At least three Nigerian states Ekiti, Cross River and Ogun have proposed a suspension of foreign debt repayments due to severe foreign exchange volatility.
This call is part of their efforts to mitigate the heightened debt service burdens that have significantly reduced their monthly financial allocations from the federation account.
Details of these proposals were highlighted in the minutes of the Federal Account Allocation Committee (FAAC) meeting held in March 2024. The minutes were adopted at the subsequent meeting on April 19, 2024, at the Federal Ministry of Finance headquarters. A copy of the minutes was obtained and seen by Nairametrics.
The Commissioner of Finance of Ekiti State, Akintunde Oyebode, noted that the financial strain caused by rising exchange rates has escalated the costs of foreign debt repayments.
He advocated for an extensive discussion on exchange rates and multilateral financing to address these challenges.
Oyebode also noted that significant deductions from the statutory revenue for savings have drastically reduced state balances.
Similarly, the Commissioner of Finance of Cross River State, Michael Odere, expressed fears about the states’ ability to fund capital projects due to reduced revenues.
He suggested a suspension of certain deductions, including those for multilateral loan repayments, especially when distributable revenue is low.
Odere also proposed that pre-FAAC stakeholder meetings be arranged to better manage financial allocations during periods of fiscal shortfall.
The Commissioner of Finance of Ogun State, Dapo Okubadejo, called for the redirection of the N200 billion previously earmarked as savings back into the federation account for redistribution among the states.
He noted that doing this will help to alleviate financial distress and support necessary infrastructural developments, enabling the states to better handle the unpredictability of foreign exchange rates impacting multilateral financing.
The Minister of Finance, Olawale Edun, who was also the Chairman of the meeting, responded to these concerns, noting that discussions regarding foreign exchange, interest rates, and other economic challenges are ongoing at the National Economic Council (NEC).
He urged the states to relay their concerns through their chief executives/ governors for thorough consideration.
Edun also emphasized the need for strengthened cooperation between monetary and fiscal authorities to foster national development in these economically challenging times.
