FG Takes Action Against States’ Excessive Borrowing

Concerned about the unrestrained borrowing by state governments from banks and the capital market, the Federal Government has initiated measures to monitor and regulate such borrowing activities.

As a result, the Fiscal Responsibility Commission (FRC) has introduced guidelines outlining the prerequisites that state governments need to fulfill before obtaining loans from any bank in the country.

During the Growth Initiative for Fiscal Transparency (GIFT) gathering with Civil Society Partners held in Abuja yesterday, Barrister Charles Abana, the Head of the Directorate of Legal, Investigation, and Enforcement at the Fiscal Responsibility Commission, revealed this development. He expressed the commission’s astonishment upon discovering that many banks entice state governments into acquiring loans.

His words:  “At the commission, we have decided to give them the template and we will go ahead to make sure that the Central Bank of Nigeria, CBN, issues a   proper guideline to banks on how to go about getting all the necessary requirements and compliance fulfilled before lending to the states unlike the past when they just go to the minister and the Debt Management Office, DMO.

“If we don’t put some checks on them, and make it not-too-easy for them to borrow, I don’t think we will come out of this debt situation.

“We   had a meeting in Lagos with banks to study debt patterns, how do banks give out loans and how they reconer it. At the meeting it was revealed that as soon as state governors constitute their cabinets bank officials swoop on them with mouth watering offers to lure them into borrowing from the banks.”

Speaking on he 2024-2026   Medium Term Expenditure Framework, MTEF, Abana noted that “the country’s fiscal deficit (including project tied loans) as a percentage of GDP will keep increasing over the medium term from 3.83 percent, 3.89 percent and 3.92 percent respectively of the projected GDP.

“Borrowing will increase over the three years while foreign borrowing will increase in the first two years of the medium term.


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