The federal government has said that it had released N2 billion of the N5 billion loan offered to each state as a palliative to mitigate the effects of the petrol subsidy removal.
Speaking on Friday, September 1, the minister of finance and coordinating minister of the economy, Wale Edun, said the government is aware of the potential negative consequences of releasing all of the palliative funds at once, “so it decided to release them gradually”.
The Minister said, “On the issue of the 5 billion, it is a combination of grants from the federal government and borrowing by the states.”
“And of course, although the sum of 5 billion is earmarked, you will agree with me that to release such funds across all the states all at once will be self-defeating because it will lead to an inflationary spiral. It will lead to the cost of goods being sold going up and it will affect the exchange rate.
“And so, it is N2 billion that has been released as an initial intervention and FCT will be included is the information that I have.”
Edun also stressed that the government would effectively manage debt, assuring that borrowings will be “linked to return on investment”, under the current administration.
Noting that the current administration intends to increase revenue.In achieving this, he said tax revenues will improve, leakages will be avoided as well as the effective management of debt so that borrowings can be properly serviced.
“The key is to increase revenues so that the government has enough funding to carry out its obligations and to stabilise the economy as a whole,” the minister said.
“On one hand, it is by increasing tax revenue, not by increasing taxes necessarily, but by bringing greater efficiency.
“We have with us the chairman of the tax reform committee, and it aims to bring greater efficiency to cut leakages and maximise the legitimate revenue that should come to the government.
“Likewise, in order to gain and build public trust, there will be an emphasis on efficiency in government expenditure, and similarly, effective debt management, so that borrowing is linked to it, the return on investment. You borrow and you will see the cash flow that will repay that borrowing.
In August, the federal government announced a N5 billion palliative package for each state of the federation, including the federal capital territory (FCT), to cushion the impact of the removal of the petrol subsidy.
Babagana Zulum, governor of Borno, had said the palliative would enable state governments to procure 100,000 bags of rice, 40,000 bags of maize and fertilizers, to cushion the effect of food shortage across the country.
