The Kaduna State Government once had to pay ₦1.4 billion out of pocket to offset part of its outstanding debt at a Federation Account Allocation Committee (FAAC) meeting, according to the state Commissioner for Finance, Ibrahim Tanko Muhammed.
Muhammed said the state was expected to receive about ₦6 billion in statutory allocation during the period but had accumulated an outstanding debt of about ₦8 billion.
Speaking on the state’s finances, the commissioner said the debt situation was such that Kaduna had to make an additional payment before leaving the FAAC meeting.
“There was a month when we attended the FAAC meeting where we actually had to pay the Federal Government 1.4 billion Naira to offset our debt against our statutory allocation,” Muhammed said.
He added that the experience highlighted the financial pressure states faced before the increase in federation revenues following the removal of the petrol subsidy.
The commissioner linked the state’s ability to meet its salary obligations to the increase in revenues available through FAAC after the removal of the fuel subsidy.
“If not for the fuel subsidy removal, how could we possibly pay salaries?” he asked.
Official data show that FAAC distributions increased significantly after the subsidy removal and other economic changes. The National Bureau of Statistics reported that ₦2.07 trillion was distributed among the three tiers of government in February 2024, while ₦2.33 trillion was shared in March 2024.
A House of Representatives document also noted that states and local governments received a combined ₦6.57 trillion from FAAC in 2023, compared with ₦3.16 trillion in 2022, attributing the increase partly to the removal of the fuel subsidy and naira reforms.
The fuel subsidy was removed by the Federal Government in 2023 as part of broader economic reforms. The International Monetary Fund has also identified subsidy removal as one of the major structural reforms undertaken by the Tinubu administration.
The reform has, however, remained a major subject of debate because of its effects on fuel prices, transportation costs, inflation and household purchasing power, alongside the increased revenue available to governments.
Muhammed’s comments provide an insight into the debt and revenue pressures Kaduna State faced in managing its finances and meeting recurrent obligations.
Comments
Post a Comment