Nigerian states borrow N46bn from Access Bank, Zenith Bank, Fidelity to pay salaries

Nigerian state governments borrowed about N46.17 billion from three banks to pay salaries between January and June.

This was disclosed in the banks' 2023 half-year result. Nigerian states borrow N46 billion from three banks to pay salaries

Findings show that the states borrowed the most from Access Bank in six months, with about N42.97 billion in the period under review.

Zenith Bank follows with N1.78 billion and Fidelity Bank with N1.42 billion in the six months.

The half-year financial statements of Access Bank show N58.84 billion as an outstanding balance on the salary bailout fund by June 30, 2023, from the N101,81 billion in December 2022.

The bank said the amount represents the outstanding balance on the state salary bailout facilities given to the bank by the Central Bank of Nigeria (CBN) for disbursements to state governments for workers' salaries.

The facility reportedly has a 20-year tenor with a 2 per cent interest rate payable to CBN.

Access Bank revealed that it is under obligation to lend to the states at an all-in interest rate of nine per cent annually. Fidelity Bank revealed in its financials that the outstanding balance on the salary bailout fund was about N80.65 billion as of June 30, 2023, from N82.07 billion in December 2022.

It stated that the FGN Intervention Fund is a CBN Bailout Fund of N80.65 billion as of December 2022 and N82.07 billion, representing funds for the states in Nigeria having challenges with salary payment.

Zenith Bank's 2023 financial statements said the outstanding balance on the salary bailout fund was N125.14 billion as of June 30, 2023, from N126.92 billion in December 2022.

According to Punch, the loans occurred despite increased revenue allocation to the states from the federation account.

The Federal, state, and local governments had an additional N540 billion accruing to the federation account.

The statement was contained in the communique issued by the Federation Account Allocation Committee (FAAC) between January and July 2023. In the first seven months of 2022, N4.96 trillion was disbursed to the three tiers of government, while in the same period in 2023, FAAC shared about N5.5 trillion to the three arms of government.

Meanwhile, 25 states in Nigeria reported a decline in their internally generated revenue and encountered a cash crunch in the first three months of 2023. The 25 states earned about N182.26 billion in the first quarter of 2023.

A quarter-by-quarter analysis reveals that the states experienced a 3.07% shortfall or N5.77 billion from the N188.03 billion earned in the fourth quarter of 2022.

The 25 states reportedly projected an IGR of N219.56 billion for the first quarter of 2023 but earned about N182.26 billion, meaning 83.01% performance. The development also means that the states' revenue underperformed by 16.99%, failing to hit their revenue targets.