ECONOMIC ANALYSIS: States’ Debt Deferral Won’t Harm Creditors — FG (By Akinrinde, Ibukunoluwa Jeremiah)

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The Minister of Finance, Mrs. Kemi Adeosun, notified that all deferred repayment of state debt (summing up to N10.9 billion — from the FG and CBN, and bondholders) would not impact creditors and bondholders negatively. This is on the premise of the Minister’s guarantee that the debts would be fully paid and that any further deferral would require the states to produce a fiscal restructuring plan with measurable objectives which must be agreed to by the Ministry.

Alternatively, the FG seeks to instill fiscal discipline into the state governments; particularly through elimination of payroll fraud and increased the efficiency of recurrent expenses. Similar to entrenching fiscal discipline, Aliko Dangote (though not in support of the FG granting bailouts to the states) opines that the states should seek alternative ways to improve revenue generation internally. This is achievable through provision of incentives to attract investors, efficient tax collection, etc. A combination of improvement in fiscal discipline and increase in Internally Generated Revenue (IGR) would improve states financial buoyancy.

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