The Federal Executive Council on Wednesday approved the issuance of promissory notes for the settlement of debts owed local contractors worth N740 billion.
The Minister of Finance, Mrs Kemi Adeosun, gave the hint while addressing newsmen after the Federal Executive Coucil meeting, adding that debts to GENCOS, DISCOs and state governments stood at N193.69 billion.
“The Memorandum that the Council approved was for the issuance of a promissory note programme to settle inherited debts to local contractors and state governments on the part of Federal Government.
“These obligations had accrued prior to our coming into office and are across a number of sectors.
“We had pension liabilities, salaries some of which go back to 2006; unpaid salaries from 2012 to 2015; pensions to former Nigeria Airways staff from 2009, the Export Expansion Grant which was suspended in 2014; there are actually obligations on that between 2007 and 2014 when they were suspendend.
“What the government has agreed to do is to issue a promissory note, which is effectively an IOU.
“We are going to issue IOUs to the contractors and to those who Federal Government is obligated.
“Those promissory notes would mature over the next 10 years.
“So basically what we are doing is solving a long standing problem of contractor arrears.’’
The Minister noted that the obligations were a drag on the economy because many of the contractors owed the banks which in turn had non-performing loans.
She said that the promissory notes had liquidity status meaning that the banks could accept them from the contractors and trade them to improve the banks’ non-performing loans.
She said that because of the government debts, there was illiquidity in such places as the power sector, which had reversal of tariff, leading to a debt to GENCOs of about N495 billion.
She said that the debt had held back investments in the power sector.
The minister said the government decided to draw a line on the inherited obligations and issue non-interest IOUs and expecting those owed to negotiate what should be paid to them at great discount.
She also said a very rigorous process was put in place to validate claims, adding that a firm was engaged to do the validation.
Adeosun said government had also directed that agencies feed back their indebtedness every quarter to avoid a repeat.
The minister said that contractors abandoned sites due to the debts and that government wanted them to return.
She also said that government intended to expand export trade with the payment of the export grants.
She further said it was expected that the non-performing loans in the banks would improve.
The minister also said that government had identified that promotion arrears to civil servants had not been paid for long and planed to clear the debt over a three year period.
Also, the Head of the Civil Service of the Federation, Mrs Winifred Oyo-Ita, said that FEC approved the 2017 to 2020 strategy and implementation plan for the transformation of the civil service.
She said that it had a strategic implementation work plan which identified the key actors and budget as well as the training and manpower development of workers.