The 36 states and the Federal Capital Territory, Friday, opposed the Central Bank of Nigeria's retention of compulsory 50 per cent Cash Reserve Requirement (CRR) on public sector funds. The Central Bank, CBN, Governor, Lamido Sanusi, had said at the end of the last Monetary Policy Committee (MPC) meeting that members resolved to keep CRR on public sector funds at 50 per cent, and 12 per cent on private sector deposits in banks.
But, the Chairman of the Forum of Commissioners of Finance, Timothy Odaah, told reporters at the end of the Federation Accounts Allocation Committee (FAAC) meeting in Abuja that the states were worried about the negative impact of the CRR on their efforts to mobilize funding for their development programmes. Mr. Odaah, who is also the Ebonyi State Commissioner for Finance, said the decision was giving states harsh experiences, as banks were no longer interested in extending loan facilities to them without the approval of the Central Bank.
He said the states' investment aspirations have been hampered, as they were now compelled to turn to the money market to borrow at exorbitant interest rates to finance their development projects. Mr. Odaah said the state governors have resolved to take up the issue by presenting their misgivings to President Goodluck Jonathan at the next National Executive Council (NEC) meeting to look for all possible ways to bale the states out of their difficult economic situations.
Though the Central Bank spokesperson, Ugochukwu Okoroafor, said he would not comment on the issue, as he was in the United States for the ongoing World Bank/International Monetary Fund's (IMF) Annual Meetings, a source close to the bank in Abuja said contrary to the fears expressed by the state, there was nothing negative about the decision. The source, who asked that his name be left out, since he was not authorized to speak on the issue, said the 50 per cent CRR was actually to discourage abuses by persons in public positions to divert public sector funds in their control to other uses.
"Under the CRR, if anyone is holding any public sector money, the requirement is that at least 50 per cent of it must be held in liquid form, which cannot be traded with. Perhaps, what critics are complaining about is that CRR has made it impossible for public officials to place such public sector funds in their possession in fixed deposits in banks to yield interest.
"Again, some of the banks were trading with government money and making easy profits, as such they became less concerned about the development of products that would deepen the market to give consumers a wide range of choices," he said. The latest controversy comes despite the resolution of the FAAC on Friday to share about N1.196 trillion as revenue allocation to the three tiers of government for the months of August and September.
The sharing of the allocation followed months of acrimony between the federal government and the other tiers of government over lack of funds for distribution after two meetings of the Federation Accounts Allocation Committee (FAAC) since July. The meeting in June ended in a stalemate after the Commissioners of Finance and Accountants-General from the 36 states and Abuja walked out on the Minister of State for Finance, Yerima Ngama, after they accused him of frustrating efforts to get the arrears of their allocation released by the government.
Similarly, the meeting of the Committee convened for last month was aborted after the commissioners were told by the Accountant General of the Federation (AGF), Jonah Otunla, that there was nothing to share. But, after weeks of consultations between the governors and managers of the country's economy, PREMIUM TIMES gathered that the FAAC meeting was finally convened to approve the latest disbursement. The Minister of State for Finance, Yerima Ngama, said at the end of the meeting that the net statutory disbursements to the federal Government for the two months was N484.43billion, or (52.68 per cent), while the 36 states and Abuja took N245.71 billion, or (26.72 per cent).
The 774 Local Government Areas, including the six Area Councils of Abuja, were allocated about N189.43billion, or (20.6 per cent). The Minister said that the sum of N127.66billion was distributed as proceeds of the Value Added Tax (VAT) for the two months, with the federal government allocated N19.15 billion, states N63.83 billion, and local governments N44.682billion.
Again, about N35.549billion was shared from the Subsidy Reinvestment and Empowerment Programme (SURE-P) by all the three tiers of government, in addition to N7.617billion debt repayment by the Nigerian National Petroleum Corporation (NNPC). Mr. Ngama, who reviewed the revenue profile of the government for period, said the month of September witnessed a N22.783 billion drop in revenue that accrued in the federation account "due to the slight decline in crude oil production as a result of the Force Majeure declared at Brass Terminal, pipeline maintenance issues and crude oil theft."
"By this development, only the actual accruals into the federation account was shared for the two months as earlier agreed by all the parties, thus bringing to an end the culture of augmenting monthly allocations, which fell short of the budgeted sum for the month," Mr. Ngama said. The minister said the NNPC has so far made 27 installments of the monthly payment of N7.617 billion to FAAC as part of the agreement to defray the over N450billion debt the corporation was expected to pay, adding that only six more installments are left to offset its indebtedness to the Federation Account.