infrastructure development.
It also insisted that funds sourced through bonds must not only be on bankable,
measurable projects but must also be released in tranches.
Vanguard reported that the release of the proceeds of bond issuing will, henceforth, be on the
basis of satisfactory utilization of earlier released proceeds.
The FSP aims to
improve accountability and transparency; increase public revenue; rationalise
public expenditure; improve public financial management; and sustainable debt
management.
Specific action points of the reform include biometric capture of
all civil servants; establishment of an efficiency unit in each state,
implementation of continuous audit, improvement in internally generated
revenue, IGR, and measures to achieve sustainable debt management.
States that
meet the above FSP conditions can access a new N50 billion facility to be
guaranteed by the Federal Government.
States must be prudent, transparent
—Adeosun At a meeting with state Commissioners for Finance, in Abuja,
yesterday, Minister of Finance, Mrs.
Kemi Adeosun, told them that the current
economic challenges facing the country left state actors with little or no
option than to be prudent and transparent. According to her, all tiers of
government operate in the same national economy and as such, the states cannot
continue as if what happened at the federal level is not their business.
She
said: “Nigeria’s economy is a confederation of the economies of her 36 states
and the FCT. Thus, we recognise the critical importance of developing a broad-based
economy, with productive activities in every region and state.
“At the federal
level, to create headroom for the urgently needed investment in infrastructure,
we are pursuing a very disciplined approach to managing public funds, ensuring
the maximisation of revenues and the minimisation of the costs of governance.
“The Fiscal Sustainability Plan, FSP, replicates this far-reaching public
financial management reform programme across all tiers of government and marks
a turning point in the management of state finances.
“By raising the standard
for public financial management in the areas of transparency, accountability
and efficiency, states will be repositioned to embark on a path towards fiscal
independence.
“On the cost side, the pressure is to cut costs, starting with
the commitment to eliminate, once and for all, the menace of ghost workers by
BVN checking of payroll and the requirement that all salary payments are made
directly to individual accounts.
“This will enable states control the size of their
wage bill and ensure that it is affordable.
The formal commitments being made
to improve expense management, greater efficiency in recurrent spending and
prudent debt management will combine to ensure that states can move towards
improved long term financial health.
“In the area of revenue, the FSP is based
on the fundamental principle that each and every state in Nigeria must be
economically viable.
“Accordingly, it recognises the fact that Internally
Generated Revenue, IGR, must be maximised and we have extended the definition
of revenue beyond the traditional confines of taxes, licences and fees.”
CBN to
announce details of ‘flexible forex’ policy today Meanwhile, the CBN will today
announce details of the much anticipated ‘flexible’ foreign exchange rate
policy.
Acting Director, Corporate Communications Department, CBN, Mr. Issac
Okoroafor, confirmed this to Vanguard, yesterday. He said: “Yes, details of the
policy will be announced tomorrow (today).”
The announcement is coming three
weeks after the Monetary Policy Committee, MPC, of the CBN decided to introduce
“greater flexibility in the management of the foreign exchange market.
“The
foreign exchange market framework, now ready, the MPC voted unanimously to
adopt greater flexibility in exchange rate policy to restore the automatic
adjustment properties of the exchange rate.
Consequently, all nine members
voted to hold and introduce greater flexibility in managing the foreign
exchange rate.
“The bank would, however, retain a small window for funding critical
transactions. Details of operation of the market would be released by the bank
at an appropriate time,” the committee said at the end of its meeting on May
24, 2016.
According to agency reports, sources at the CBN said an announcement
by Governor Godwin Emefiele will be made in Abuja, having concluded
consultations with various stakeholders on the policy.
As part of the new
policy, the CBN will allow market forces determine the exchange rate between
the naira and other currencies but may retain a small intervention window to
allow it intervene in some instances ‘critical’ to the nation’s economic growth
and will apply foreign exchange at an adjustable rate between N230 and N250,
depending on the rate in the market.
Naira to be officially devalued “The Naira
will be officially devalued tomorrow and going forward, the exchange rate will
be market-driven as done anywhere else in the world,” a source with knowledge
of the policy said on condition of anonymity.
The CBN had set the official rate
at between N197 and N199 but the scarcity of foreign exchange due to the crash
in the global price of crude oil, which accounts for the bulk of the nation’s
foreign exchange inflow, has forced the Naira down at the parallel market
(black market) to between N365 and N370, mostly due to speculative trading in
anticipation of the implementation of the new policy.
Analysts are positive
that the new policy would stabilize the forex market, calm nervous foreign
investors and ease the flow of foreign exchange in and out of the country.
Source
