The Federal Government has approved the sum of N522.74bn to be paid to the 36 state of the federation as part of the reimbursement for the over-deduction on the Paris Club loan.
The development was confirmed in a statement issued on Friday by the Federal Ministry of Finance.
State governments had recently submitted to the Federal Government their claims of over-deductions for external debt service arising between 1995 and 2002 as a result of First Line Charge deductions from Federation Account Allocation Committee allocations.
These debt service deductions are in respect of the Paris Club, London Club and multilateral debts of the Federal Government and the states.
While Nigeria reached a final agreement for debt relief with the Paris Club in October 2005, some states have already been overcharged.
On the request by state governments for a refund of the amounts owed by the Federal Government, President Muhammadu Buhari had directed that the claims should be subjected to verification by the Debt Management Office.
A team was raised and given the mandate to scrutinise the claims by the states and reconcile them with available records.
The statement from the Finance ministry said the payment was approved by Buhari as part of the fiscal stimulus plan of the Federal Government to the states.
It added that the Federal Government had reached a conditional agreement to pay 25 per cent of the amounts claimed by the state governors subject to a cap of N14.5bn to any given state.
The statement issued by the Media Adviser to the Minister of Finance, Mr. Festus Akanbi, stated that balances due after the release of the 25 per cent would be revisited when the fiscal conditions improved.
It explained that the first batch of N153.01bn was currently being processed for release to 14 state governments to provide direct stimulus through government spending.
The release of the fund, according to the statement, would also boost demand at consumer level and reverse the slowdown in economic activities.
The statement read in part, “Mr. President’s overriding concern is for the welfare of the Nigerian people, considering the fact that many states are owing salaries and pensions, causing considerable hardship.
“Therefore, to ensure compliance with the directive that a minimum of 50 per cent of any amount disbursed is dedicated to this, funds will be credited to an auditable account from which payments to individual creditors will be made.
“Where possible, such payments will be made to Bank Verification Number-linked accounts and verified.”
It added, “Due to the fact that reconciliation is still ongoing and the final outcome might show an under or overstatement of claims, an undertaken has been signed by state governors declaring that in the event that the amount already paid exceeds the verified claim, the surplus will be deducted directly from the state’s monthly Federation Account Allocation Committee allocations.
“The total amount approved by the President is N522.74bn and is to be paid in batches.”
The statement added that a team had been constituted to review interim payments to state governments made under previous administrations.
It said work had commenced to resolve each state government’s claim, adding that the exercise was expected to take approximately 12 months.