FG bars banks from giving loans to state governments

Banks in the country have been barred from further giving loans to state governments.

This directive from the Federal Government is in line with the Fiscal Sustainability Plan, FSP, which has been agreed to by the Federal Government’s economic team and state governors, to ensure prudent management of sub-national resources.

Sources said that President Muhammadu Buhari has been disappointed with the manner some past and present governors misapplied loans from banks  while mortgaging the finances of their states.

Some states are known to have too little to meet their recurrent obligations after deductions are made on outstanding loans.

Rather than bank loans, the Federal Government has directed states to source funds from the capital market for their infrastructure development.

It is also required that funds sourced through bonds must not only be on bankable, measurable projects but must also be released in tranches.

It is also required that the release of the proceeds of bond issuing will, henceforth, be on the basis of satisfactory utilization of earlier released proceeds.