There are indications that between January and June 2023, state governments borrowed N46.17 billion from three banks to pay salaries.
According to information obtained, the three banks are Zenith Bank Group, Access Bank, and Fidelity Bank.
According to report, the development was uncovered through examination of the three banks’ financial accounts for the first half of 2023.
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According to information, state governments borrowed N42.97 billion from Access Bank in the last six months, setting a record. Zenith Bank came in second with N1.78 billion in borrowings, and Fidelity Bank came in third with N1.42 billion.
It was found that between January and June 2023, they borrowed a total of roughly N46.17 billion from the three banks to cover salaries.
The change follows a minor rise in the amount of money given to the states for revenue. The amount distributed among the Federal Government, states, and Local Government Areas increased by N540 billion between January and July 2022 and 2023, according to a review of the communiqués released by the Federation Account Allocation Committee (FAAC).
However, it was discovered that in the first quarter of 2023, roughly 25 states in Nigeria struggled with a cash shortage and a decline in their internally generated income (IGR).
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The platform indicates that the 25 states forecasted an IGR of N219.56 billion for Q1 2023 but only produced roughly N182.26 billion, meaning that they underperformed in the quarter with a revenue performance of 83.01 percent.
The salary bailout fund’s outstanding balance decreased from N101.81 billion in December 2022 to N58.84 billion by June 30, 2023, according to Access Bank’s H1 2023 financial statement.
The Access bank statement disclosed that ”The amount of N58,842,651,795 represents the outstanding balance on the state salary bailout facilities granted to the bank by the Central Bank of Nigeria for onward disbursements to state governments for payments of salary of workers of the states. The facility has a tenor of 20 years with a 2 per cent interest payable to the CBN. The bank is under obligation to on-lend to the states at an all-in interest rate of nine per cent per annum. From this creditor, the bank has nil undrawn balance as at 30 June 2022.”
Also, “For Fidelity Bank, the H1 2023 financial statement showed that the outstanding balance on the salary bailout fund was N80.65 billion by June 30, 2023, from N82.07 billion in December 2022.”
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The bank noted, “FGN Intervention fund is CBN Bailout Fund of N80.65 billion (31 Dec 2022: N82.07 billion). This represents funds for states in the Federation that are having challenges in meeting up with their domestic obligation, including payment of salaries. The loan was routed through the bank for on-lending to the states. The bailout fund is for a tenor of 20 years at 9 per cent per annum.
“The bailout fund is for a tenor of 20 years at 7 per cent per annum and availed for the same tenor at 9 per cent per annum until March 2020, the rate was reduced to 5 per cent for one year period due to Covid-19 pandemic to March 2021 after which it was extended to February 2023. CBN, on August 17 2022, further reviewed the rates in response to the economic outlook and approved the following order; All intervention facilities granted effective July 20, 2022, shall be at 9 per cent per annum, while all existing intervention facilities granted prior to July 20, 2022 shall be at 9 per cent per annum effective September 1, 2022.”
Similar to this, according to Zenith Bank’s H1 2023 financial statement, the salary bailout fund’s outstanding amount decreased from N126.92 billion in December 2022 to N125.14 billion by June 30, 2023.
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The bank said, “The Salary Bailout Scheme was approved by the Federal Government to assist state governments in the settlement of outstanding salaries owed their workers. Funds are disbursed to banks nominated by beneficiary states at two per cent for on-lending to the beneficiary states at 9 per cent. The loans have a tenor of 20 years. Repayments are deducted at source, by the Accountant General of the Federation, as a first-line charge against each beneficiary state’s monthly statutory allocation. This facility is not secured.”
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