State govts borrow N46.17bn from banks to pay salaries over economic crisis

State governments borrowed about N46.17 billion from three banks to pay salaries between January and June 2023 from commercial banks such as Access Bank, Fidelity Bank, and Zenith Bank.

Data from the first half of the 2023 financial statement of the three commercial banks disclosed this.

The states borrowed the most from Access Bank in six months, with a record of N42.97 billion.

Access Bank said the outstanding balance on the salary bailout fund was N58.84 billion by June 30, 2023, from N101.81 billion in December 2022.

It was followed by Zenith Bank (N1.78 billion borrowed) and Fidelity Bank (N1.42 billion borrowed) within six months.

“The amount of N58,842,651,795 represents the outstanding balance on the state salary bailout facilities granted to the bank by the Central Bank of Nigeria for onward disbursements to state governments for payments of salary of workers of the states. The facility has a tenor of 20 years with a 2 per cent interest payable to the CBN. The bank must lend to the states at an all-in interest rate of nine per cent annually. From this creditor, the bank has nil undrawn balance as of June 30 2023,” Access Bank noted.

For Fidelity Bank, the H1 2023 financial statement showed that the outstanding balance on the salary bailout fund was N80.65 billion by June 30, 2023, from N82.07 billion in December 2022.

The bank noted, “FGN Intervention fund is CBN Bailout Fund of N80.65 billion (December 31 2022: N82.07bn). It represents funds for states in the Federation that are having challenges meeting their domestic obligation, including payment of salaries. The loan was routed through the bank for on-lending to the states. The bailout fund is for 20 years at 9 per cent annually.”

It added, “The bailout fund is for a tenor of 20 years at 7 per cent per annum and availed for the same tenor at 9 per cent per annum until March 2020; the rate was reduced to 5 per cent for a year due to the Covid-19 pandemic to March 2021 after which it was extended to February 2023. CBN, on August 17 2022, further reviewed the rates in response to the economic outlook and approved the following order: All intervention facilities granted effective July 20, 2022, shall be at 9 per cent per annum, while all existing intervention facilities granted before July 20, 2022, shall be at 9 per cent per annum effective September 1, 2022.”

According to the H1 2023 financial statement of Zenith Bank, the outstanding balance on the salary bailout fund was N125.14 billion by June 30, 2023, from N126.92 billion in December 2022.

The bank noted, “The Federal Government approved the Salary Bailout Scheme to assist state governments in settling outstanding salaries owed their workers. Funds are disbursed to banks nominated by beneficiary states at two per cent for on-lending to the beneficiary states at 9 per cent. The loans have a tenor of 20 years. Repayments are deducted at source by the Accountant General of the Federation as a first-line charge against each beneficiary state’s monthly statutory allocation. This facility is not secured.”