FG moves to check excessive borrowing by states.

The Federal Government in Abuja has begun a process to curb the reckless borrowing of state governments from banks and the capital market.

In light of this, the Fiscal Responsibility Commission (FRC) has developed regulations outlining the prerequisites a state government must achieve before receiving a loan from any national bank.

At yesterday’s GIFT, Parley with Civil Society Partners in Abuja, Barrister Charles Abana, Head, Directorate of Legal, Investigation, and Enforcement at the Fiscal Responsibility Commission, made the announcement.

According to him, the commission was astounded to learn that the vast majority of American banks use deceptive practises to coerce state governments into taking out loans.

This is what he had to say: “At the commission, we have decided to give them the template and we will go ahead to make sure that the Central Bank of Nigeria, CBN, issues a proper guideline to banks on how to go about getting all the necessary requirements and compliance fulfilled before lending to the states.” Previously, banks had only gone to the minister and the Debt Management Office (DMO).

“If we don’t place some checks on them and make it not-too-easy for them to borrow, I don’t think we will come out of this debt crisis.

We gathered with banks in Lagos to discuss lending practises, default rates, and other financial indicators. It was discussed during the meeting that “bank officials swoop on state governors as soon as they constitute their cabinets with mouthwatering proposals to seduce them into borrowing from the banks.”

Abana said, “The country’s budget deficit (including project-tied loans) as a percentage of GDP will keep increasing over the medium term from 3.83 percent, 3.89 percent, and 3.92 percent of the anticipated GDP.” This was in reference to the MTEF for the years 2024–2026.

Over the next three years, borrowing will rise, and over the next two years, borrowing from abroad will rise.