The Federal Government has approved the sum of N2.7 trillion for the payment of outstanding debts which it owed pensioners, contractors, oil marketers among others for a period of two decades.
This was one of the key issues discussed at the Federal Executive Council held on Wednesday, July 12, 2017.
The Minister of Finance, Mrs. Kemi Adeosun, made this known to State House correspondents at the end of the weekly meeting of the Council presided over by the Acting President, Yemi Osinbajo, at the Presidential Villa, Abuja.
Adeosun said the obligations that accumulated over the last two decades would be paid through bond and promissory note issuance.
She said: “The Federal Executive Council has today approved the Ministry of Finance’s proposed validation process and promissory note and debt issuance programme to resolve a number of inherited and long outstanding Federal Government (FG) obligations to contractors, State governments and employees. This will be followed by a request to the National Assembly to approve the programme ahead of implementation.
“In March 2017, the Economic Management Team, under the leadership of His Excellency Acting President Yemi Osinbajo, mandated the Minister of Finance to Chair a Committee that would establish a process to confirm the validity of inherited Federal Government obligations, and propose a mechanism to resolve them.
“These obligations largely consist of dues owed to State governments, oil marketers, power generation and distribution companies, suppliers and contractors by FG parastatals and agencies, payments due under the Export Expansion Grant (EEG), outstanding judgement balances as well as pension and other benefits to Federal Government employees.
“Some of the obligations date back as far as 1994. The resolution of this will significantly enhance liquidity in critical sectors of the economy.
“Following an exhaustive process of reconciliation, the committee has been able to provisionally confirm a discounted total of N2.7 trillion of obligations, consisting of N740 billion of outstanding pensions and promotional salary arrears (not discounted) and N1.93 trillion (discounted) of other obligations including dues to Federal Government contractors and suppliers.
“These numbers are aligned with existing Federal Government estimates, and in some cases, are lower than previously estimated.
“The supplier and contractor obligations will be resolved through a strict process of final validation, following which those confirmed will be settled through the issuance of liquid promissory notes (ten-year tenure) phased over a three-year period to minimise impact on liquidity and with preference given to those willing to offer the largest discounts.
“Obligations owed to individuals (for example pensions and employee benefits) will be resolved through the issuance of specific bond instruments, again phased over the next 3 years. These obligations will then be incorporated into the Medium- Term Expenditure Framework by the Ministry of Budget and National Planning.”
Meanwhile, the Acting President, at the meeting, directed the finance minister to release the sum of N1.6 billion for 16 states ravaged by floods across the country.
The move, according to Special Adviser to the President on Media and Publicity, Mr Femi Adesina, was to help cushion the effects of the disaster on Nigeria.