The Federal Executive Council (FEC) on Wednesday approved for release the sum of N2.7 trillion following the outcome of an exhaustive committee report that ascertained the level of Federal Government’s debt profile.
A larger chunk of the fund would go into settling outstanding debts consisting of N740 billion pensions and promotional salary arrears (not discounted), and N1.93 trillion (discounted) of other obligations, including dues to contractors and suppliers.
The fund will be disbursed through the Ministry of Finance and will come in form of promissory notes and debt issuance programme to resolve a number of inherited and long outstanding Federal Government obligations to contractors, state governments and employees.
The executive has also mapped out a strategy for approaching the National Assembly to approve the programme ahead of its implementation.
Minister of Finance, Kemi Adeosun, made the disclosure to State House correspondents after the FEC meeting chaired by Acting President Yemi Osinbajo.
She said the debts were accumulated over the last two decades, adding that it has been found to be stalling development efforts as most contractors have left sites where they work.
Also, Federal Government’s indebtedness to power generating firms and GENCOs hit the threshold of N495 billion, Adeosun disclosed.
She noted, however, that with the approved debt repayment plans which is expected to run for a maximum of ten years, the economy is expected to bounce back fully soon.
“In March 2017, the Economic Management Team, under the leadership of the Acting President Yemi Osinbajo, mandated the minister of finance to chair a committee that would establish a process to confirm the validity of inherited Federal Government obligations, and propose a mechanism to resolve them,” she said.
She added, “These obligations largely consist of dues owed to state governments, oil marketers, power generation and distribution companies, suppliers and contractors by Federal Government parastatals and agencies, payments due under the Export Expansion Grant (EEG), outstanding judgment balances as well as pension and other benefits to Federal Government employees.
“Some of the obligations date back as far as 1994. The resolution of this will significantly enhance liquidity in critical sectors of the economy.
“Following an exhaustive process of reconciliation, the committee has been able to provisionally confirm a discounted total of N2.7 trillion of obligations, consisting of N740 billion of outstanding pensions and promotional salary arrears (not discounted) and N1.93 trillion (discounted) of other obligations, including dues to Federal Government contractors and suppliers.
“These numbers are aligned with existing Federal Government estimates, and in some cases, are lower than previously estimated.”
Adeosun maintained that the suppliers and contractors’ obligations will be resolved through a strict process of final validation, following which those confirmed will be settled through the issuance of liquid promissory notes (ten-year tenure) phased over a three-year period to minimise impact on liquidity, and with preference given to those willing to offer the largest discounts.