The Federal
Government has admitted that the backlog of contractual debts and outstanding
welfare issues like pensions valued at N2.7 trillion contributed the
worsened
Non-Performing Loans in the nation’s banking industry.
With the
development, the banking sector may be in for a treat once the process of
payments for the outstanding, which currently is waiting for legislative
action, is completed.
The
lingering obligations are assessed as part of issues constraining growth,
raising reputation issues for government and escalating the level of bad loans
in the books of banks, now at about 10.3 per cent due to interest accumulations
against debtors.
Already, the
Minister of Finance, Mrs. Kemi Adeosun, admitted that these debts need not be
prolonged anymore, as the oldest is dated 1994, while the obligations include
money is owed to state governments, contractors, oil marketers, as well as
power generation and distribution companies.
According to Guardian report, in a note
from the ministry’s Director of Information, Salisu Na’Inna Dambatta, the
minister said: “The government cannot allow this level of inherited obligations
to go unresolved any longer. As part of the process to reset the economy, we
must address these legacy issues once and for all.
“The
contractor obligations have a significant effect on private sector confidence
and are a direct cause of non-performing loans (NPLs) in the banking sector.
“We are
embarking on a significant programme of capital expenditure and to optimize the
contracting process and deliver maximum value for Nigerians, we cannot have
these legacy issues constraining us”.
She said
that paying the debts now would be in the interest of the government and
economy, as a way to restore private sector confidence in government while
embarking on a range of capital projects.
The move
would put significant liquidity into the system, which would stimulate spending
and economic activity, including contractor obligations linked to NPLs in the
banking system, which the programme is expected to resolve.
A government
contractor, who would not want his name in print, told The Guardian that the
prolonged debts either mean that they want to punish someone or push the
company to go under.
“Majority of
the funds used in executing the contracts are borrowed from banks at high
rates, with timeline. The implications are that if you fail the terms, the
interests and rates are compounded by banks. Still, when the situation becomes
too numerous, banks’ liquidity positions are impacted as you can see.
“In this
situation, who would believe government’s business? If contractors are
liquidated this way, where will they raise another, especially now that there
is even much need for private sector contributions in building the economy?” he
queried.
But speaking
on enthroning a regime of transparency and building confidence among civil
servants, the minister pointed out that pension and employee benefit arrears
are simply unacceptable.
“We rely
heavily on the hard work and dedication of our civil servants, which is even
more important as we implement and deliver the reforms we need to make
government more efficient. We must demonstrate a willingness to ensure their
issues and concerns are addressed, and this solution does that.
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