FG Orders Commercial Banks not to Grant Loans to State Governments

The Federal Government has ordered commercial banks in the country to stop granting loans to state governments.
The decision follows the Fiscal Sustainability Plan, FSP, reached by the government’s economic team in collaboration with state governments to foster prudent management of resources, the Vanguard reports.

This announcement is coming as the country awaits the announcements of the Central Bank of Nigeria (CBN) flexible exchange rate regime later today.

Sources within the ministry of finance told the Vanguard that President Muhammadu Buhari is unhappy with the way some past and current governors took loans from banks, misused them and plunged their states into debt.

At the moment, many states have little resources left after the deductions are made for the loans they had collected from federal allocations.

Many states owe workers due to their heavy loan burden and the dwindling price of oil, which is the mainstay of the country’s economy.

The federal government, however, encouraged states to raise funds from the capital market through the issuance of bonds. It also gave conditions for such bonds to be issued saying they must be released to the states in tranches.