States’ inability to tap capital market could see another rush for FG’s bailout

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…amid worsening revenue decline

The inability of most state governments to raise debt instruments from the capital market amid declining revenues could see a rush for another round of bailout from the Federal Government, according to views of a wide spectrum of analysts surveyed.

“There are strong indications that we might see another round of bailouts given that FAAC allocations, which account for a major source of states’ revenue, have come under pressure due to the pandemic,” said Gbolahan Ologunro, an equity researcher at CSL Stockbrokers.

States’ finances are speedily drying up due to the coronavirus pandemic which has resulted in a double whammy of falling internally generated revenue (IGR) by states as well as the monthly allocations from the Federation Account.

Revenue shared to states from the Federation Account saw a drop by 5.13 percent to N181.49 billion in April from the over N191.30 billion shared in January, according to figures from the National Bureau of Statistics, as the pandemic took a toll on both the demand and prices of crude oil, Nigeria’s biggest dollar earner.

The drop in the FAAC was despite the N360/$ conversion rate adopted by the Central Bank of Nigeria (CBN) in March, as opposed to the dollar to the naira conversion rate of N306/$ when the apex bank had not devalued the currency. Allocation from the Federation Account, at 70 percent, accounts for the biggest chunk of states’ revenue.

Read Also: CBN Disburses N49bn COVID-19 Intervention Fund to 80,000 Beneficiaries

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