Nigeria's government will loan its states a total of 90 billion naira ($453 million), in its latest effort to augment their monthly income and ease strain caused by plunging oil revenues, the country's finance minister said.
The funds will help tide the 36 states over for a year as they get their finances in order, Finance Minister Kemi Adeosun said late on Tuesday. The loan is structured as 50 billion naira for three months and then 40 billion for nine months. She did not say what the interest rate on the loans would be.
"It is a loan and it is fully repayable, although it has a secured tie against future dividends, revenues and any amount that government might owe the states," Adeosun said at a meeting with state finance commissioners. "The loan is a bond and it has been guaranteed by the federal government."
Several Nigerian states borrowed in the domestic bond market and from banks to fund infrastructure projects at the peak of oil prices. But as crude prices dropped, many states have been unable to pay bills or salaries.
Last year, several state governments got financial help from the central bank and Debt Management Office, to clear a backlog of unpaid salaries and other expenses after their combined debts climbed to around 658 billion naira [nL5N10W2CW][nL5N10B406].
In April nearly two-thirds of states struggled to pay salaries despite a federal bailout, the government said. It then allowed them to defer loan deductions of 10.9 billion naira for March so that they will have funds to cover salaries [nL5N17V8UA][nL5N17S2LP].
Adeosun said the states have signed up to a fiscal plan that would help them increase internally generated income and cut costs. That was part of a list of 22 requirements they must fulfill before getting the loan.
States are also required to submit an updated debt profile regularly to the debt office and will not be allowed to borrow from commercial banks, as part of the requirements.
($1 = 198.60 naira)