The Federal Executive Council (FEC) wednesday put in motion the machinery for the payment of N2.7 trillion owed contractors, pensioners and state governments by the federal government in the past two decades.
Briefing journalists at the end of the weekly FEC meeting presided over by acting President Yemi Osinbajo in the State House, the Minister of Finance, Mrs. Kemi Adeosun, said the council approved a process for the validation and payment of liabilities inherited by the federal government since 1994.
The minister gave the breakdown of the total verified N2.7 trillion liabilities to include: discounted N1.93 trillion owed contractors and suppliers as well as N740 billion outstanding pensions and promotional salary arrears reconciled by a committee set up by the Ministry of Finance on the order of the acting president in March.
She said the arrears which had accumulated over the years would be paid through bonds and promissory notes issuance after a strict validation process, explaining that clearing the liabilities would go a long way in stimulating economic activities.
“The FEC has today (yesterday) 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 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 his leadership 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 federal government parastatals and agencies, payments due under the export expansion grant (EEG), outstanding judgment balances as well as pension and other benefits to federal government employees. Some of the obligations date back to 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 three years.
“These obligations will then be incorporated into the Medium Term Expenditure Framework (MTEF) by the Ministry of Budget and National Planning,” Adeosun said.
Also briefing the journalists, the Head of Service, Mrs. Winifred Oyo-Ita, said FEC approved a four-year implementation plan for the transformation of the civil service. According to her, the plan would involve revamping the civil service through a strategic implementation work plan that would include infrastructure development, effective payment systems and digitisation of the civil service.
In the same vein, the Minister of Federal Capital Territory (FCT), Mr. Mohammed Bello, said FEC approved memoranda for infrastructure provision in FCT including N2.5 billion access road to Kabusa, a project he said would open up the area for commercial value.