The Minister of Finance, Kemi Adeosun, on Tuesday in Abuja said Federal Government would lend state governments N90 billion.
Adeosun announced this during a meeting with Commissioners of Finance on the Fiscal Sustainability Plan.
The plan is aimed at guaranteeing that states take responsibility for their financial viability.
Adeosun said the objectives of the loan was going to be achieved over an 18-month period and that it would help the states rebalance their portfolio.
She said: “The amount of the loan is N50 billion for three months to be shared with all the participating 36 states and N40 billion for nine months.”
She said it was an average of about N1.3 billion for the first three months and N1.1 billion for the next nine months for each state.
Adeosun said: “It is a bond that has been guaranteed by the Federal Government and is being sold in the normal manner that bonds are traded.
“It is fully repayable although it is secured against future revenue, dividends and any amount the Federal Government may owe the states.”
The minister said the loan, which was secured from the private sector, was not a bailout as there were conditions attached to it and that all 36 states were ready to abide by the set conditions.
The conditions are a 22-point fiscal reform action plan that mirrors the ongoing public financial management reforms being undertaken by the federal government.
They include biometric capture of all civil servants, establishment of an Efficiency Unit, implementation of Continuous Audit and improvement in Internally Generated Revenue among others.
Adeosun said: “The governors unanimously approved the plan, the commissioners endorsed the plan and they know its going to involve a lot of work in some cases.
“There are a lot of very tough conditions but the governors and commissioners recognise that these reforms are necessary if they want states to be fiscally sustainable.”
She said governors’ consent to the conditions of the plan was commendable and that “it would send a strong signal that they are indeed partners in the journey towards the recovery of the Nigerian economy”.
Adeosun also said the plan was to ensure that the states were fiscally responsible to allow them take advantage of whatever resources they have to reduce their dependence on the federation account.
She said: “Whether fiscal federalism or fiscal responsibility, every state must be viable.
“We cannot have a situation where states are so dependent on the federation account for their revenue that once the federation account is down they cannot survive.
“We have to make sure that within each state whatever local advantage they have they exploit it.
“What we are saying is that every state is a centre of prosperity and should look inwards and work towards improving their own IGR and have the discipline to make sure they can pay salaries.”
Adeosun, however, said the federation account was not being suspended.
She said: “Of course, we are not suspending the federation account as it will still be there.
“We expect the federation account to recover and then as it recovers we will withdraw the need for this support but for now we need to support the states.”
Umar Namadi from Jigawa State, who spoke on behalf of the Commissioners of Finance, said they appreciated the Federal Government’s effort to help them out with finance and said they were ready to key into the reforms.
Namadi said the reforms were necessary to guarantee sustainability of the states.
He said: “These reforms are not only for the purpose of getting the loans but because they are the only things that will guarantee the sustainability and reforms of the states economically.
“They are clear ingredients that are required for the states to continue to survive as an entity.”
The Federal Government had earlier granted the states bailout funds to enable them pay workers’ salaries.