The Central Bank of Nigeria (CBN) has revealed that as of September 2023, thirty-one state governments collectively owe a staggering sum of N339.9 billion.
This debt stems from funds acquired to cover workers' salaries between 2015 and 2023, facilitated through the Salary Bailout Facility (SBF).
Introduced as part of the CBN's initiative to ease fiscal pressures faced by states, the SBF aimed to address salary arrears and alleviate financial strains.
However, despite the injection of over N10.3 trillion into the intervention fund during Godwin Emefiele's tenure as CBN governor, the debt burden persists.
Current CBN Governor Olayemi Cardoso discontinued the program, citing the inability to sustain additional intervention initiatives amid prevailing economic challenges.
The SBF was instrumental in assisting state governments to settle outstanding salary obligations to their employees. However, the recent report underscores a concerning trend of non-repayment and loan defaults by sub-national entities.
According to the document, the outstanding debt includes both principal and interest repayments, with a significant portion remaining unpaid. While the program has officially ended, it involved collaboration among various stakeholders, including state governments, Deposit Money Banks, the Federal Ministry of Finance, and the Accountant-General of the Federation.
The breakdown of the report highlights the extent of the issue, with 31 states benefitting from the SBF and a total disbursement of N457.17 billion. However, despite the substantial financial aid provided, the repayment performance has been subpar, exacerbating the financial strain on state governments.
Moreover, the inability of several states to settle their workforce's primary obligation underscores broader fiscal challenges and calls for more robust financial strategies.
The failure of states to meet their salary obligations has broader implications for economic stability and governance effectiveness. It highlights the urgent need for states to bolster revenue generation efforts and explore sustainable fiscal management practices to alleviate debt burdens and enhance financial sustainability.
