Nigeria okays bailout measures for cash-strapped states

Nigerian President Mohammadu Buhari raises his fist to greet the crowd before taking oath of office at the Eagles Square in Abuja, on May 29, 2015 (AFP Photo/Pius Utomi Ekpei)

Abuja (AFP) - Nigeria's President Mohammadu Buhari on Tuesday approved a package of measures to bail out states with biting cashflow problems, including the inability to pay public sector salaries.

Cash-strapped states would be allowed to draw from a specially set up central bank intervention fund worth 250 billion naira to 300 billion ($1.5 billion to 1.3-billion-euro).

"This will be a soft loan available to states for the purposes of paying backlog of salaries," a statement from his office said.

States would also be helped to reschedule the over 660 billion naira they owe to commercial banks, it added.

As in the past, the federal government, states and local government would share $2.1 billion in dividends paid by the state-run Nigeria Liquefied Natural Gas Company, according to a statement from his office.

No money would be drawn from Nigeria's Excess Crude Account (ECA) in order to meet the states' shortfall, contrary to widespread reports in the country's media, Buhari said.

The ECA is a "rainy day" fund into which the difference between government-set oil prices and the market rate is deposited.

Newspapers on Tuesday suggested the account would be emptied to fund struggling states' salary obligations but Buhari maintained it would be "left untouched at this time".

Nigeria, Africa's top economy and largest oil producer, has been hammered by the 50 percent fall in global crude prices, with sales accounting for more than 70 percent of overall government revenue.

Squeezed revenues forced this year's budget to be revised and federal projects scrapped or halted while state employees have gone months without being paid.

The national currency, the naira, has also come under intense pressure, losing substantial ground to the dollar on both the official and black market.

Buhari has accused his predecessor Goodluck Jonathan's government of leaving the treasury "virtually empty" and promised to clear the rot in the system.

Last week, he supported a move by state governors to look into the finances of the state-run oil firm.

Nigeria's Debt Management Office said last Wednesday the country's total debts stood at 12.06 trillion naira ($63.5 billion) at the end of March this year.

In December last year, the figure stood at 11.2 billion naira.

Former finance minister Ngozi Okonjo-Iweala has maintained overall debt was much lower and most of it was incurred by the states rather than the federal government.